Introduction to forensic investigations and money laundering.

Hello.

I have a caveat and, of course, something about me.

First, about me: I’m Nigel Morris-Cotterill. I had a career in law, including high-value litigation and commercial work for companies in many sectors. In 1994, I began to develop a specialist practice in financial crime risk and compliance and eventually left the practice of law entirely. In 1996, I published my first book, How not to be a money launderer which introduced the concepts of trade-based financial crime, the risk-based approach and other things that, later, other people gave names to. In 1999, I presented a paper at York University on the use and abuse of the internet in financial crime and later that same year was invited to present it at The Multimedia University in Cyberjaya, Malaysia.

For thirty years, I have toured the world giving lectures, delivering seminars and advising companies on how to reduce the risks that they will be victims of criminals who try to defraud them or to use them to commit crimes such as money laundering, terrorist financing and corruption.

I should make a policy statement so that my later words are not misrepresented: to be absolutely clear: I want law and regulation to make it easy for financial institutions and others to detect and deter and to report suspicions of relevant financial crime. I want compliance to take a back seat to the question of risk for the simple reason that it is risk awareness that subsequent action that works towards the prime objective of crime prevention and the connected consequence of confiscation of benefits obtained as a result of crime. Internal compliance is an essential part of that process. Regulatory compliance has become a hindrance to that process. The current global legal and regulatory regime does not work as intended if the intention was to work to reduce financial crime; if it was to create a leviathan built of a cartel of large accounting companies, training enterprises and civil servants in regulators and some financial intelligence units, operating with impunity as judge, jury and executioner, then the past 30 years has been remarkably successful.

Some of us still believe in the original mission and we strive to build risk systems that will protect organisations against criminals.

I am highly critical of the current regulatory regime as it is structured in many countries: the purpose, i.e. to detect, deter and ideally to prevent various offences has been de-prioritised in favour of an insanely complex and expensive regulatory regime that removes the flexibility that dealing with risk requires and instead micromanages regulated businesses to the point where failing to tick the boxes required by regulators is a bigger risk than criminal activity.

Of course, everything in this lecture should be regarded as being my intellectual property. The video itself is owned by Vortex Centrum Limited as to mechanical copyright and by me as to performance rights. Nothing in this paper is intended to be or should be taken as legal advice. The paper will be published in full at both countermoneylaundering.com and World Money Laundering Report. The paper is in two parts: one relating to forensic accounting and the other relating to money laundering and related activities.

Now the caveat: this lecture was booked for delivery live and in person in a lecture hall. All the arrangements were in place, so far as I was concerned, but at short notice that face to face delivery was cancelled. It would be unfair of me to name the University concerned but it’s important to know that I know I’m rubbish at presenting in this way and a live presentation, where I can prowl the stage and engage the audience is by far how I perform best. So while the content I will deliver is right, as to me… meh. So don’t judge me!

First we’re going to look at Forensic Accounting and because all lectures work best where the audience can relate to the subject matter, we are going to talk about your discipline and about you.

Forensics, nothing to do with forensic accounting, is an ancient subject. And by ancient, I mean ancient, as in ancient Greeks, ancient Romans, ancient Chinese and, as we’ve learned in the past few days with the discovery that Man, in the East of England, had fire some 350,000 years before what has previously been thought to be the earliest that Man could cook his food and sit around having a chat on long winters’ nights.

We can regard what the as yet un-named Man did to get fire as a form of forensics: he discovered that he could strike a type of stone called Pyrite, or “fool’s gold” to get a spark which would set something else on fire.

Now we might say that the process of doing that was trial and error and that is almost certainly true but trial and error only produces results when failures are recorded, analysed and a new test done. Otherwise, we simply make the same mistakes over and over again.

That’s the essence of forensics: apply what you know to what you see and record the results for later presentation to others.

In a recent paper called “Poisoning Crimes and Forensic Toxicology Since the 18th Century”, Katherine Watson, Professor of Criminal Justice History at Oxford Brookes University looked at a very specific aspect of the discipline of forensics, that of the use of poisons as instruments of homicide with particular attention the 18th Century and afterwards.

