Analytics software key to FIFA financial investigation
GRC & Fraud Software Journal
International bribery, one of the high crimes governed by Foreign Corrupt Practices Act (FCPA), is at the center of the stunning U.S. Justice Department investigation into FIFA officials. The Justice Department also charged leaders in the organization with racketeering, wire fraud and money laundering.
The U.S. Attorney General believes officials in the organization that owns the World Cup competition accepted bribes from countries seeking the right to host the competition; engaged in bribery to determine who received media distribution rights and even to decide who would run FIFA itself.
The indictment claims the defendants routed the bribes through U.S. Banks and falsified documents to hide their activity, including fake invoices and numbered accounts around the world.
Analytics software digs for evidence
Looks like a job for analytics software.
“When it comes to FCPA, there are two specific areas where analytics are important, and the largest is in the area of bribery investigations,” says Jeremy Clopton, a Certified Fraud Examiner at BKD CPAs & Advisors of Springfield, Mo. “The other is in forensic accounting.”
BKD is not involved in the FIFA investigation, but Clopton has expertise in using data analytics to help companies remain compliant with banking and other laws governing international commerce. He also teaches certified fraud examiners, internal auditors and other anti-fraud professionals how to use analytics software in of fraud investigations.
The certified data analyst explained how auditors look for anomalies in digital financial records to spot suspect transactions. Companies that either install the software or hire a data analytics provider also use it to monitor their own business transactions to prevent running afoul of FCPA rules.
Culling years of financial transactions
The FIFA investigation spans continents and involves years of electronic and paper records, but the methods used to find illegal payments are the same when reviewing paper bank statements, deposit receipts or batching, filtering and examining electronic bank records.
“It is valuable to design your analytics to identify potentially improper activity, such as improper payments to a foreign official,” Clopton said. “Detecting illegal electronic transactions can be difficult; rarely do you see payments labeled as ‘bribes.’”
That’s why investigators search transactions to non-profits or charitable organizations linked to a government or an official’s family. Auditors can discover relationships between individuals, organizations and companies by using non-structured analytics. It is one way the FBI can determine associations among criminal gangs.
“There are a number of ways to identify a relationship,” Clopton said. “You can look at social media sites, email activity, attributes in customer files and determine if the payments are going to the person in a position that can have an effect on business.”
Email, chat logs rich in data
Email is rich in evidence: It contains precise communication in the sender’s words, it is time stamped, and it can be traced from origin to destination and contains other digital fingerprints in the background.
Recommind, a company formed in 2000, uses its Context Optimized Relevance Engine technology for “vexing search, classification, eDiscovery and compliance challenges facing today’s large enterprises,” the company says.
Recommind partner Adam Kuhn wrote about the role emails play in the FIFA investigation and other fraud schemes.
“The scheme was carried out, in no small part, by email communications,” Kuhn writes. “But here, the emails helped to form, among other things, the very grounds for wire fraud conspiracy.”
Analytics software can search for key words in emails, map relationships between suspects, and gather other realities hidden in a fraud scheme.
“Searching through a decade’s worth of emails and chat logs, analytics software can create digital histograms that map communications over time, show activity velocity and call out peaks and valleys,” Kuhn says.
Visualizing time and transactions
“Visualization technology connects the dots; who talked to whom? Which email accounts did they use? Phrase analysis provides context to keyword searches, helping investigators associate common nouns that are in proximity to their specific keywords. And smart filters can help narrow the scope of the tools to zero in on a key player, timeframe, or issue.”
What is not so easy to determine is intent, that is, if the money was sent to obtain business that would not be attainable without that payment.
“All you can do is identify red flags that indicate a need for further investigation,” Clopton said.
Cash deposits reveal much
The Justice Department alleges that one FIFA official deposited cash in ATMs and newly created bank accounts. Investigators may have figured that out by searching for deposit amounts slightly lower than the $10,000 limit for reportable deposits.
The Justice Department also accuses the FIFA defendants of money laundering, that is, using deception (mislabeling, wire transfers) to hide the origin, destination and purposes of some $150 million in alleged bribe money during the 24 years the indictment covers.
American Banker magazine reported May 28 that only one unnamed bank refused to accept a transfer belonging to defendants. The transfer: More than $1.2 million a FIFA defendant allegedly tried to divert from a Qatari bank into the accounts of his family members, the indictment alleges.
One anti-money laundering consultant says investigators can use analytics to search bank transaction records for wire transfers to and from banks known for breaking reporting rules or financial institutions under a regulatory cloud.