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Tracking the smallest financial anomalies

Member: Nifa

After the UK’s Criminal Finances Act comes into force today (30 September), HM Revenue & Customs (HMRC) will be able to pursue money laundering, tax evasion and the possible facilitation of terror financing anywhere in the world. The Act is extremely far-reaching and will put the spotlight on a huge range of businesses.

Terror financing is moving clean money to a criminal destination, whereas money laundering is moving dirty money to a clean destination. In both cases, forensic accountants can track the movement of the money and help put a stop to it. These days, many cases are tracked by algorithms that detect anomalies, which is key to forensic investigation.

For example, such algorithms come into their own when tracking terrorist funds. In many cases, these criminals raise money by hacking into tens of thousands of online bank accounts and transferring small amounts into their own account. In the normal run of events, these amounts are so small they would be difficult to detect or trace but the use of software can raise huge sums.

However clever the terrorists think they are being, they can be thwarted by the algorithms, which analyse all possible transaction data, such as the amount, the IP address, and the relationship between them. The software can even spot ‘false positives’ and random transactions.

A forensic investigation of this sort can even analyse data to the extent that it creates a trail that can make a criminal’s entire financial history public information.

Author: Roger Isaacs, 29 September 2017

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