Of course, poisons long predate that period as does the study of poisons. Poisons have been used in all cultures and all sectors of society including the administration of poisons by the use of venomous creatures. If we look at myths and legends, the earliest part of three of the world’s five major religions includes the story of the poisoned apple in the Garden of Eden, a story which also introduces the concept of fraud. Hence the asp that killed Cleopatra in Ancient Egypt and the alleged 15th Century serial killer, Lucrezia Borgia. I say “alleged” because as often happens, truth and fiction are blurred, history is written, then re-written and facts become mere allegations as new versions of stories are written.

And that is what you will find in every single investigation you take part in. Facts change, some stop being facts and some opinions become fact. Today’s false negatives may easily be tomorrow’s real positives. This has always been a problem but with today’s technology, false positives and false negatives are a major cause for concern and can destroy the reputation of anyone that relies on them.

Watson forms the view that “The easy availability of deadly poisons in 19th-century Britain, Western Europe, and the United States led to widespread public anxiety about the prevalence of murder by poison, resulting in what might be termed a “poison panic.” The fear was fed by well-publicised reports of trials and executions which, though not especially numerous, seemed indicative of the dangerous incidence of a unique type of homicide, one that was particularly difficult to prevent or detect. As a result, poisoning crimes stimulated the development of the earliest medico-legal specialism, forensic toxicology.”

Again, this is directly relevant to the world you are going to step into: as Malaysians, you are used to media and social media reporting, some of which is little more than fanciful opinion and the vast majority of which is unfounded opinion that gains traction not from valid endorsement but by so-called viral repetition.

The Greek storyteller, Homer, to whom the ages have been kind and he is now described as a philosopher, wrote in book 4 of AENEID “ Rumour runs through Libya’s great cities – Rumour the swiftest of all evils. Speed lends her strength, and she winds vigour as she goes; small at first through fear, soon she mounts up to heaven, and walks the ground with head hidden in the clouds.”

Homer was a contemporary of the 7th century BC Greek colonial expansion when Libya was annexed. So while today we might think about viral messaging, social media and general lack of discipline over the information that investigators are subject to fake news and its various associates are so long established that we can consider them part of the human condition: it’s only the speed and breadth of the false information that has changed – and even those things were a concern three thousand years ago.

As we will see over and over again, basic principles do not change: only fashion as to delivery mechanisms. If you learn the basics, you can apply them over and over again. If you learn the latest fashions, you have to learn everything from scratch when something new comes along. That’s an intellectually bankrupt approach and a massive waste of time.

But guess what: that’s exactly what so-called generative artificial intelligence does: every time you modify its instructions, it build again from scratch and what you get the second time maybe be fundamentally different. OK, so Google’s Nano Banana Pro can make edits to images it has produced but those changes are quite simple e.g. change the colour of the background, so there is some movement in that area but I use many such tools and it’s almost impossible to get the same output twice, albeit with something added to or subtracted from the original instructions.

Forensics in financial investigations

In terms of financial investigations, the term “forensic” came into vogue in the late 20th Century in relation to due diligence in commercial transactions. The term “due diligence” had a very specific meaning. As a lawyer in Mergers and Acquisitions, I worked with Forensic Accountants to make sure my clients were getting what they had been told they would be getting: no less and, equally importantly, no more.

Something that often fascinates me is how often I read of companies that, having taken over another company, are exposed to fines, penalties or litigation that were not uncovered, or were not accurately assessed, during the pre-completion period. This, to my simple brain means one thing: someone lied or misrepresented the financial condition of the company or someone else didn’t ask the right questions.

In litigation, forensic accountants would search records looking for assets that had suddenly disappeared or, in rare cases, appeared. We might think that this work would be post-judgment, i.e. a the asset recovery stage but that was never my view. In two specific types of case, insolvency and family law, the only thing that really matters is whether there are assets that are not being disclosed: so by definition, that’s pre-judgment. In litigation lawyers have to manage their clients’ expectations – and intentions. Many parties in litigation say they don’t care what litigation costs, they just want to teach their opponent a lesson – that attitude soon evaporates when the solicitor says something like “this case will cost a quarter of a million pounds, so that’s the up front payment I want before we start.” But the clients’ intention is often more insidious, saying “keep going” when it might be more financially sound to give up. It’s in these cases where, even before issuing a letter before action, I would want a financial investigation into the proposed defendant to demonstrate to my client whether the litigation was simply throwing good money after bad. There is no point in suing a straw man because, ultimately, he probably has nothing left to lose. Unless investigations can turn up some hidden resources. That’s where investigators, which includes forensic accountants come in.

