Funds Tracing Services in Houston TX
Funds tracing, like all tracking services, relies on forensic accounting methods to support litigation and perform fraud investigations. During funds tracing, a forensic accounting expert will gather financial information pertaining to the target person or account, analyze transactions and assess cash flows to visualize account activity.
It takes a team of professionals to execute funds tracing and other forensic accounting techniques. This team may include legal specialists, IT or cybersecurity experts and a forensic accounting experience.
When Funds Tracing Services are Recommended
Forensic accounting measures like funds and asset tracing are powerful information and evidence-building tools. As such, funds tracing is useful in many high-stakes applications, including:
- Fraud investigations – Funds tracing is most often used in fraud investigation cases, no matter the parties involved. Examples include embezzlement, bribery or simple theft. The goal for forensic accounting experts is to develop a financial profile of the target, analyze account transactions, discover unusual or unauthorized account activity, and link this activity to the suspected fraudulent party.
Funds tracing is also used to support money laundering cases, given the common link between money laundering and fraud.
- Divorce proceedings and civil litigation – To ensure a fair and equitable split between divorcing spouses, asset and funds tracing services can uncover any hidden assets and ensure they are considered during divorce.
Funds tracing also provides support for civil litigation cases, such as those involving debtors or creditors.
- Government investigations and asset seizures – Funds and asset tracing are also vital tools for supporting government-led criminal investigations. If a connection can be made between any traced funds and criminal activity, they can be seized, which is the first step in the recovery process.
Asset and funds tracing aren’t always connected to fraud investigations. In some instances, forensic accounting services can assist businesses that need a better understanding of their own cash flow and whether unusual accounting activity is present. In this way, funds tracing can support business process optimization.
How Funds Tracing is Performed
As a forensic accounting strategy, funds tracing requires a collection of information gathering and accounting methods to perform. These methods include:
- Financial information gathering – Investigation skills are necessary during the early stages of funds tracing. If services are provided in order to support a fraud investigation, for example, the forensic accounting team will build a clear financial picture of the target. This is important to link unexplained account activity to assets or deposits the suspect has recently acquired.
During this part of the process, the accounting team will search public records, such as real estate records, court records, commercial databases, campaign filings, licensing records and more.
Additional, non-public records may be acquired in cooperation with law enforcement, and reputable forensic accounting professionals are frequently brought in to analyze non-public records, such as testimony, tax returns or transcripts. - Transaction and document analysis – Once all documentation is gathered, the funds tracing team will analyze transactions tied to any account of interest.
This includes the flow of money into and out of the accounts. As active accounts often include funds from many sources, accounting professionals utilize one of several tracing methods to link cash deposits or withdrawals to potentially fraudulent activity.
Two of the most common tracing methods are First In, First Out (FIFO) and Last In, First Out (LIFO). Both methods consider the order in which transactions have been made into an account, as well as the source of those transactions. With the FIFO method, account withdrawals are linked to the earliest deposit in the account’s history. The opposite is true when using the LIFO method of funds tracing. Instead, withdrawals are linked to the most recent deposit in the account’s history.
The right funds tracing method is critical for precisely linking illicit funds to the right transactions. - Timeline and link analysis – During timeline analysis, the forensic accounting team will organize transactions in chronological order, as well as identify the source and nature of those transactions. Timeline analysis is useful for building a financial profile of a suspected fraudster and can be used to link purchases of other assets using cash.
For cases that involve many parties, link analysis provides a clear visual diagram of everyone involved in a potential fraud case. This can also help in cases where shell companies or other asset concealment measures are in place to throw off investigators.
Funds Tracing is a Useful Forensic Accounting Tool for a Variety of Litigation and Business Applications
Funds tracing is an effective forensic accounting tactic when tracking cash flow is of paramount importance. It’s a complex undertaking that requires a diverse set of skills and accounting methods. As such, funds tracing is trusted to forensic accounting experts to manage.
If your organization is investigating potential fraud, performing due diligence – or if you’re involved in legal proceedings where funds tracing is important, consider partnering with Evident Pros to ensure you have access to funds tracing that centers on best forensic accounting practices.
