INVESTIGATION AND EXPERT WITNESS TESTIMONY

INVESTIGATION AND EXPERT WITNESS TESTIMONY PRE-READING NOTE A fraud investigation can cover a wide variety of issues and actions. Fraud investigations and forensic enquires may not involve actual fraud or corrupt behavior but may instead be concerned with a breach of company policy, a problem with health and safety, harassment, or an investigation into security. Fraud itself is defined as a misrepresentation that is intended to deceive a person or business. Companies can be accused of fraud if they make claims about a product they sell that are untrue or made up only in order to make a profit. Fraud investigations are carried out to determine whether fraud has taken place or whether there is evidence of the fraud. Fraud can cause serious problems not only concerning loss of money but physical harm to people and harm to reputations. Fraudulent behavior or unethical actions can impact strongly on a business. Unethical behavior can bring emotional as well as financial trauma from which a business may take years to recover.  Fraud investigations occur when fraud is suspected, and the fraud investigator meets with the client to find out what is alleged to have happened. When fraudulent behavior is known to have taken place, the investigator focuses on why and how it occurred and what can be done to prevent it happening again in the future. Fraud investigations cover a number of procedures, including the thorough analysis of electronic data. Computer forensics is vitally important when dealing with fraudulent or unethical actions in businesses today. It can reveal evidence that would otherwise never have come to light — evidence can be hidden within mountains of electronic data, and only professional computer forensic investigators will be able to uncover it. Computer forensics is one of the first procedures to be carried out in a fraud investigation — making sure that dates and time stamps on files are not changed, and that critical information is not overwritten. A fraud investigation should always be carried out from an objective position and supported by documented evidence. The investigation should be carried out by a neutral professional, so that the company can ensure it is seen to be complying with a commitment to objectivity. The practices used within a fraud investigation should be consistent and thorough.

INVESTIGATION AND EXPERT WITNESS TESTIMONY

Forensic Accountants are often called upon to initiate a fraud investigation for the primary purpose of determining whether a fraud has occurred. Other reasons for initiating a fraud investigation include the following: a tip or concern received (from an employee, a vendor, a customer, or other source), an accidental discovery, fraud uncovered as a result of an audit, or a concern from the business as to the adequacy of their internal controls system.

 Fraud Investigation

A fraud investigation is the systematic examination to obtain the truth as to:

1. Whether a fraud has occurred

2. Who is involved

3. How it was perpetrated

4. How much is involved

 Fraud Investigation Versus Accounting Audit

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COMPETITIVE STRATEGY

COMPETITIVE STRATEGY

PRE-READING NOTE

The old competitive strategies of invention and mass production no longer work in an increasingly turbulent business environment. Successful firms and implementing the new competitive strategies of continuous improvement (constant process improvement) and mass customization--a dynamic flow of goods and services via a stable set of processes. This paper provides a "lens" through which managers can assess their firm's current competitive position, build a vision for where they must be in the future, and craft a transformation strategy to turn that future vision into reality.

How to succeed in today's rapidly changing competitive environment is a question weighing heavily on many a manager's mind. Everything seems to be changing-markets, customer demands, technologies, global boundaries, products, and processes. In the midst of this seemingly overwhelming change, managers are being asked to make critical competitive decisions that will affect not only the present position of their firm (the legal or competitive entity), but also its future success.

Much to their dismay, however, many managers are finding out, sometimes the hard way, that it is a different game, and the old rules do not apply anymore. To compete in today's rapidly changing competitive environment, new strategic responses are required that most managers may have never thought possible. In addition, managers must understand that at the heart of these new strategic responses is innovative management through advanced information technologies.

In the dynamic environment of the business world, a firm needs to constantly focus on improving its competitive strategy. Competitive strategy refers to the way a firm can gain advantage over others operating in a similar market. Rivalry drives improvement and innovation.

Without competition, strategy would be irrelevant. Strategy goes beyond operational improvement. Tactics that are easily imitated do not constitute a strategy.

 Simply improving operations or quality cannot lead to a competitive strategy. A competitive strategy utilizes analysis of the structure of an industry and its competitors in order to identify an optimal position. A competitive strategy will also integrate the strengths and resources of the firm to develop a competitive advantage. A sustainable competitive strategy involves continuous improvement with strategic continuity.