So, while it’s likely that most of you think your work will be in relation to recoveries in the sexy world of international high profile corruption cases, that’s not the bulk of the work you will do and probably most of you will never do that kind of work. But you might get high-value, low profile, work in international civil litigation. Same job – different regimes.

Those different regime make an enormous difference to your capability. While law enforcement has a network of international memoranda of understanding, often through a group known as The Egmont Group, it is nevertheless a patchwork. Interpol, Europol and similar organisations do not have a comprehensive asset recovery database. There is a database but we have to recognise that the vast majority of crime never reaches it and of that which does, much is not accepted.

For example, the issue of an Interpol Red Notice is not automatic, as Malaysia found when it attempted to issue one for Clare Rewcastle-Brown over her reporting of matters of interest to certain politicians.

But outside the criminal law net, in civil law there are no such databases. Well, not officially. In fact, there are information services that scour the internet looking for data on people and companies and retaining it and cross referencing it. But, and here’s something quite important: those databases are highly selective, pick information up from public sources e.g. newspapers which only report what is “newsworthy”. And some actively reject valid data from companies in the same field but from a different sector e.g. will accept information from banks, will not accept information from so-called FinTechs. There is therefore a built-in lack of information.

Further, most civil litigation cases are not reported in the Law Reports. Lower courts are almost never reported, most cases in more senior cases are not reported unless there is public interest or a novel point of law. This means that much of the information that you could use is not only not collected, it’s not even available.

Worse, some cases are confidential – matrimonial cases for example.

Here in Malaysia, where law reports are sporadic and even then not readily available to the public you will not be surprised by that but while the reasons are different, the result is the same across the world in every form of legal system.

One of my professional colleagues found that one market leading information service did not pick up on a significant court case that raised serious questions about whether financial services should be provided to a a company. An alert money laundering reporting officer had a feeling that there was something missing from his reports and made enquiries and found the case. He took it to the information provider and told that provider about the missing, relevant, information. That provider said “we didn’t know because it’s a civil case and we don’t report on those” or something to the same effect. That happened in the customer acquisition process, or Know Your Customer. At least that’s what we used to call it before someone decided to create confusion.

Due Diligence in relation to money laundering, etc.

In relation to financial crime, the term “due diligence” has been adopted and used in a related but fundamentally different way to way I’ve been using it. I suspect it was adopted by accountants who wanted to talk their way into the Know Your Customer process in financial institutions when in fact such inquires are not accounting inquiries at all. The reason for this is simple: at the time of customer acquisition, the purpose of Know Your Customer is to ascertain whether the applicant for business fits within the company’s risk appetite and / or presents suspicion of a specific risk.

In 1788, Samuel Farr described his book Elements of Medical Jurisprudence, as “A succinct and compendious description of such tokens in the human body as are requisite to determine the judgment of a coroner, and of courts of law, in cases of divorce, rape, murder, &c. To which are added, directions for preserving the public health.”

Farr’s book is widely regarded as the origins of the connection between forensic medicine and law. Watson concentrates on his views relating to poisons, because that is what she was studying, but Farr’s work encompasses a much broader range of harms.

Forensic work means to closely examine, analyse and form a view on the detail and to ascertain what detail may be missing. Investigations look for that missing detail and prove its existence or absence and to feed that back into the examination.

In short, it’s to find facts and present them without opinion. But in order to find the facts, the process often involves forming opinions and acting on them. It involves making what, for want of a better expression, we can call “educated guesses” as to where to look next. Those rarely come from hard data which is another reason that machines can’t do this work properly: in order to find the data, investigators have to apply a broad range of information and even feelings to know where to look.

