In a speech delivered at the American Institute of Certified Public Accountants National Conference on Fraud and Litigation Services in 2007, an Associate Deputy Director of the FBI, Mr. Joseph Ford best described the increased threat of financial crimes in the age of globalization and the Internet. He characterized the Internet “as much a conduit for crime as it is for commerce.” While opening up new avenues of crime in computer hacking, the Internet facilitates a wide range of traditional criminals that include mobsters, drug traffickers, corporate fraudsters, spies, and terrorists.
The critical challenge that cyber-crime imposes is that unlike traditional crime, the physical presence of the criminal at the scene of the crime is not necessary. In the traditional days of bank robbery, the robber had to be present at the heist and took the risk of being caught and dragged away in cuffs. However, in the age of the Internet, a bank robber could commit a crime of much greater magnitude without ever even having to set foot in the bank. They usually operate from remote locations, under the umbrella of legal protection provided by a different jurisdiction than where the crime is being committed. These criminals exploit the weaknesses in internal controls to commit their crimes. The risk they face is that their plans might be thwarted, but usually the identification, prosecution, or incarceration of such criminals is complicated due to the involvement of multiple jurisdictions. According to the FBI, a significant percentage of cyber-crimes originate in Romania, but the victims are in the United States or in other western nations. These criminals, formerly employed by the now defunct intelligence apparatus of Romania, have targeted money transmission agencies. Additionally, one type of securities fraud, known as a “pump and dump” scheme, has been traced back to criminals in Latvia and Estonia who hack into accounts of online brokerage companies. Although these crimes originate and are committed overseas, the consequences are felt in the United States and adversely impact U.S. investors.
Consequently, the significant threat encountered by banks and other financial institutions is no longer that of an armed robber engaging in a heist, but that of a cyber-criminal sitting in the comfort of his home at a remote location. The weapon of choice for such criminals is not a firearm as used in traditional bank robberies, but a few keystrokes on their computers. Consequently, the analysis of evidence of such crime doesn’t require evaluation of fingerprints or ballistics experts. They require a financial analysis of the money trail and hence the expertise of accountants.