ERIC ED385747: Financial Investigations. A Financial Approach to Detecting and Resolving Crimes. [Text], Instructor's Guide, and Student Workbook.

1158 Pages·1994·17.3 MB·English

by  ERIC

DOCUMENT RESUME
ED 385 747
CE 069 669
TITLE
Financial Investigations. A Financial Approach to
Detecting and Resolving Crimes. [Text], Instructor's
Guide, and Student Workbook.
INSTITUTION
Internal Revenue Service (Dept. of Treasury),
Washington, D.C.
ISBN-0-16-041830-5; ISBN-0-16-045051-9;
REPORT NO
ISBN-0-16-045052-7
PUB DATE
94
NOTE
1,162p.
AVAILABLE FROM
U.S. Government Printing Office, Superintendent of
Documents, Mail Stop: SSOP, Washington, DC
20402-9328.
PUB TYPE Classroom Use Instructional Materials (For
Guides
Classroom Use
Teaching
Learner) (051)
Guides
Guides (For Teacher) (052)
EDRS PRICE MF09/FC47 Plus Postage.
Banking; Classroom Techniques; Computer Security;
DESCRIPTORS
Course Content; *Crime; Crime Prevention; Criminals;
*Criminology; Evidence (Legal); *Financial Audits;
Learning Activities; Lesson Plans; Postsecondary
Education; Teaching Methods; Test Items; Units of
Study
ABSTRACT
This packet contains a textbook, an instructor's
guide, and a student workbook for a course on conducting financial
investigations to detect and solve crimes. The topics covered in the
11 chapters of the textbook and the ancillaries are the following:
(2) laws related to financial
(1) why financial investigation?;
(4) sources of information;
(5) financial
(3) evidence;
crimes;
(6) tracing the movement of
institutions as sources of information;
(7) tracing funds using the direct method
money through a business;
(8) tracing funds using indirect methods of proof;
of proof;
(9)
planning, conducting, and recording an interview; (10) investigative
techniques; and (11) money laundering and forfeitures. The text also
contains responses to end-of-chapter questions, a glossary, and two
appendixes listing selected sources of information and American
Bankers Association numbers of cities and states and Federal Reserve
districts. The instructor's guide provides materials for each
chapter, including preparation requirements, instructor notes and
presentation outline, and an appendix containing exercise feedback
sheets, case studies, role-play 'scenarios, chapter transparencies,
and supplemental chapter information. The guide also includes a bank
of tests and quizzes. The student workbook contains supporting and
supplemental materials to the textbook content including:
introductions to each of the chapters, individual and group skill
exercises, information sheets, case studies, and worksheets. (KC)
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Reproductions supplied by EDRS are the best that can be made
*
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from the original document.
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k
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U a DEPARTMENT Of EDUCATION
of Edo Cabonal Research and Improvement
'CT\
UCATIONAL RESOURCES INFORMATION
CfNTER IERICI
This document has been reproduced
as
t\N
received from the person or organisation
originating it
C)
C Minor changes have been made to improve
reproduchOn Ouality
Points of view or opinions state0 in this docu
merit do not necessarily represent official
OERI posettOn or policy
FINANCIAL
INVESTIGATIONS
A FINANCIAL
APPROACH TO
DETECTING
AND
RESOLVING
CRIMES
hot ,ale h!. the
io% eminent Printing ()I tice
.S
Superintendent ot I )oeuntenK Mail Stop: SSOP. Wahington. DC 2.114112.932g
ISBN 0-16-041830-5
Department of the Treasury
Internal Revenue Service
Publication 1714 (6-93)
4
Catalog Number 15271 F
Acknowledgements
The men and women of Internal Revenue Service Criminal
Investigation are proud to present this course to the colleges, uni-
versities and students who have expressed an interest in learning
more about financial investigations.
The purpose of this course is twofold: first, to encourage
young men and women to consider law enforcement as an enrich-
ing career and second, to bring to the reader's attention the seri-
ous and sometimes evil crimes that are motivated by money and
greed.