You let the facts tell the story and the story is the reason you are doing what you are doing. We talk about “asset tracing” and it means to follow the money, either towards where it is now or where it came from. One is about confiscation of assets, the other is about proving involvement in an offence.

So, if that’s what you are doing and why you are doing it, when it comes to money laundering, how is it done?

We can divide it into two aspects: where there is currently no cause for suspicion and where there is currently a cause for suspicion.

Let’s again look at the question of forensics in medicine. In a paper in the British Journal of General Practice in 2021, David Mummery, a general practitioner in the UK, refers to the work of De Edmond Locard, a criminologist from Lyon, France who died in 1966 in his 90s. Locard’s early work, published in the late 19th Century, advanced the theory that “every contact leaves a trace”. It’s called Locard’s Exchange Principle and, in full, it says that “the perpetrator of a crime will bring something to the crime scene and will leave with something from it.”

So, medicine and criminology involving examination of things, be they bodies, beds or anything else. Any touch results in the exchange of something, like when a white car brushes against a blue car: there’s white paint on the blue car and blue paint on the white car.

In all financial crime, there are touch points : a person deposits money in a bank. The bank has possession of the money and the person has an acknowledgement of deposit: call it a receipt.

But what if he deposits the money into a bank into someone else’s account. What touch points can you see?

But en passant, there are two things that need clarification: first, what is money, for money laundering purposes and secondly what is a thing?

Only a decade ago, there was a vast divergence between what ordinary people, economists and those of us engaged in financial crime risk and reduction considered money. And all of them had a different view to politicians and those who make policy.

The man in the street thought money was the notes and coins in his pocket and that which he had in his bank accounts. In short, it was money if it had a dollar, pound or other currency symbol in front of it. Remember that word “currency” because it causes trouble later.

The economist thought money was anything that had value that could be used as a medium of exchange or in barter.

The politicians and policymakers thought money was something they could control through the money supply, a notion that had lost all credibility during the global financial crisis that started in 2005 but economists, politicians and policymakers deliberately denied there was a problem and, indeed, actively promoted policies that were guaranteed to make the crash worse when it came.

One of the consequences of the global financial crisis was that there was a slow realisation that “money” was not what the man in the street thought it was, that it was beyond the economist’s idea of something that could be sold or exchanged and was now only data, albeit data with some kind of token for daily use. Economically, it also became clear that there was, in financial terms, no money at all. There was simply a belief in a notional construct called currency. In just one decade, driven by fashion, technology companies and governments, the world has undone thousands of years of reliance on notes and coin and other tokens.

Now, value is stored in accounts, not in pockets and wallets and that has material consequences.

We are driven by commercial concerns to change our way of life: from a single bank account with a debit card, it is now almost necessary to have multiple electronic wallets and to hold balances with multiple financial services businesses.

Whereas multiple banking arrangements might have been a cause for inquiry, now it is the norm, not a cause to look further. Yet, as an investigator, you will have to locate them all and to trace money going into and out of each of them. This leads to complexity and cost and increases the probability of failure.

Today, the definition of “money” as it is used in relation to e.g. money laundering has gone beyond the economist’s view, partly because of the dematerialisation of money, partly because of the reducing dominance of currency as we have for thousands of years understood it and partly because of the ease of operating in a wide variety of currencies including virtual currencies.

What was once called “the audit trail” now looks like a three-dimensional spider’s web with multiple hubs. Visualise that for a moment: while we think of a person’s financial network as being a simple, two dimensional network with the person at the hub, now we must think of multiple networks, each with their own hub, each operating independently of the hub and, often, acting on instruction sets that are not always activated by the person at the original hub.

This is a development of the financial networks that have long been commonplace: the use of accounts and multiple identities, for example corporations and trusts, across the world, using multiple jurisdictions, has been the bane of the lives of investigators for many years. The so-called “offshore” world gets the blame but the real blame lies with the international law and accounting and banking enterprises that set up business in relevant jurisdictions and sell services to non-residents: the appropriate view is that it is the customers who are offshore relative to the jurisdiction, not the jurisdiction that is offshore relative to the customers’ home jurisdiction. This latter approach is that which has led to hostility against so-called havens for tax and secrecy. Think of it like this: we are offshore to them, it’s not that they are offshore to us.

