Financial forensics is the analysis of financial information for use in a legal setting. This can include civil cases as well as criminal ones. Experts in this field typically have degrees in accounting or related fields along with special training in how to apply their skills to court cases. Training ensures that people collect and document information correctly, so it can withstand evidentiary challenges in cases that go to court.
In civil cases, financial forensics may be necessary to document the circumstances of a case or provide background information. For example, a company applying for bankruptcy might use a skilled accountant to justify that it has run out of funds, cannot recover under its current operational structure, and needs protection and an opportunity to reorganize. Likewise, financial forensics might be used to identify and trace assets in a case where one party is suing another for repayment of a debt or payment of a judgment. The accountant could show that the respondent in the case has assets available and should surrender them to the plaintiff.
Criminal investigations also make use of financial forensics. This can include evaluation of records for evidence of fraud, money laundering, and other white collar crimes. Government agencies may use accountants. Financial institutions can hire experts in financial forensics to assist them with regulatory compliance and audits, with the goal of reducing the chance that they will be involved in a criminal case. A bank, for instance, might ask for help with an anti-money laundering campaign.
Specialists in this field may support law enforcement and legal teams while they investigate and prepare for cases. In court, testimony is not always required, but it can be helpful. Expert witnesses in financial forensics need to be able to convey information clearly and understandably to the jury so it can reach a decision. This requires a different set of skills; not all accountants, for example, can explain their profession in terms that laypeople will understand.
Preparing materials for court requires meeting a number of standards. The evidence needs to be kept secure, with a chain of custody to make sure it is accounted for at all times. Experts in financial forensics need to know how to handle data while maintaining its integrity so evidence isn’t thrown out on a technicality. For example, if an auditor leaves paperwork on the seat of the car while going to get groceries, the chain of custody is broken and that paperwork can be excluded from court.
