A Guide to Forensic Accounting Investigation, 2nd Edition

Chapter 25

Money Laundering

Andrew P. Clark, Marie-Alice Hofmaier, and Christopher Cowin

Money laundering within the United States alone, let alone in other parts of the world, remains a serious problem. Exhibit 25.1 conveys a sense of the dimensions of the problem. In fiscal year 2009, for example, the Internal Revenue Service obtained more than 1,000 indictments and over 700 sentencings.

EXHIBIT 25.1 Statistical Data: Money-Laundering Enforcement

Data Source: Criminal Investigation Management Information System. Source: Internal Revenue Services, www.irs.gov/.

This chapter introduces a range of circumstances in which money laundering may be encountered in business. It examines the relationships and distinctions between fraud and money laundering as well as the remote likelihood of indications of money laundering showing up in the course of a financial statement audit. The chapter looks at the unique skills and perspectives necessary to successfully investigate money laundering and identifies some of the potential red flags a financial statement auditor may encounter if money-laundering transactions are taking place. For the purposes of this chapter, money laundering refers to the crime or activity of moving funds of illicit origin, and anti–money laundering (AML) refers to formal and informal systems and controls designed to prevent or frustrate attempts to launder money and ...