To find the bad guys, you’ve got to think like a bad guy, according to Professor Dick Riley. He said though special software can be helpful, investigating money laundering can be like looking for “a needle in a haystack.”
Riley spoke to Managing Editor Jennifer Gardner about the Forensic Accounting and Fraud Examination Master’s program here at WVU, and how he teaches his students to follow the money.
Q. What is the role of a forensic accountant?
A. Forensic accountants investigate issues where there is a legal problem and money is involved. As an example, forensic accountants investigate money laundering, chasing bad guys around the world through the books and records. The investigation not only help to develop a case against, let’s say drug traffickers, but also follow the money of those traffickers so that the authorities can also take the money away from them. Forensic accountants not only support a conviction, but also facilitate asset forfeiture so (the criminal) has to give up the profits from their nefarious acts.
Q. What strategies are used to detect fraud?
A. What fraud examiners are good at is following nuggets of money movements and nuggets of financial transitions, and being able to take a lot of little pieces and pull them together and organize them in such a way that you can see the bigger picture of what’s going on. In other words, most bad guys—if they’re going to launder a million dollars—are not going to make one transfer that moves $1 million dollars. They’re going to move it in tiny little pieces. So fraud examiners help identify all of those pieces, pull them all together, so that we can see what was really transferred was a million dollars, just done in 15 or 20 different pieces.
Q. What can be difficult about tracking such large amounts of money?
A. Concealment—Everything is disguised. In the world, in a day, there might be a trillion financial transactions, and we’re looking for thousands of transactions associated with money laundering. The problem is that in most fraud and money laundering situations, the number of illegal activities is very small compared to the total population of transactions. Basically, we look for a needle in a haystack. You just have to be very careful and pay attention to very small clues. We also have software that helps us look for pattern recognition and stuff like that to help us detect anomalies. Once we see an anomaly, we have to realize what that anomaly means and then organize all of the anomalies in such a way that we tell the whole story.
Q. Has technology progressed much over the last several years?
A. Technology has had a huge impact, probably in the last 15 to 20 years, more than anything. We now have big data technology and we have software programs. One that we use at WVU is called IDEA, and it’s a data mining software package devoted to forensic accounting and fraud examination issues. It’s designed to help us look for anomalies often associated with fraud and financially-motivated crime. For example, if someone is writing a check and running it through the bank multiple times, IDEA helps us identify duplicates very quickly.
Q. What skills do you teach students so they are able to find “the needle in a haystack?”
A. We start almost every class with a creative thinking exercise, and the reason being is that if you’re a good person chasing bad people, you don’t think like a bad guy. So in order to think like a bad guy, you have to think very creatively. So we spend a lot of time on creative thinking, we spend a lot of time on how to organize and piece disparate data together so it tells a story, and we also spend a lot of time on the graphical presentation of our results, so that we can convert a lot of numbers and charts into pictures for juries to help them understand the flow of transactions and the amount of dollars involved.
Q. Why do you believe students are interested in the fraud examination program?
A. One of the things we do is take our students to the crime scene houses to search for evidence; I also think they like the excitement of trying to figure out a puzzle, the idea that they’re helping to solve a crime. In the end, students love the intellectual challenge of trying to solve the problem, wondering if the bad guy can be smarter this time and get away. It’s a lot of tenacity.