According to banking and finance trade body UK Finance, fraud cost the UK economy £1.2bn in 2022. And that’s just from the cases we know about. The National Crime Agency, the police body that tackles serious and organised crime, states that as many as 86% of fraud cases go unreported.
Fraud is big business for the criminals involved. And because of that, combating economic crime is an equally major undertaking. It’s not just the police and judicial authorities who take on this responsibility. Financial experts play a crucial role in investigating often complex and technically challenging cases. The people who perform this task are known as forensic accountants.
Forensic accountants are sometimes referred to as financial detectives. But they have more in common with the forensic scientists who support criminal investigations through the application of advanced scientific techniques, such as DNA analysis.
Identifying fraud and building cases
In the case of complex fraud cases, forensic accountants apply expertise in areas such as bookkeeping and financial data, finance and tax law and auditing to uncover evidence of fraud and help prosecutors build a case.
Financial crimes are often perpetrated by individuals who themselves have expert knowledge of how financial systems work, and are therefore able to hide their crimes very well. It could be an insider embezzling funds from a business they work for, burying the fraud under legitimate financial transactions in the company’s accounts. Organised criminal gangs, including those who steal money through cybercrime, use sophisticated financial transactions to move funds around between different entities, making it incredibly difficult to track their origins.
As a result, it’s not uncommon for financial crimes to go undetected for many years. Forensic accountants play an important role in the initial detection of fraud. They often also serve as financial auditors, as an audit provides one of the best opportunities for external eyes to delve deeply into the financial affairs of an organisation. Having someone trained in forensic accountancy carrying out an audit increases the chance of anomalies and red flags being spotted.
In other instances, forensic accountants are brought in when fraud is suspected but hard evidence is needed. This includes forensic accountants being asked by police and prosecutors to help them build a case they can take to court. Specialist financial investigators will again probe the records kept by an organisation, plus relevant external records like tax filings and transaction statements, and try to establish evidence of things like falsified records, balance sheet irregularities, statutory requirements not being met and more.
Forensic accountants are regularly called to court to serve as expert witnesses in cases. It’s their job to explain how the evidence presented stacks up as proof of fraud, and also to unpick the technical complexity for jurors.
As well as criminal cases, forensic accountants also frequently get hired in civil disputes and litigation, too. Their role can range from establishing the true value of assets to be shared in divorce proceedings, investigating breaches of contract and trademark infringements, or delving into valuation disputes. In all cases, it’s the forensic accountant’s expertise in dissecting complex and technical financial data, and being able to apply that to the law, that is sought after.
