Financial crime investigation: A balanced approach

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By Tim Tyler and Wayne Haynes, 8 July 2024

“Between 1999 and 2015, more than 900 sub-postmasters were wrongly prosecuted due to faulty software”.[1]
 
This statement by the BBC is itself wrong and hints at a weak understanding of the investigation process. The public inquiry into the scandal continues, with fresh revelations on an almost daily basis, but one thing is already clear – the faulty software is just part of the reason for the failed investigations and prosecutions. Evidence presented to the inquiry highlights weaknesses in all four elements required for successful financial crime investigation.
 
This article explores each of these four elements. To some readers this will not contain any revelations. You might say it states the painfully obvious, but, although obvious, the Post Office did not see it for decades. We have the opportunity to remind ourselves and bring clarity to the investigation process, and, crucially, the training and development of financial crime investigators.

Understanding

A clear, nuanced knowledge of the facts relevant to the investigation is vital. This needs to be augmented with a deep appreciation of the surrounding circumstances – the legal and procedural context. The UK government’s Counter Fraud Standards, for instance, highlight the need for knowledge of relevant policies, data protection, human rights and search procedures.
 
Some forms of investigation, such as complex fraud, require a deep knowledge of specific products, markets or trades. By way of example, the authors of this article have during past investigations into fraud allegations, needed to develop a strong knowledge of such areas as the patent process; factoring; the manufacture of earthenware; gold ore reprocessing; the Nasdaq; plantations; and mergers and acquisitions.

Knowledge alone is not enough, however. Successful investigators demonstrate understanding, and with this, the ability to use information – to apply, organise, challenge and make sense of it. It moves an investigation from two to three dimensions and better enables investigators to challenge, probe and make sense of complex or ambiguous information. 

Skills

The College of Policing sets out core investigator skills in the following areas: 

  • Communication
  • Technology
  • Problem solving
  • Teamwork
  • Performance management
  • Prioritisation
  • Report writing
  • Relationship management 

This is useful, but there are many other skills that could have been included. For instance: analysis; interview; time and project management; innovation; and interpersonal skills. The list could go on. The key message however is that knowledge, even understanding, is not enough on its own. This needs to be wielded with the right skills. 

Some skills have arguably been sidelined. For example, with current anti-bias training and mindsets, we risk cancelling out an appreciation of the ability to ‘read’ people and situations. Some might say instinct. It draws on a rich well of unconscious awareness that can shape and guide our thoughts. It carries a health warning of course, needing to be balanced with an awareness of potential bias and the need to corroborate evidence and challenge ourselves. It is, none the less, a skill, even if you’re not likely to see it defined in job descriptions or development plans. 

Investigative tools

Recent decades have seen the emergence of new and existing technologies being routinely used to: 

  • Identify suspicious activity – for instance, the use of artificial intelligence within transaction monitoring systems.
  • Identify patterns, trends and relationships – for instance, software that analyses bulk information drawn from multiple sources.
  • Review high volume documentation – for instance, the use of natural language processing.
  • Organise long term investigations involving many lines of inquiry – for instance, project management and similar software.
  • Present complex, nuanced information – for instance, data visualisation, relationship charting, timelines.
  • Recover data from digital assets – for instance, forensic imaging software.   

We can trace a convergence of technologies such as the combined use of biometrics, big data and artificial intelligence as customer activity is verified, tracked, analysed and predicted within a single overarching process. 

The bewildering array of options and potential commercial partners in this space makes the adoption of relevant systems particularly challenging. Uncertainty about relentless change and evolution of technical solutions; the regulatory and ethical implications of automating certain functions; and the use of ‘black box’ solutions in which the detail of processes and decision making can be opaque – all this creates a hazardous environment in which big decisions to invest in new solutions are made. We need, then, to be sharply focused on our strategic and tactical goals, develop a strong understanding of the many options to meet them, and courageously explore, challenge and at the appropriate moment, adopt systems that meet our requirements. 

Before moving on from this topic, we should note the danger if we abdicate reason and experience in favour of the technology.  We risk elevating our systems to the status of investigative gods. This would be a mistake. The Horizon inquiry offers compelling evidence of where this type of thinking can lead, and a convenient segue to the fourth and final element of successful financial crime investigation.

Qualities

The Horizon inquiry has exposed weaknesses in, not just the technology, and the understanding and skills of the investigators and decision makers, but also their integrity, curiosity and courage.

This is the most serious of the failings, and the reason for the collective rage of so many that have been following the events. The level of anger may be understandable, but it creates a risk that we focus on the individuals rather than, more soberly, considering the qualities that were absent, or undermined. 

A more forensic appreciation and understanding of qualities like courage, integrity, agility and curiosity will help organisations to define the standards, aspirations and values required in all areas of business. The ability to relate the detail of what has gone wrong to the particular qualities that went missing, offers insight and a more articulated approach to corporate values and culture. 

The challenge here is, put simply, human nature. Behaving in the right way doesn’t always come naturally and may on occasions mean acting against our immediate interests. We would be foolish to assume that all involved in the investigative process, from investigator to senior decision makers, are impervious to temptation. We can always find ways to rationalise bending the rules or shortcutting the system – ‘just this once...’ (let the individuals that have never done this cast the first stone). 

The various financial crime and compliance related qualifications the ICA offers are keenly focused on the first and second elements described above – understanding and skills. The investigative tools required to be effective are referenced and incorporated into our materials, but there is no attempt to formally train and develop the essential qualities of an investigator. Instead, the ICA makes reference to the qualities and why they are so important through case studies and challenge within our classroom delivery. 

We need then to create an environment – some might call it a culture – that encourages and rewards the right qualities and behaviours. We need at the same time to build checks and balances into our investigative journeys that mitigate against dishonest, weak or overly risk-averse decision making.

Final thoughts

Financial crime presents a tsunami of threat to individuals, communities, businesses and governments across the world. Taken together, fraud, money laundering and cybercrime eclipse all other forms of crime. The response to this threat is shared between private and public sector organisations. It means designing and building systems, processes, and capabilities with fraud prevention at their heart. There will, however, always be occasions when systems fail to prevent financial crime – and inquiries are triggered. To be successful, these investigations require understanding, skills, effective tools and the right qualities. None of these can be taken for granted. 


This article originally appeared on www.counter-fraud.com and www.i-law.com



 

Don’t forget you can sign up to our dedicated ICA Certified Financial Crime Investigator course.