Following the Flow of Funds

By Ruffin, Richard | Security Management, July 1994 | Go to article overview

Following the Flow of Funds


Ruffin, Richard, Security Management


LAW ENFORCEMENT typically reacts to illegal activity, such as the drug trade or organized crime, by arresting street-level criminals, taking them down to the station, and letting them sweat it out under the bright lights. Officers hope a long, tough grilling will force the criminal to leak the name of someone higher up in the organization.

History shows this type of investigation to be ineffective and resource consuming. To better combat crime, law enforcement must change its view and see crime for what it is--a business. A business that is engaged in illegal activity to make a profit. Working from this perspective, the investigator has a new tool. He or she can follow the flow of funds generated by financial events surrounding the criminal activity.

Financial investigations identify and document specific events involving the movement of money during the course of a financial crime. These events are considered to be interrelated, a part of the offense, and attributable to the suspect under investigation. Through a financial investigation, these events are identified and linked together. They serve as the basis of proof that a crime was committed, or they support the determination to stop further inquiry.

Financial investigations by their very nature are record intensive. Bank account information, motor vehicle registrations, and real estate files are documents or records commonly used by the investigator in this type of investigation. Records such as utility bills, divorce decrees, and credit card carbons also can play important roles in financial investigations. Any record that pertains to or shows a trail of events is important to the financial investigator.

The process of identifying and documenting a financial transaction requires the ability to locate records created by an activity; follow its trail through the banking system; analyze and account for the impact of the transaction within a bookkeeping system; summarize interrelationships between it and other financial transactions; and report the findings in order to prove or dispel the criminal allegations.

Sources. Where to look and what to look for are two integral questions facing every investigator. An effective investigator constructs an investigative work plan that establishes retrieval priorities for gathering information and, once implemented, adjusts to the incoming data. The first step is to know what type of information is out there.

Anything or anyone can be a source of information. Although it is impossible for a person to know everything or everyone, it is possible to know where to look or who to ask. Arguably, the best source of information is the target of the investigation. The suspect has all the answers to every question and the documents to support those answers.

Since the target of the investigation usually represents the best source of information, it is only a question of when, not if, to make contact. The timing of the contact depends on the type and complexity of issues surrounding the case. Like people, no two financial investigations are alike, but if this best source of information is known, sooner or later, he or she must be contacted.

If the target is unknown or refuses to talk or provide records, the search for financial facts must be conducted through other sources of information. Unlike investigations into crimes of passion, such as murder, where the only people directly involved in the crime are the criminal and the victim, every transaction that makes up a financial crime creates "eyewitnesses." Knowing where to find these witnesses and what information they possess is the second step in a successful investigation.

Public records. Public law and local regulations require that records and documents of certain financial transactions be subject to review by anyone who wishes to inquire. Such records are known as public records. A tremendous amount of financial information is obtainable from public records. …

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