Fraud Investigation: A Comprehensive Guide to Techniques and Tools for Fraud Investigators (2024)

Financial crime in the United States has surged  staggeringly , costing trillions of dollars.

Did you know that the average time for detecting fraud is a year? Such delay harms individuals and businesses financially.

Fraud investigation agencies often struggle due to a lack of resources or reliance on outdated tools like Excel, limiting their ability to analyze financial crimes.

In this article, we share practical techniques to track money flow and combat illicit activities. Plus, a list of powerful tools to aid fraud investigations without draining resources.

Given the urgency of addressing financial crimes, it’s crucial to adopt enhanced techniques. Equip yourself with the best strategies available for quicker solutions.

The Art of Fraud Investigation: 5 Proven Techniques Investigators Should Know About

Here are the 5 techniques to uncover corporate fraud and combat financial misconduct:

1. Transaction Overview

Transaction overview is a machine learning model used in financial fraud detection that detects unusual behavior in transactions by checking for information like the credit/debit card number, location, date, time, I.P. address, amount, and transaction frequency. 

All this data is fed as input into the fraud detection algorithm, and the analyst checks for any unusual activity that may indicate a fraud attack. Transaction records document the transfer of assets between parties which when viewed over time, exhibit specific patterns. Fraudulent activity frequently deviates from these trends in some way, offering a starting point for data-driven fraud detection methods. 

2. Flow of Funds 

The flow of funds model helps in understanding the movement of money within a system or organization. 

The model does not measure the performance of any particular asset but rather focuses on how money moves – by graphically demonstrating where money comes from, where it goes, who has been involved, and more.

Flows might differ based on the frequency at which money is transferred, the currency and the nature of the business, the goods or services the business provides, by whom the business is run, and the asset types that the business holds. 

Models such as this one help the fraud investigator scrutinize the movement of funds in various cyber crimes, elder abuse cases, and more.

3. Benford’s Law

Benford’s law is a mathematical tool and an effective method for data analysis to help detect fraud. 

Benford’s law describes the relative frequency distribution of numbers with leading digits in datasets. Leading digits with lesser values occur more frequently than leading digits with larger values. 

The rule stipulates that 30% of numbers begin with 1 and 5% with 9. This law states that leading 1s occur 6.5 times more than leading 9s! Benford’s law is the First Digit Law. Leading digits 1–9 would appear 11.1% of the time if they had equal probability. However, this does not stand true in several datasets.

The theory is that fraudsters tend to submit larger fake invoices, disrupting the natural order of numbers as predicted by Benford’s law. For example, if you run a Benford’s law test on your August payments and find the first digit was 9 in 35% of the payments, that’s an anomaly. Bendford’s law says 9 should be the first digit only 4.6% of the time.

Fraud Investigation: Benford probability distribution

Source – Software Engineer Institute 

No test is foolproof; however, Benford’s law does provide an extra method for fraud examiners to test data for potentially fraudulent activity.

4. Suspicious Activity Report (SAR) Analysis

Suspicious Activity Reports (SARs) are documents that financial institutions file to assist U.S. government agencies in detecting and preventing money laundering and other forms of financial crime.

These reports flag transactions that could be indicative of criminal activity, such as large sums of money that are inconsistent with an account holder’s known income or transactions that have no apparent business or lawful purpose. 

Importantly, filing a SAR does not mean a crime has occurred, but it does serve as a tool for law enforcement agencies to initiate or aid ongoing investigations.

Those tasked with filing SARs must create a compelling narrative. A well-documented SAR can kick off new investigations, supplement existing ones, or provide law enforcement with the missing piece they need to act. 

Here’s a video guide to assist professionals in creating effective SARs.

To illustrate this, let’s see an example – in a recent case, Bank of America, U.S. Bank, and Wells Fargo submitted over 170 suspicious activity reports to the Treasury Department regarding the Biden family, alleging their involvement in money laundering, human trafficking, and tax fraud, according to congressional investigators.

Fraud Investigation: Recent SAR case

Source – Twitter

5. Flight and Phone Records

Financial fraud investigators use flight and phone records to track suspects. Such information can be crucial for tracking suspects, identifying witnesses, and strengthening a case.

Flight records from airlines, airports, and travel firms are available to investigators. These records help investigators determine the suspects’ travel patterns, identify potential accomplices, and establish links between different fraud schemes.

Phone records from suspects’ service providers can also be obtained by fraud investigators. The information helps detectives uncover suspects’ communication patterns, co-conspirators, and fraud scheme ties.

Now that we’ve explored the techniques used in the fraud investigation process let’s delve into the powerful tools that will enhance your capabilities in detecting and resolving financial fraud.

Also Read: How is AI Transforming Financial Fraud Detection and Investigation

Detect, Investigate, Resolve: 5 ScanWriter Tools That Can Help You Speed Up Your Investigation

ScanWriter is a suite of financial investigative tools designed to support fraud investigators at every step of their investigation. It is a homegrown software trusted by many district attorneys, forensic accountants, and fraud investigators across the United States working in the public sector.