In fact, the genesis of the idea that money is disassociated from its physical form is not new. Again, we look at history. 4,000 years ago, or thereabouts, the Emperors of northern China had a simple approach to taxes: go to traders and demand their money or they and their families would be killed. Merchants on The Silk Road started to walk around in clothes that were not much more than rags and moved from their mansions to very modest homes and they sent their families to Canton or Shanghai where there was international trade by sea and a far less aggressive approach to taxation. The system that is today globally referred to as hawala began in China at that time: the traders in the north would hand over their money to a chop dealer and arrangements would be made for the equivalent sum, minus a fee, to be paid out to a designated recipient in the south. For our immediate purposes, what we are concerned with is that the value moved but the physical currency did not.

So if we now look at value, we reach the position that English law adopted in 2002: it is not money that is laundered, but “benefit.”

And that opens the door to what I had explained in my first book, How not to be a money launderer” in 1996: for money laundering etc. purposes, anything that has value can be the vehicle for money laundering and it does not need to have a physical form.

So, the use of a car, holiday home, even time itself, can be considered a benefit because they can be traded. If you borrow something belonging to a money launderer, you are a money launderer. You can borrow from someone who has evaded taxes, been paid to help someone slip over a border or defrauded a little old lady out of her life savings using an online fraud: because of the principle known as commingling, any benefit that arises in whole or in part from the proceeds of crime represents, in its entirety, the proceeds of crime.

If a car accident insurance fraud generates 1000 and that 1000 is used as part payment for a car costing 3000. The whole value of the new car is regarded as proceeds. That’s information that you might uncover during an investigation.

We also have to address the difficult question of what is “a thing.”

If we take the view, as we must, that money means value not currency, then we are tempted to say that “something” has value but while in common use a thing has physical form, in law it’s more complicated.

Money in a bank account is data and data is not a thing. Worse, that specific data represents a debt, which is known as a chose in action. A chose in action is enforceable but, historically, it cannot be stolen because only things can be stolen. Around the world, laws have been expressly made to establish that money in a bank account can be stolen but that same problem arose in relation to crypto-assets e.g. crypto-currencies and non-fungible tokens. The irritating thing about this is that the problem was entirely foreseeable when the law was changed but those making changes are not, usually, very well versed in risk management. And so while the legal standing of money in a bank account was changed, the legal standing of virtual assets was not despite the fact that virtual assets in a non-crypto form, had been a big challenge in the mid 1990s.

Where does that leave us? It leaves us with a mindbogglingly complex regulatory system, with many variations, all over the world. The distinction between “money” in inverted commas and virtual assets has become artificial. While software people talk of “tokens” they are not things you carry around in your pocket.

The end result is that the investigative world, which operates within the structures set by governments, concentrates on what can be seen, touched, tasted and smelled within a specific jurisdiction while teenagers can create global networks of financial hidey-holes with no obvious connection to anything else.

The investigative techniques are fundamentally the same and will remain so but there are gaps in the audit trail, leaps across asset classes, providers and jurisdictions that will defeat even the most intrepid investigator.

OK: let’s start to look at the work a forensic accountant does.

As I said, I used forensic accountants extensively in due diligence in commercial transactions such as mergers and acquisitions. But that wasn’t the only place I used these skills. I engaged them in personal injury cases to ascertain an appropriate level of damages. I used them in civil litigation to assess the damages there and, of course, in matrimonial and insolvency cases where hiding assets was all part of the game. Anywhere that there was asset recovery, the forensic accountants would look for money trails and I’d get injunctions to prevent the disposition or destruction of assets.

In a world where people like to dream up titles, the Certified Fraud Examiner has become an alternative name and, because there is a certification scheme, people like to get the CFE certificate. It amuses me to think that in the criminal legal system we had the coroner whose job became divided into the coroner who hold inquests and a new title: the medical examiner.

Fraud examiner, medical examiner…

Looks like a pattern, doesn’t it?

Where do you start?

