Why Use A Forensic Accountant Defending Criminal Fraud?

A review of the different types of work carried out over recent years revealed some interesting results. The most positive and satisfying outcomes invariably came when working as a forensic accountant defending criminal fraud.

This may seem at odds with my previously stated goal of providing an essential forensic accounting service to fraud regulators. It is not…because independence in forensic accountancy is key. I would rather see the right outcome in any matter, no matter what side I am on – gamekeeping or poaching.

This means that I am sometimes instructed by the regulators as a last resort. When a reasonably clear case (in the Prosecution’s eyes) is being challenged robustly by the defence, it may need another level of support to the allegations being made.

Why, Is Defending Criminal Fraud Satisfying?

It’s not…well not all the time. Sometimes the forensic accounting review simply supports the Crown’s allegations. However, in large and complex cases of financial fraud the story can be quite different.

A few years ago I was asked to assist in an extradition case against a Kenyan businessman now residing in London. The Kenyan government had obtained highly expensive forensic accounting reports from top international firms of accountants, but nobody really knew what the case involved.

The forensic accounting work examined the huge volume of documents relating to the purchase, shipping, financing and distribution of oil in Kenya. The evidence clearly pointed to widescale public sector corruption. It also highlighted financial difficulties experienced by the Kenyan businessman’s company. The problem turned out to be nothing other than his company becoming insolvent in an extremely volatile global market.

The defending barrister responded in conference to my draft forensic accountant’s report with the words “…so that is what it was all about…”

Defending Tax Fraud

I get very angry about the level of tax evasion taking place. I get angry every time I pay my VAT, Corporation Tax and Income Tax, thinking about those that do not. Very often solicitors instruct me in cases of tax evasion on behalf of clients. However, defending criminal tax fraud in many cases is desirable. HMRC has a very difficult job recovering all the tax that is due. However hard they work, they do not always get it right. They have to assume the worst, and very often this disadvantages someone who has simply “got it wrong”.

Our work will involve interpreting the Crown’s case, and then proceeding to assess the defendant’s finances afresh. This means that we examine turnover and profitability in detail. We compare the results to HMRC’s tax calculations. We will challenge HMRC’s assumptions at all stages. It is essential that we consider all relevant allowances and reliefs when re-calculating the tax due.

We Are Not Legal Advisors – But We Can Spot A Problem!

Our advice to any business is to keep good records and ensure that they are always up to date. Many of our cases involve reconstructing accounts that have lapsed. In these cases HMRC will assume the worst, and often estimate more tax than would be properly due.

A major criticism we have with many businesses is that the records are overcomplicated. For example, it seems to be vogue to have many different bank accounts – an account for each activity it seems. This is fine when you keep records up to date. The trouble is, it simply invites HMRC to ignore inter account activity or relevant allowable expenditure if problems arise in the future.

Of course, over complication of accounting records and multiple bank accounts can be a very big red flag that fraud is taking place. Money laundering relies on obscuring the trail of cash – and moving it between several bank accounts is one way of achieving this.

So What Did Our Fraud Case Review Reveal?

We read about how certain crises give rise to the prevalence of fraud in ensuing years. Remember the “Credit Crunch” and collapse of the banks some years ago. Many predicted that there would be substantial fraud coming to light after this. The pandemic promoted similar warnings. However, our work seems to show a steady mix of diverse frauds – sometimes reflecting recent trends but mostly a sad reflection of the difficulty the authorities have dealing with what appears to be a criminal sector that is increasing in both size and motivation.

We will continue defending criminal fraud. It is to ensure balanced and fair outcomes. Our view is that legislation should expand confiscation and forfeiture powers. This would recover much more criminal wealth than is the case. This in turn would further fund the fight against fraud – and yes, more opportunities for the independent forensic accountant!

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