We would like to thank the Internal Revenue Service Special
Agents who instnicted the pilot courses at the colleges and uni-
versities. We would also like to thank the colleges and universi-
ties that allowed the Internal Revenue Service Criminal
Investigation to offer this new course at their institutions.
A special note of thanks goes to the National Association of
Certified Fraud Examiners, and their Chairman, Joseph T. Wells,
for their contributions to the text.
The following Internal Revenue Service Criminal
Investigation Employees were involved in the research. develop-
ment, writing, editing and publishing of the text:
Cathy Pledger
Don Vogel
Rich Tucker
Robert Pledger
Richard Ruffin
Bob Wilson
John Imhoff
Mike Spang
Robert Diffenderfer
Arnie Sitzmann
Ross Sutton Diane Svoboda
Diane Evans
Elliott Lich
Patricia Reid
Ed Federico
Sue Roderick
Douglas Castorf
Dennis Madden
Paul Whitmore
Bill O'Connor
Vince Williams
Table of Contents
Chapter 1: Why Financial Investigation?
1
Chapter 2: Laws Related to Financial Crimes 13
Chapter 3: Evidence 37
Chapter 4: Sources of Information 63
Chapter 5: Financial Institutions as Sources of InfOrmation 83
Chapter 6: Tracing the Movement of Money through a Business 125
Chapter 7: Tracing Funds Using the Direct Method of Proof 179
Chapter 8: 'fracing Funds Using Indirect Methods of Proof 193
Chapter 9: Planning. Conducting and Recording an Interview 227
lapter 10: Investigative Techniques 263
Chapter I 1: Money Laundering and Forfeitures 295
Resimnses to End-of-Chapter Questions 327
Gkssary 354
Appendix A: Selected Sources of Information 369
Appendix B: Federal Reserve Districts
ABA Prefix Numbers of Cities and States 389
Index 391
1
CHAPTER
Why Financial Invoti-otion?
arly criminologists categorized criminal activ-
:
ity into two large groupings: crimes against
people and crimes against property. Since the
victim's ölcrimes were either people (murder, robbery) or property
(burglary, arson) it was natural to list criminal activity by victim.
But today, criminal activities have evolved beyond merely
"against people" and "against property.- Criminal activity can
now be classified by motivation factors: passion or greed. This
textbook deals with crimes related to the latter, crimes motivated
by money.
With this new view of crime comes the need for a new
approach to dealing with criminal activity the financial inves-
tigative approach. Gone are the days when the headlines read
"James Gang Robs Bank." Today we are more likely to see a
headline that reads "International Bank Implicated In Money
Laundering Scheme.- A special type of investigator is needed to
deal with these crimes. This investigator must be able to use the
investigative techniques of the past in combination with a new set
of techniques. These new techniques focus on financial dealings.
Throughout this textbook. you will learn about the techniques
used by the financial investigator. But first, you will be provided
with an introduction to the financial investigative approach. This
chapter begins with a review of some of the more sensational
headlines of the time. It will become clear that a new approach to
criminal investigation is needed. You will then be provided with a
general overview of the financial investigative approach and we
will lnok into the types of crime where the approach is applicable.
The knowledges and skills required of a financial investigator will
be identified and then the chapter concludes with a look at
Federal government agencies that employ financial investigators.
After studying Chapter 1. you should be able to:
State whv there is a need for a new investigative approach.
Provide a general overview of the financial investigative
process.
Identify the skills required of a financial investigator.
Thday, the overwhelming majority of crimes committed in
America are motivated by money. Criminal activity is directed
toward making money in a way fashioned not to get caught.
Although this is not a revolutionary concept to the experienced
law enforcement officer, the importance of this fact is commonly
disregarded. In today's law enforcement, a new investigative
approach is emphasized along with a new type of investigator.
This approach and this type of investigator are the focus of this
chapter and this text.
A New Investigative Approach
It seems that we cannot pick up a newspaper. listen to a radio. or
watch television without learning about some crime that has been
alleged or committed. Crime is page-one news. It seems to be
everywhere. Let's recall some of the major headlines and sensa-
tional stories that appeared in the news in the late 1980s and
early I 990s. For example:
Ten-term Congressman Mario Biaggi was sentenced to
eight years in prison and fined 8242.000 f'or 15 felony convictions
ranging from racketeering to obstruction of justice and bribery.
