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Solving the Puzzle: The Role of Financial Investigators in the Fight Against Corruption

“This year we have seen corruption on protestors’ banners be they rich or poor. Whether in a Europe hit by debt crisis or an Arab world starting a new political era, leaders must heed the demands for better government,” (Huguette Labelle, Chair of Transparency International). The 2011 Corruption Perceptions Index shows that public frustration is well founded. No region or country in the world is immune to the damages of corruption, the vast majority of the 183 countries and territories assessed scored below five on a scale of 0 (highly corrupt) to 10 (very clean.) In its January 2011 report, Illicit Financial Flows from Developing Countries: 2000-2009, Global Financial Integrity found that approximately US$6.5 trillion was removed from the developing world from 2000 through 2008.

“Figures don’t lie, but liars figure.” The first part of this old saying reminds us that more often than not it is the figures – when put together by a competent financial investigation — that cause the downfall of corrupt public officials and those who collaborate with them. Corruption is the abuse of authority, usually in return for some type of monetary gain. However, this monetary gain soon becomes the Achilles Heel of the corrupt official, because there can be no truthful and legitimate explanation for where the money came from. Public officials, for the most part, are prohibited from having secondary employment interests to ensure that their sole duty is to the public. If other employment is permitted, typically it requires a waiver based upon full disclosure that enables a determination that the outside employment will not result in conflicts of interest. When an official violates a duty to the public in return for money, the lack of a legitimate outside source of income makes the illicit money, when discovered, blatantly obvious.

The second part of the saying — “but liars figure” – – can be analogized to the methods that corrupt public officials and their confederates often use to obfuscate their illicit relationships and to conceal and the manner in which the bribe is paid as well as its final disposition. Concealing these illicit funds may be as simple as using untraceable cash payments, or as sophisticated as channeling funds through layers of offshore shell corporations in a series of complex financial transactions made even more complex by nominee ownership of assets and the use of new technology such as prepaid access devices and virtual or digital currency. The means and methods utilized by corrupt officials and those who pay them are limited only by their sophistication and resources.

In corruption cases, as with all other crimes of greed, money explains “why they do it.” There is no escaping this simple fact, which is why a financial investigation needs to be a key component in any attack on corruption. It is easy to say that we are going to take away the assets of the corrupt officials; it is another thing, however, to find those assets and to demonstrate excessive spending above legitimate earnings. This is the role and mission of the financial investigator. A financial investigator need not be an accountant, as illustrated by the following metaphorical description highlighting the difference between the two roles. If given a jigsaw puzzle, the accountant will examine the box and tell you that it’s a picture of a particular mountain range containing 1,000 pieces, the name of the manufacturer, and the cost of the puzzle. The financial investigator will open the box, assess and organize the pieces, and then put the puzzle together. It is this mindset that sets the financial investigator apart, i.e. the investigator’s goal-oriented, aggressive, innovative problem solving skills using training, logic, and common sense to find out exactly what happened, coupled with the accountant’s discipline for organization and a bottom line result to gather and organize the evidence needed for conviction.

The key to being a good financial investigator is to combine the above traits with competent training to develop a knowledge base of money and financial transactions, how funds flow in the formal and informal markets, how to identify and document pertinent financial transactions, and the methods and techniques that individuals employ to conceal and disguise these financial transactions and their connection to them.

Financial evidence, when presented in context with any crime of greed, particularly corruption, is devastating to the defendants since it demonstrates their motive at the same time it connects them to the crime. And figures, if presented correctly, not only don’t lie, but can be nearly impossible to challenge. The corrupt public official, whose sole legitimate source of income is his government salary, will not be able to explain the lavish assets, travel and lifestyle that a financial investigation will uncover.

The financial investigation will also uncover the trail back to the corruptors. This is a key component of any corruption investigation. Removing one corrupt public official will not solve any country’s problem, if the corrupting influence remains.

The final piece of the puzzle that a financial investigation will put together is a trail to the assets that were purchased with the illicit payments. A key component in punishing the corrupt public official and those who corrupted him, as well as a key deterrent for those who would do the same is the confiscation of their illicit wealth.

The financial investigative training offered by the International Anti-Corruption Resource Center is unique in that it not only teaches the methods and techniques of financial investigations and begins the building blocks of the knowledge base of formal and informal financial systems, but also focuses on teaching the mindset and investigative approach of a good, competent financial investigator.

1Donald C. Semeskey is an advisor to the IACRC and the lead presenter of its course on conducting financial investigations.

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International Anti-Corruption Resource Center

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International Anti-Corruption Resource Center attacks corruption around the world

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