As a former criminal investigator, I know how frustrating the job can be at times. This is especially true of financial crimes investigations. These investigations seek to obtain sufficient relevant evidence regarding the probability that a criminal act was or was not committed. Financially- based crimes are inherently complicated and rely heavily on circumstantial evidence. It is rare to catch the perpetrator with their hands on the money. The investigator must seek out information and/or documentation from a variety of sources. They may conduct interviews or interrogations. The investigator may obtain court orders, conduct surveillance or even dig through trash. The totality of the facts and circumstances are pieced together like a puzzle, in order to develop the story of what happened, who did it, for how long, and to what extent or magnitude. Ultimately, this investigation and the corresponding financial analysis becomes the basis for a conclusion by the investigator whether or not a crime was committed.
To investigate financial crimes the criminal investigator must have, at a minimum, a rudimentary understanding of relevant financial theory and application. In such investigations, the financial analysis component turns out to be a major part of the investigation. Unfortunately, investigators with little or no substantive training in financial forensics are all too often called upon to perform these types of investigations. Herein lays the frustration.
Investigators are expected to perform at least minimal financial forensics. Training in this specialized area, if provided at all, is usually on the job. The quality and extent of such training depends on (1) whether there is anyone in the group with sufficient knowledge to be a trainer, (2) whether the person with knowledge, if there is such a person, has the aptitude and attitude to be an effective teacher, and (3) whether there is sufficient time to devote to teaching. Even if each of these three requirements is met, the cycle starts all over again when an experienced person retires or moves to a different assignment. As a result, there are many situations where the expectation for job performance far exceeds the background and training required.
Our firm was engaged by a defense attorney to provide financial forensic services in a money laundering case. We were asked to review and evaluate the case, which was built by the criminal investigator. The defendant was a truck driver for a large parcel delivery company. According to the detective’s criminal report, the defendant was allegedly involved in a drug trafficking organization and engaged in money laundering activities. Based on his source and application analysis of financial documents, the investigator attempted to perform an analysis of the cash flows of the defendant. Upon completing this analysis, the investigator concluded the defendant was instrumental in laundering large amounts of cash proceeds derived from illicit drug-related activities because his income was higher than his level of known income from various sources. After reviewing the evidence, our opinion was that the detective’s application of the source and application method was flawed, misleading and ignored potentially exculpatory evidence. During an evidentiary hearing, we provided the defense attorney suggestions regarding cross-examination questions to pose to the detective, which assisted the judge and ultimately led to the money laundering charges being dropped.
Defense attorneys need to be aware of the issues and methods commonly considered by investigators to prove a defendant’s income in these types of cases. Application of methods such as the source and application analysis of cash can look impressive at first glance. However, as they say, “the devil is in the details.” This or any method of financial analysis is only as valid as the foundation on which it is built. This is an example of a case where detailed examination of the foundation for the conclusion of the investigator proved it was sufficiently flawed to warrant dismissal of money laundering charges.
Defense attorneys need to understand that detectives, with the most honest of intentions, can arrive at erroneous conclusions due to their lack of technical knowledge on financial issues. A financial expert can identify such errors and, if necessary, testify in the trial for the defense.