Our discussions will focus on the process by which a successful competitive strategy can be developed. The first step to creating a competitive strategy is to analyze the structure of the industry and the nature of competition. Next, we will discuss how to assess the firm’s internal environment. Once a clear picture of the industry structure and firm attributes are identified, we can consider the options for achieving goals and sustaining a competitive advantage. Industry Analysis In 1979, Michael Porter introduced the business world to a framework for analyzing the structure of an industry. His model, commonly referred to as “The Five Forces,” (Supplier Power, Threats of New Entrants, Rivalry, Threat of Substitutes and Buyers Power) takes a broad approach to competitive analysis. These are what we shall explore in this course.

COMPETITIVE STRATEGY

Decisions generate action that produces results.  Organizational results are the consequences of the decisions made by its leaders. The framework that guides and focuses these decisions is strategy. The framework that guides competitive positioning decisions is called competitive strategy.  The purpose of its competitive strategy is to build a sustainable competitive advantage over the organization’s rivals.  It defines the fundamental decisions that guide the organization’s marketing, financial management and operating strategies.

A competitive strategy answers the following questions.

-How do we define our business today and how will we define it tomorrow?

-In what industries or markets will we compete?  The intensity of competition in an industry determines its profit potential and competitive attractiveness.

-How will we respond to the competitive forces in these industries or markets (from suppliers, rivals, new entrants, substitute products, customers)?

-What will be our fundamental approach to attaining competitive advantage (low price, differentiation, niche)?

-What size or market position do we plan to achieve?

-What will be our focus and method for growth (sales or profit margins, internally or by acquisition)?

The key to strategy formulation lies in understanding and overcoming the system barriers that obstruct the attainment of organizational goals.  An effective strategy recognizes these barriers and develops decisions and choices that circumvent them.

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DUBAI FORENSIC AUDITING - MONEY LAUNDERING COURSE

ANTI-MONEY LAUNDERING

PRE-READING NOTE

Money Laundering is commonly referred to as the concept of concealing, relocating or seeking to retain the profits conducted from a crime. The European Communities Directive of March 1990 defines it as “the conversion or transfer of property, knowing that such property is derived from serious crime, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in committing such an offence or offences to evade the legal consequences of his action, and the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from serious crime.”

Criminals benefit from the proceeds of the crime by usually initiating in complex money laundering schemes which more often than not, finance terrorism and large criminal organizations. However, under UK law money laundering can also encompass the simple ownership of the proceeds of criminal's own crime. The Proceeds of Crime Act 2002 (PoCA) identifies this to be “wide-ranging and encompasses mere possession of criminal or terrorist property as well as its acquisition, transfer, removal, use, conversion, concealment, or disguise”..

Many organizations in the finance sector, such as banks and accountants, are required to employ anti-laundering safeguards and implement secure systems in respect of money laundering. Reporting obligations are strictly set whereby firms must report suspicious activities to The Serious Organized Crime Agency (SOCA).

Money which is laundered by criminals worldwide is estimated to be the equivalent of 2-5% of the world's Growth Domestic Product (GDP) - an estimated £20 billion is laundered yearly in the UK alone. Whilst smaller criminal organisations deal in diminutive amounts of cash, the more serious criminals have a propensity to locate a safer place for the proceeds of their crime in another country, quite possibly a self-governing state, where there is less suspicion and more security for themselves. This safeguard arrangement is a renowned precaution for criminals to distance the proceeds of their crime from the crime itself.

“From the point of view of the criminal, it is no use making a large profit out of criminal activity if that profit cannot be put to use…putting the proceeds to use is not as simple as it may sound. Although a proportion of the proceeds of crime will be kept as capital for further criminal ventures, the sophisticated offender will wish to use the rest for other purposes…If this is done without running an unacceptable risk of detection, the money which represents the proceeds of the original crime must be "laundered"; put in an estate in which it appears to have an entirely respectable provenance”.

Subsequently, the UK government has implemented many instruments to prevent a criminal from abusing the UK's financial system and benefiting from the proceeds of crime. The UK law is of the first which requires any British citizen to provide an obligatory report to the authorities about not just the actual awareness that one is involved in a crime but a suspicion also. This signifies both, a moral and legal obligation for British citizens and indicates the importance of compulsory responsibility within the UK. However, despite this, it must be analysed how these changes have affected professionals within the private sector who have created an act by omission.