Here’s where we start to talk about you, how you will develop in this discipline and where it might be going.

Your job is not self-starting. You don’t walk down the road and offer passers by your services. You only get work when someone needs you and contacts you. So you need to build a network. The precise relationships will depend on many factors: large corporations may call you in, say “we think someone in our accounts department has been embezzling. Can you come and take a look?” But in many cases, the call will come from lawyers representing clients. In most cases of this sort, the lawyers will be your client.

This can lead to some difficult conversations: the lawyer sets the terms of reference and your fee. But the lay client might insist on interfering, suggesting things you might do, creating mission creep. That means your fees increase or your profits reduce. Often it will be the latter: you won’t want the lay client to complain you were uncooperative and you won’t want the lawyers to be angry because you are adding hours to the agreed bill.

So, if you go away from this lecture with one lesson ringing in your ears it should be this.

Always tell your client if there is mission creep, an enlargement of scope, and say that either the work must stay as agreed or additional fees must be agreed.

Some people deliberately agree a scope narrower than that which is really needed, relying on the unwillingness of the contractor, that’s you, to rock the boat.

If there is a second lesson, it should be this: a client that tricks you into more work than agreed but will not pay for the additional work is not a client worth having.

Third lesson: price every job according to its scope. Never, ever, agree to give a discount on the promise of additional work unless you have a contract for that additional work and you price both jobs as a package.

Fourth Lesson: agree stage payments or a monthly retainer with awards on set stages. The lawyer is doing that as against the lay client so he’s got the money in hand in his clients’ account and if he hasn’t, it’s because he’s billing and collecting the money he should be using to pay you.

Fifth, you probably won’t get fees deposits but you should try. If you do, the deposit should be for an amount equal to your expected fees for the next month plus expenses and taxes. Bill monthly and in your engagement letter make it clear that you will cease work if bills are not paid on time or if the amount you are holding on deposit runs out.

Honestly, it’s not a great idea to try to set up on your own. Technically, there’s nothing to stop you but getting work is hard and there is increasing competition in everything where investigations are needed. It’s best to work for an accounting or law company. In Malaysia, international law firms will have forensic accountants on the staff but local firms probably don’t. After a while, you might have several senior contacts in professional firms but I can tell you that as of today, those who have been in your field for as much as 50 years are finding it hard to find jobs and even harder to find jobs that pay enough to maintain a team. Pure investigation companies aren’t dead yet, but as independents many are struggling, often month to month.

The reason for this is in many ways a cultural shift, in part but not entirely driven by technology.

Before I explain that, let me say something very important: don’t buy into the absolute lie that there is any such thing as artificial intelligence. It does not exist, it cannot exist and it will never exist. Computers are in the most fundamental way limited not by their software but by their architecture. Everything they do, and the way that they do it, is reduced to two states: on or off, yes or no, true or false. Even so called fuzzy logic is just a yes/no condition awaiting an answer. Machines are, simply not intelligent. They are tools. They are also limited by their software designers understanding of the task in hand. All too often companies think “the answers are always in the data” but that’s simply not true: the answers are in the results of the processing of the data that the software has access to.

The fundamental question, and the fundamental risk, is this: who is instructing those tools? Here’s a hint: it’s not you.

When you use a computerised tool, how much control do you have? Does it do what you want it to do or is it doing what some random system designer who worked in the company for six weeks three years ago introduced into its systems.

I assume that you all play with so-called AI tools for lots of purposes. And I assume that you are all aware of the risks that the information you are provided with will be the result of badly programmed software that will introduce fictional information. I don’t use the word “hallucinations” because to hallucinate is a condition that afflicts sentient beings. Incredibly, there is a group of people advocating for computers to be given rights as if they were sentient which, for the same reasons as I set out before, they cannot be.

The trouble is this: they can be programmed to fake it.

Tools

Your job depends on data and you can’t do it unless you have all relevant data. That’s fine if you are dealing with a small company with a few dozen employees and a few hundred customers and suppliers. Or at least it used to be. But today the biggest problem you have is fragmentation.

You can’t walk into a company, go to the accounts and sales departments and take files out of cabinets – and the hidden stuff in the middle drawer of an executive’s desk.