Here’s a list of five tools of ScanWriter that help fraud analysts focus on more critical tasks to fight financial fraud, meet deadlines, maintain data integrity, and provide deeper data analysis.

Fraud Investigation: ScanWriter for investigation

                                     Source – ScanWriter for Investigators

1. Data Capture: Automating With Exceptional Precision and Speed

Fraud investigators grapple with the arduous task of manual data entry, a process laden with error-prone pitfalls. 

Back in 2008, Professor Raymond R. Panko shed light on this issue in a research paper. He revealed that when people manually input data into spreadsheets and documents, the likelihood of human error ranged from 18% to 40%. And when dealing with complex data, that error rate can climb even higher.

The labor-intensive nature of this task not only consumes investigators’ valuable time but also introduces inaccuracies that can compromise the integrity of investigations. 

Furthermore, the vast array of data formats from disparate sources presents a formidable obstacle in establishing a standardized and efficient investigative workflow.

However, with ScanWriter’s data capture tool, investigators can automate data capture with remarkable precision and speed. It effortlessly converts data from PDFs to Excel spreadsheets with 100% accuracy. Thanks to its intelligent error detection, ScanWriter ensures pinpoint accuracy and maximizes the efficiency of your data entry processes.

Fraud Investigation: ScanWriter automation data preparation

By accelerating the manual data entry process, investigations can be expedited. The tool is capable of accurately processing over 1,000 checks in under an hour. Check out this case study, which cited how ScanWriter simplified data handling and saved six weeks for an investigator tasked with inputting 5,000 transactions into the system.

ScanWriter’s versatility shines through its ability to capture data from diverse sources, including bank statements, checks, invoices, and receipts. 

For checks, ScanWriter decodes both printed and handwritten information, detecting crucial details such as payer, payee, signature, number, amount, memo, and date. 

ScanWriter’s capabilities extend to reading whooping 40,000-plus formats, and in the rare event that you encounter an unsupported format, fear not—ScanWriter’s SUPER helpful team can integrate it within 48 hours. 

Here’s a review from one of our customers to make you even more confident about ScanWriter.

Fraud Investigation: Capterra

Source – Capterra

Explore the top 8 cutting-edge financial investigation software solutions of 2024 and be the gateway to the future of data capture in fraud investigations.

2. Audit Trail for Ensuring Legitimacy of Documents

One of the challenges fraud investigators face is maintaining a reliable and detailed audit trail of financial documents and data. 

Lacking a comprehensive audit trail, investigators find themselves facing a substantial obstacle, replete with time-consuming endeavors to trace the origin of data, verify the accuracy of the information, and ensure accountability for every action taken during an investigation.

ScanWriter’s audit trail tool is seamlessly integrated into Excel files. The tool monitors and documents all activities and transactions related to financial documents. 

It maintains a chronological log that details what was done, when it was done, and by whom, providing an invaluable layer of transparency and accountability, facilitating easy review and verification processes.

The tool also allows investigators to easily locate associated PDFs, bestowing them with a supremely time-efficient solution. 

Additionally, this versatile tool provides a source link to track the source of data in the Excel sheet, allowing users to verify its accuracy with a single click.

3. Data Visualization Tool for Effective Analysis

After capturing data from various sources, investigators have to enrich it to create a flowchart of funds to find relationships and connections between accounts that they can’t spot in Excel. 

However, manual data analysis might be error-prone and slow the investigation.

ScanWriter’s data visualization tool, in partnership with Microsoft Power B.I., automatically generates financial data visualizations using pre-built models like “All Transactions,” “Flow of Funds,” “Benford’s Law,” “SAR Analysis,” and more. 

Now let’s walk through how these models can be utilized effectively in your investigations:

  • Flow of Funds Model: ScanWriter automatically populates the ‘Flow of Funds’ visualization, allowing investigators to follow the money trail between accounts by filtering entities, transaction amounts, dates, etc. 

ScanWriter represents each account as a node, which automatically contains graphics to assist you in identifying accounts.

Links between nodes show account transactions. Links with arrows show transaction direction. Deposits and transfers are represented by entering arrows and payments by outgoing arrows.

The volume of dollars exchanged through a link determines its line thickness. Thicker lines indicate more funds. 

The node can be a question mark if you don’t know anything about them. This shows which accounts need more inquiry. It may also reveal which accounts lack enough transactions to warrant further investigation.

Source – ScanWriter – Data Visualization Tool

ScanWriter lets you visualize the flow of funds and segment financial data by several parameters for effective analysis:

  • Money flow with photos
  • Activities by location
  • Flow of funds by the entity
  • The amount and date of cash flow
  • Flow of funds by category 
  • SAR Analysis: When investigators get a Suspicious Activity Report (SAR), ScanWriter simplifies the process of digging deeper into account data and helps them analyze financial data from various accounts to find strange transaction patterns and relationships. 
  • Benford’s Law Analysis: ScanWriter’s ability to apply Benford’s law to data and show the results can assist investigators in quickly discovering first-digit distribution discrepancies, a common marker of financial anomalies.