Biaggi was involved in the Wedtech scandal. kNedtech paid mil-
lions of dollars in bribes to public officials to obtain no-bid kd-
end contracts.
Hotel queen 1.cona Helmsley was convicted of tax evasion
and sentenced to fonr years in prison. It seems she and her hus-
band avoided paving more than $1.7 million in federal and state
taxes from 1983 through 1985.
Ivan Boesky was sentenced to three years in prison and
paid $100 million in fines for insider trading.
Michael Milken, king of the junk bond, was indicted on 98
counts involving racketeering, insider trading. and assorted secu-
rities fraud. He pleaded guilty to six counts and the government
dropped all other charges. Milken was sentenced to 10 years in
prison and agreed to pay $600 million in penalties.
Operation Ill Wind, an investigation into Pentagon procure-
ment fraud, impacted individuals as well as corporations. Among
the casualties of the probe were Unisys Corporation and Melvyn
Paisley. Unisys agreed to pay $190 million in fines for having
bribed its way to hundreds of millions of dollars worth of defense
contracts. Paisley. a former assistant secretary of the Navy, admit-
ted he sold his influence for bribes and leaked secret government
information to defense firms bidding on weapons contracts.
The savings and loan scandal rocked America. The col-
lapse of the Lincoln Savings and Loan Association alone will cost
the American taxpayers 82.6 billion.
The list could go on and on! And what do all of the crimes
described above have in common? Money! It seems like most of
today's criminal activity either involves money or money is its
main motivator. And many of the crimes depicted by today's
headlines are crimes that cannot be solved solely by the use of
traditional investigative techniques.
In the past. police relied on investigative tools such as crime
scene analysis, physical evidence, fingerprint identification, eve
witness accmnits. informants, and confessions of the offender to
understandable proof of tlw crime. These general
supply Ili
investigative techniques work best in situations where a crime
has been committed aml then law enforcenwnt tries to find the
criminal. However, will these tools work when the criminal is
kmmil mid authorities begin an investigation to prove the crime?
For example:
Organized crime legends like Al Capone, Lucky Luciano,
John Gotti, and Frank Balestrieri operated for years with relative
impunity. How does law enforcement prove criminal activity when
informants are killed, eve witnesses threatened, and confessions
are nonexistent?
Money launderers, tax evaders, and crooked politicians are
Infamous mobster Al Capone
enforce-
for the most part respected pillars of society. How does law
%sasn't easy to catch. But when
people like former Vice-
ment investigate the criminal activities of
IRS Special Agents, who are
trained accountants, stepped in
President Spiro Agnew and rock and roll legend Chuck Berry?
and charged him with tax m a-
These are people whose power rivals that of law enforcement itself.
sion, this crime czar's career
came to an end. Froof that some-
To answer these questions, it is necessary to go beyond the
tinies only the accountant can
law enforcement's investiga-
mere inclusion of a few new tools in
appreheml the criminal.
light of the
tive arsenal. A brand new approach is called for in
evolution of crime in America a financial inrestigatire
approach. The growth of money-motivated crimes mandates the
need for financial investigations. The future success of' law
enforcement is contingent upon its ability to conduct financial
investigations in conjunction with general criminal investigations.
Approach?
What's Involved in the Financial Investigative
docu-
The major goal of a financial investigator is to identify and
of money during the
ment specific events involving the movement
is suspected of embez-
course of a crime. Suppose an accountant
would
zling money from her employer. A financial investigator
determine what accounts she is taking the money from, when she
took it. and where she is putting it. If the investigator is able to
have
identify these events and link them together, he or she will
the
the basis of proof indicating the commission of' a crime. If
together, the investigation
events cannot be identified and linked
&termination to discontinue further inquiry into
may support the
the matter.
Financial investigations bN their verv nature are record inten-
of' money.
sive: specifically. records pointing to the moveme»t
0