CHAPTER 6

Financial Investigation
 Defined as the collecting, controlling,
complementing, processing, and analyzing of
financial and/or related data on behalf of law
enforcement.
 Not a weapon nor a tool, but a multi- faceted
approach which in essence, does not differ very
much from other investigative ways of thinking.
 The core of it is an analytical and systematic
approach to all aspects of the criminal
information which one related to the financial
aspects of a given crime.
 It can be and has to be applied to a wider range
of criminal phenomena, not only to crimes for
profit.
 Investigating financial aspects of organized
crime mean examining the nature and extend of
illegal transaction from economic as well as
from behavioral point of view.
 Concealed Income Analysis
 To determine the extend to which a person,
group or organization receives and benefits from
money obtained from illegitimate sources.
 The network principle is commonly used by
government tax authorities for the purpose of
determining tax payers income tax liabilities and
obligations, primarily in those instances where
no books or records of income and expenses
have been maintained by tax payer’s from which
a determination of tax liability could be made.
1. Assets
-something of value, either cash or a
commodity which can be converted to cash

• Real property
• Personal property
• Stocks
• Bonds
• Jewelry
• Furniture
2. Liability
-financial obligation involving an oral or
written promise to pay.

• short-term loan
• Mortgage
• Car loan
• Personal or character loan of an individual
persons, groups or organization.
3. Net Worth
-refers to total assets minus total liabilities or
what a person owns minus what he owes.

4. Income
-money or goods received in return for
services or goods over a period of time.
• Salary
• Profits
• interest
5. Expense
-refers to payments for consumables as
parts of living or doing business, over a period
of time.

• Food
• Gasoline
• Taxes
• Medical care
• Entertainments
• Travels
 It will require as astute investigator to employ
all his techniques and skills to reveal the
information.

 Suggested possible sources of information:

-individual records and books
-records in financial institutions
-informants
-surveillance
Basic for Indirect Methods of Proof
 Three methods of proof that have been accepted to
undertake financial investigation in a criminal case.
- specific item
-bank deposits and cash expenditures
-net worth and expenditures

 Each methods relies on a thorough investigation of

the facts, application of deductive and inductive
reasoning in the analysis of circumstantial evidence,
and establishing “proof beyond reasonable doubt”
through negative proof of potential defenses.
 Indirect methodology is applied in a criminal
investigation, the courts are faced with
determining whether or not the innovation
meets violates the rules of evidence, and the
requirements to prove the violation beyond
reasonable doubt.

 Three basic methods of proof will apply these

requirements and incorporate the judicial
modification to insure accuracy and a high
level of success in the presentations.
Process of Indirect Methods of Proof
-this method is determine what must have occurred
during the time frames to cause the change in
financial conditions.
1. Starting Point
2. Likely Source of Income
3. Identify all Players
4. Following All Available Leads
5. Mathematical Accuracy
6. Addressing Defenses
7. The Cash Hoard
8. Personal Loans
9. Denial of True Ownership
Specific Items in the Standard Method
of Proof
 Is the simplest way to conduct a financial
investigation and the easiest to present to a
prosecutor or court.
 Used primarily in cases where the financial
crime involves a single type of fraud, or when
the evidence of financial gains from the crime is
sufficient for presentation to court.
 Specific item method shows the profit from
each fraudulent transaction in the financial
criminal activity.