These tools help investigators evaluate and visualize financial data, helping them to efficiently track the money trail, uncover fraud, and show it to the lead investigator.

Here’s a case study that shows how ScanWriter’s data visualization tool helped investigators apprehend a murder suspect quickly.

4. Asset Tracing: Helping Investigators Follow the Money to Trace Assets

When investigators perform an investigation, asset tracing is an essential step in identifying fraud, money laundering, and other financial crimes. 

ScanWriter’s asset tracing tool extracts vital information, enabling them to refine their analysis through data filtering based on names and transaction descriptions. The filtering capability affords analysts the precision to tailor their visualizations to specific criteria. 

For instance, they can effortlessly eliminate minor transactions by establishing a threshold amount, resulting in a streamlined flowchart that exclusively showcases substantial financial movements.

Furthermore, the tool facilitates a user-friendly interface where selecting an account from the visualization instantly narrows their focus to transactions associated with that specific account. This eliminates the laborious process of manually constructing flowcharts and accommodates shifting investigative priorities with remarkable ease.

With our tool, investigators get such granular details in response to a click on the visualization. This gives them a powerful and fast way to track down information in the bank statements instead of hunting through a spreadsheet.

More importantly, ScanWriter’s asset tracing tool gives each transaction a unique transaction name and number. 

Source – ScanWriter –  Asset Tracing Tool

Investigators can use this information to cross-reference the spreadsheets to pull up the document that included that transaction. As a result, they have the evidence at their fingertips as they build their case.

Our asset tracing tool empowers investigators to diligently track and connect the flow of assets to criminal activities.

5. Case Management Tool Enables Investigators to Efficiently Manage Complex Cases

One of the key challenges that fraud investigators face is the overwhelming amount of documentation and data they need to sift through during their investigations. This leads to inefficiencies in locating specific information, hinders collaboration among team members, and makes it difficult to track the progress of cases accurately. 

ScanWriter’s case management tool is designed to address these problems effectively. 

Here are some  features that help streamline the investigation process:

  • Effortless Document Organization: The case management tool enables investigators to automate manual sorting and categorizing of documents. It sorts and organizes documents into customized categories based on type, owner, status, and more. 

Investigators can even create personalized categories to align with their specific needs, ensuring relevant documents are easily accessible and reducing the time spent on document management.

  • Enhanced Collaboration: Complex fraud cases often involve multiple team members who need to work together efficiently. ScanWriter enables investigators to seamlessly share files and data with other agents involved in the investigation. 

This collaborative feature fosters better communication among team members by providing a centralized platform for sharing case-related documents, notes, and updates.

  • Real-time Case Tracking: Monitoring the progress of an investigation can be difficult, particularly when working with a large number of documents and tasks.

ScanWriter’s case management capabilities can simplify this by providing a visual representation of case progress through a bar graph. 

Investigators can easily see the number of documents at different stages of the investigation (such as added, read, accuracy checked, mapping applied, normalized, and exported to various formats like Excel and Power B.I.).

This real-time tracking feature ensures that nothing falls through the cracks and deadlines are met.

You can also check out this quick video to understand how ScanWriter’s case management capabilities can make fraud investigations efficient for investigators.

Also read: Top 3 Case Management Software for Federal & State Government Agencies to Try in 2024

ScanWriter – The #1 Tool for Fraud Investigation in Government Agencies

In today’s data-driven age, investigators face the daunting task of sifting through countless bank statements, wire transfers, checks, and deposit slips. 

This isn’t just tedious—it’s downright overwhelming, especially when you consider the limited resources at the disposal of agencies combating fraud.

However, what sets ScanWriter apart is it stands alone in its ability to flawlessly transform data from PDFs into Excel spreadsheets. This isn’t just about convenience; it’s about ensuring impeccable accuracy.’ Thanks to its smart error detection, ScanWriter elevates data entry efficiency to new heights.

The beauty of ScanWriter lies in its seamless integration into your existing business processes. Post-installation, this remarkable tool can be swiftly incorporated into your workflow, enabling immediate utilization. 

And fret not; our dedicated support team stands ready to guide you through the initial stages of data capture, ensuring a smooth transition.

Don’t just take our word for it. Professionals across industries vouch for ScanWriter, praising not only its features but also the unparalleled support they’ve received from our dedicated team.

Yet, the capabilities of ScanWriter extend far beyond what’s outlined here. To uncover the full spectrum of its capabilities, we invite you to explore further.

If you’re a fraud investigator and want to see ScanWriter in action, don’t hesitate – reach out for a free demo or get in touch with our dedicated ScanWriter team. Your journey toward unmatched efficiency and accuracy begins here.


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