You might laugh at that but I am aware of three banks where senior staff did private deals with favoured customers and kept the records, such as they were, in the staff members’ desks. In each case, the notes were found by investigators. The banks were in the UK, Grenada and Labuan. Only the bank with the branch in Labuan survived and honestly, that survival was because it was politically important that it did.

The deals were loans, with no expectation of repayment, leaving holes in the bank’s accounts for money that was not accounted for other than by the staff’s own signatures.

Across the world, banks have been used as victims in money laundering and fraud and sometimes it is hard to understand how they could not know.

For example, in one country, a bank created for the management of accounts for the armed forces, paid out periodic payments to ghost regiments in the army. Others are used in collect and remit fraud: one bank had several hundred accounts opened by elderly people in the neighbourhood of a branch. Proceeds were paid into those accounts and a criminal gang had control over the cheque books etc. People who like facile terms have taken to calling those accounts “mule accounts” and the elderly people “money mules.” It’s demeaning and dehumanising: don’t use that term. The money is collected in their accounts and remitted, hence collect and remit fraud. And it’s not only the elderly, there have been many more examples of students and everyone in between.

Sending money to a person to buy an asset, for example an expensive handbag, and to hand it over is commonplace. In the UK, students have been found to launder thousands of pounds sent from China and the bags being hand carried to somewhere for sale. The same scheme is often used in relation to art but it is when this becomes industrialised as organised crime gangs adopt the same system for the purchase of drugs and weapons that society is placed at risk in ways that even the organised handbag, watches and jewellery rings cannot match.

As a financial investigator, you cannot take the view that the only relevant information is in the data.

I’ve established that it’s anything that has a value or which can be regarded as a benefit.

It is no respecter of persons, or cultures: in fact, status and cultures are often used to deflect attention and if you are to do your job, you cannot let any external factor put anything out of sight or out of reach.

Some years ago, a religious figure strode into Los Angeles Airport with a fortune in diamonds sewn into the hem of his gown: he claimed that as a man of God he was exempt from search. Such arguments are often raised by persons of all races and religions and they are always false. But often people feel they must respect such persons due to their expression of faith. Trust your gut: if you think there’s a problem, investigate. Status of any kind must not be a barrier to your investigation: again, across the world and in all cultures, titled persons have been convicted of a wide range of financial and other crimes, some especially heinous such as sex crimes. Being rich and famous remains a barrier to investigation but it shouldn’t. Jeffrey Epstein’s appalling behaviour was protected not only by his own wealth which meant he could use a private plane and a private island for his malfeasance but by his cohort of the rich and famous. And yet, what you won’t know unless you read court papers relating to several banks is that there were persistent concerns about his conduct but that the banks maintained the financial infrastructure he needed and for which he paid fees.

OK, for the last few minutes, let’s turn to the specifics of money laundering although some of you might have worked out that we’ve been in money laundering stealth mode for a while. I’m going to keep using the term “money” even though by now the point is well made that we are talking about benefits of any nature.

Money laundering is the hiding, moving and investing of the proceeds of criminal conduct OR the provision of money for the purposes or committing a crime including but not limited to terrorism.

You will often hear people talk about Placement, Layering and Integration. These terms were outmoded and derided in the mid 1990s and the fact that they persist owes more to ignorance and the fact that many people think they sound clever if they use big words.

They are extremely unhelpful when it comes to any financial analysis for the simple reason that they arose because of the American obsession with laundering the cash proceeds of drugs trafficking. Cash has to be either moved around as cash, deposited into some form of account (think bank, then expand that to all forms of account into which cash can be paid) or converted into assets e.g. a house or a car or a diamond ring. Those preliminary activities are when funds are hidden in the financial system. Then the money is moved as deposits are transferred, assets are bought, sold and traded or – and this is important but often overlooked – left in the original account until the value is invested. In this context invested means the purchase of assets, spending on a lifestyle, or putting the money into a business venture, for example.

Let’s look at one of those things in particular because it’s the one that trips up most people: spending on a lifestyle. Across the world, it’s the flashy cars, the expensive holidays and the gold taps in a cheap house that give people away. Basically, if someone is living beyond their means, as the old saying went, there is something worth taking a look at.

