Citizens wishing to understand their government’s concern over national security threats can easily do so by calling the human resource departments of the Central Intelligence Agency, Securities and Exchange Commission, the Federal Bureau of Investigation, or the National Security Agency to see whom they are hiring. More often than not however, rather than hiring secret agents with a license to kill, these federal agencies are looking for an accountant with a nose for detail.
Forensic accounting has been around for a while. Forensic accountants get credit for stopping legendary mobster, Al Capone, in the 1930s, and their skills are still needed today as government investigators attempt to unravel complex financial scandals like Enron and the Bernie Madoff Ponzi scheme. One such financial sleuth who answered her government’s call, Sofia Hussain, has been instrumental in helping the Securities and Exchange Commission (SEC) crack down on security fraud cases.
Analytical Tools Brought to Bear against Corporate Malfeasance
Hussain, 32, began her career in federal law enforcement with a stint at the FBI before moving her considerable analytical skills to the SEC in 2010. In the five years since beginning her current tenure, she has worked directly on more than twenty investigations from the SEC’s Boston regional office while working to build criminal cases involving insider trading, market manipulations, and accounting fraud. Indeed, her analytical methods helped snare hedge for security fraud before recouping more than $230 million for defrauded investors. Another case utilized her analysis of bank records and wire transfers to uncover a $500 million dollar Ponzi scheme.
For Sofia Hussain, her forensic accounting skills have placed her squarely in the frontlines in the war on financial fraud, and her innovative use of new technologies has made the capture of corporate wrongdoers much easier for agents who were unable to discern patterns created by the illegal acts.
Crunching Numbers and Crushing Criminals
To keep pace with increasingly tech-savvy criminals, the SEC is continually updating their methods of capturing them. Hussain brought powerful tools to that fight by wielding data analytics to spot potentially criminal activity like insider trading, money laundering, and fraudulent investment performance reporting. Specifically, Hussain credits the use of link analysis and aberrational performance detection.
Link analysis — looks at relationships between seemingly disparate data sources for analysis. SEC agents look for patterns that would point to criminal activity. Hussain used link analysis to connect the phone lines of two parties to an insider trading fraud, and proved the value of this analytical tool early on in her SEC career.
Aberrational Performance Detection — seeks out unexpected performance matrixes to identify candidates for closer review and inspection. For instance, when a hedge fund manager reported consistently higher performance than industry peers, through both cycles of boom and bust, it raised red flags that led to an investigation, which unearthed the truth that the manager was sitting atop a sophisticated Ponzi scheme, and in fact, his performance was significantly lower than his honest cohorts.
Making a Difference with Forensic Accounting
Sofia Hussain has proven that an exciting world is out their waiting in the murky world of forensic accounting. With an uptick in financial crimes, and an increasingly sophisticated methodology performed by criminals, talented forensic accountants are needed to help maintain honesty in the system.