Prior to the PoCA 2002, there were separate offences for drug money laundering. These were outlined in the Criminal Justice Act 1988 (CJA) and Drug Trafficking Act 1994 (DTA). Under the DTA and CJA, it was problematic for the Crown as it sometimes had difficulties analyzing when charging under the appropriate Act the foundation of the criminal Proceeds. The 2002 Act has significantly amended all key money laundering offences and associated definitions. It will be examined how the PoCA has replaced the parallel offences with single offences to resolve confusion. Nonetheless, there have been many developments ever since. These comprise of the Serious Organized Crime and Police Act (SOCaPA) 2005, Terrorism Act (TA) 2006 and Fraud Act (FA) 2006. Furthermore, independent government bodies, such as the Financial Task Force on Money Laundering (FATF) and the Joint Money Laundering Steering Group (JMLSG), have been created to provide assistance for both, individuals and organizations in ensuring preventative measures are taken to help prevent money laundering

Money laundering is an emerging problem currently faced by all countries around the world, and whilst many changes have been introduced to prevent it, it can be seen from the evidence of this research that the rudiments of this misdemeanor remain is more or less still the same. Technology has provided, and will probably continue to provide a more intelligent and sophisticated ways to convert the proceeds of a crime into legal assets. It has been demonstrated that money laundering and its affiliation with organized crime are more often than not connected in one way or another. The massive takings that accumulate from such areas as drug trafficking, domestic fraud, VAT fraud, etc, are usually used to aid operations in progress and to create status and admiration for those in control of the criminal business.

The degree of intelligence and sophistication within organizations is a major concern due to the recent cases involved corrupt public servants and politicians. Though the law has vastly developed over the years, the fight against money laundering continues. An international effort continues through regulatory authorities, such as the introduction of the 40 (+9) Recommendations by the Financial Action Task Force (FATF).

The FATF has acknowledged four significant threats presented by money laundering activities. Firstly, simply failing to prevent laundering from happening makes it a lot easier for criminals to gain access to key information and profit from their illegitimate conduct. Secondly, this failure then allows criminal organizations to finance other criminal activities such as Terrorism. Thirdly, the accessibility of the financial system by launderers creates a risk for all institutions in the finance sector. Finally, the power and wealth of criminals which is derived by laundering can ultimately place the national economies and democratic systems under threat.

Thus, money laundering poses a threat to the UK's financial development, political integrity and steadiness of our country. The Bahamas is a primary example of dishonest investment resulting in the government being regarded as corrupt and the country's financial sector on a downfall. The stability of a countries economy relies on well-constructive preventative measures to prevent criminals from cheating the revenue into claiming millions. Loopholes still exist within the English legal system, and though we cannot close them due to innocent traders, other strategies can be introduced to prevent this, as demonstrated in the Bond House Decision.

Money laundering is carried out first and foremost through financial institutions and it is therefore crucial that preventative measures against money launderers are enacted in those sectors. The recent Money Laundering Regulations 2007 has rung alarms in all institutions dealing with finance and has tightened up security. Now, firms such as banks, accountants, solicitors, loan companies, mortgage companies and many more have had to undergo training to prevent money laundering. This does indicate that the government is taking this issue seriously but so are the perpetrators. However, investigations have discovered that money laundering exists within members of a talented criminal class, such as professional money launderers. These comprise of accountants, lawyers, bankers and many other practicing professionals. Most, such as Donald Mackenzie – a bank manager in a £21 million fraud case, are fascinated by enormous amounts of wealth and a celebrity lifestyle. This has been brought to the attention of the authorities and legislation has been enacted so that now no financial institution or professional will be protected from the provisions contained within the UK's legislation.

In order for this to happen effectively, we must amplify our efforts on identifying the proceeds of crime and preventing criminals from accessing the financial system. Only by using these methods will criminals and money launderers become more doubtful and find money laundering to be a risky activity and ultimately one seen to be not worth the risk. Professor Bill Gilmore (1993) states: "for the first time, to take co-ordinated and effective world-wide action to undermine the financial power of drug trafficking networks and other criminal organisations, is now in sight if not, as yet, fully within our reach".

However, there must be political assistance in helping the nation to cement together a strong well-constructed international operation, against the battle against money laundering.

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ANTI-MONEY LAUNDERING

What is Money Laundering?

Definition

A basic definition of money laundering is that illicit funds from one source are deposited to another while the original source of the funds is hidden. The money then appears without fines, penalties, or legal restrictions elsewhere, through a series of transactions and becomes available for use in a legal setting.

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