This is the kind of information that is not data, and that’s why local knowledge, actually knowing one’s customer, is so much better than any number of computerised research tools. That information never finds its way into the relevant data sources and so the computerised research tools don’t have the data.

But it’s the information that you will need if you are to follow the assets you are investigating.

Money laundering is simple: that doesn’t mean it’s easy and it doesn’t mean it’s bound to succeed. It’s easy because each individual step is not complicated. When you read that a scheme is “sophisticated”, it isn’t. It really isn’t.

Money laundering is always one of three things: passing the benefit to a third party; taking the benefit from a third party (not necessarily the same one as before) and not moving it at all.

One of the most successful large scale laundering techniques is to use a master contractor to build a large project like a hospital or a dam or a toll road; usually through a Public Private Partnership, the contractor bears much of the cost in return for a share of revenues over a period of time and/or ownership of the project after a time. The master contractor engages sub, sub-sub and sub-sub-sub contractors all of whom are secretly owned or controlled by the master contractor or someone connected to him. The money that is paid to them comes back through a circular route, and amazingly, it’s very rare that anyone asks how the master contractor came by the money in the first place. So the money is not only being made to work for the criminal but it is effectively hidden in plain sight for, say, 25 years in the case of a hospital.

The auditors don’t notice and they don’t ask questions.

Fixed assets such as jewellery and bullion are popular in certain cultures: in India a man covered his back with paste made from gold and tried to walk through customs. In the UAE, a company took delivery of gold that had been plated with silver and declared as such. Over and under invoicing, relating to quality, quantity or source of traded goods is an ancient way of both laundering and of settling payments and is, in fact, one of the primary ways that hawaladars settle balances between each other.

You will find that trade documents are a great source of information but only if you know what is in fact shipped and, if it’s not what’s in the documentation, what the difference in price is.

Corporate fraud, i.e. fraud against corporations, always leaves a trail and a trace: remember Locard’s principle. The objective of the money launderer is to make that trace seem innocent.

When a case comes to court, you will, usually, not be a witness for either party, even though one party instructed you. You are probably an expert witness, there to assist the court to understand, not to provide the evidence to convict or acquit, or to secure a judgment for either side in a civil trial.

You are there to tell the story that your examination uncovered. You are not there to appear clever – in fact, in countries where there is a jury, that is counterproductive. Your job is to take something most people find dull and boring and to tell a story which is supported by your inquiry in such a way as makes it interesting.

There is a theory that in a text book, 50% of the readers lose interest every time a formula appears. I once read a book on financial crime theory that had so many formulae that if everyone that had ever lived on earth had started it, that theory would mean there was only one reader left just over half-way through the book. I can’t speak for everyone else, but the only way I read most of it was by mentally deleting all the formulae. I’m adopting the same approach to a book I’m reading now, about game theory. I want to know about it, I want to understand it and I want to be able to incorporate it, at a more advanced level than I already do, into my work. So, out go the formulae, the buzzwords, the acronyms and the meaningless phrases that so many people sprinkle into their reports and presentations.

The biggest lesson I can give you today is this: you will either be good at tracking and tracing funds or you won’t. Long established forensic accountants all say that experience is needed and that it can’t be taught in a classroom. But what can be taught is this: you are embarking on a career that everyone tells you is about numbers and about data. Yes, it is, in part.

But really what it’s about is the ability to think calmly, to identify and follow assets and payments and to do that with dogged determination and, once you’ve got something to report, to produce oral and written reports in clear, concise language, leaving out nothing. It’s not your job to express an opinion as to the conduct of the parties or their motives for doing what they were doing but if money was transferred to a company with an opaque ownership structure, then that’s a fact, not an opinion.

But most of all be clear because clarity is always the enemy of all financial crime from fraud, through bribery to money laundering and terrorist financing.

Money laundering offences talk of “concealing.” It’s your job to find and report the hiding places and to demonstrate how assets were moved and eventually used.

Financial investigators are an elite group that most people don’t think about.

Good luck in your careers.