How the FBI Follows the Money to Catch White Collar Criminals

How the FBI Follows the Money to Catch White Collar Criminals

White collar crime costs the US economy over $300 billion every year according to the FBI. These crimes include things like fraud, embezzlement, money laundering, bribery, and more. The FBI has gotten really good at catching these criminals in recent years by following the money trail.

Most white collar crimes involve some kind of financial transaction or money trail. This gives the FBI a huge advantage if they can follow the money. The FBI has accountants, forensic auditors, financial analysts, and other experts that comb through financial records looking for any signs of illegal activity.

Subpoena Financial Records

One of the main ways the FBI follows the money is by subpoenaing financial records from banks, investment firms, casinos, real estate agencies, and anywhere else the suspect may have accounts or have conducted transactions. They use things like grand jury subpoenas to get these records.

Once they have the records, FBI forensic accountants meticulously reconstruct the paper trail of where the money came from and where it went. They look for any suspicious transactions like large cash withdrawals, transfers to offshore accounts, payments to shell companies, or other red flags.

Look for Structuring

One common technique white collar criminals use to avoid detection is called structuring. This is when someone conducts financial transactions under $10,000 to avoid triggering automatic reporting requirements. The FBI looks closely for any patterns of transactions just under $10,000 as this can indicate structuring.

For example, if they see 10 separate $9,500 transactions over a few months rather than one large $95,000 transaction, that’s a red flag. Structuring alone is illegal even if the funds are legitimate.

Follow Offshore Money

Offshore banking secrecy used to help criminals hide illicit funds, but the FBI has gotten better at piercing the veil. They work with banks in jurisdictions like Switzerland, the Cayman Islands, and others to gain access to records through treaties and agreements.

The FBI also works with other countries’ financial intelligence units to share information. So if funds from a U.S. crime end up in an offshore account, the FBI can now often follow the trail.

Review Tax Returns

Most embezzlers and other financial criminals don’t declare their illegal income on tax returns. The FBI will forensically analyze tax returns looking for any glaring anomalies. Lavish lifestyles that don’t match the declared income can indicate hidden funds.

They also look for signs of tax evasion like overly complicated corporate structures designed to hide ownership. Al Capone was brought down by tax evasion rather than more serious crimes.

Follow Real Estate Purchases

Money laundering often involves extravagant real estate purchases made with cash through shell companies. The FBI looks closely at any luxury home or commercial property purchases that seem suspicious.

They work with real estate agencies to identify buyers using shell companies or paying in large cash transactions. Real estate is an easy way to clean dirty money.

Analyze Cryptocurrency Transactions

Cryptocurrencies like Bitcoin initially helped criminals move money anonymously. But the FBI has gotten better at analyzing the blockchain and de-anonymizing crypto transactions. They work with crypto exchanges to identify account owners.

Tools like Chainalysis help trace Bitcoin payments on the blockchain back to an exchange account. As crypto transparency increases, it’s getting harder for criminals to hide funds this way.

Follow Online Transactions

The FBI can subpoena records from online payment processors like PayPal to identify suspicious funds moving through those systems. Paying for goods and services online leaves a digital paper trail.

They even browse sites like eBay looking for expensive items bought by suspects. EBay has helped identify many fraudsters this way.

Review Insurance Claims

Insurance fraud costs billions per year. The FBI looks for suspicious claims like a house that burns down right after the owner takes out a big fire insurance policy. Or luxury items reported stolen that were never actually owned.

Insurers have gotten better at identifying fraud. They share claim data with the FBI to help spot criminal patterns.

Analyze Communications

Emails, phone calls, and texts can all provide valuable financial information. The FBI has legal ways to access communications data that can help identify co-conspirators and how crimes were planned.

They look for any mentions of payments, financial transfers, accounting tricks, or other useful info. Digital communications often leave an evidence trail.

Follow Referrals from Banks

Banks are required to report any suspicious transactions to the authorities. They file Suspicious Activity Reports (SARs) on activity that looks illegal or unethical.

These SARs provide valuable leads for FBI investigations. Banks have sophisticated fraud monitoring and will often notice criminal activity before law enforcement.

Seek Whistleblowers

The FBI frequently receives tips from whistleblowers that start or advance investigations. Insiders at companies are often the first to recognize shady financial activity.

The FBI encourages whistleblowing through programs like SEC whistleblower rewards that pay for useful information. Whistleblowers can remain anonymous.

Follow Political Money

Following political donations can reveal bribery and kickback schemes. If a politician receives big payments from a corporation before awarding them a contract, it can indicate corruption.

Non-profits and charities can also be used to launder money. The FBI scrutinizes donations looking for abuse of the system.

Obtain Warrants

If the FBI uncovers strong evidence of financial crimes, they can get warrants approved to raid properties, freeze accounts, or make arrests. Warrants allow much more invasive searches to further follow the money.

Things like wiretaps, computer searches, and even undercover operations can help unlock evidence. Warrants mark a major escalation in investigations.

Offer Plea Deals

Nearly all white collar cases end in plea bargains rather than trials. The FBI will offer reduced charges or sentencing recommendations in exchange for cooperation and information.

Suspects often take the deal as white collar trials are hard to win. The intel gathered from plea deals can help further follow the money trail.

Follow Up with Charges

If all else fails, the FBI can bring charges like money laundering, wire fraud, tax evasion, bribery, and other crimes based on the money trail. While tough to prosecute, these charges can lead to sizable fines and years in prison.

Even the threat of charges is often enough to get suspects to take plea deals. The FBI follows the money to gain leverage.

Conclusion

Following the money trail is often the key to building white collar cases. The FBI has many tools and techniques to reconstruct financial transactions, pierce secrecy, and identify suspicious flows of funds.

New technologies like cryptocurrency and offshore banking do make it harder, but the FBI adapts and finds ways to shine light on shady financial activities. As long as greed drives crime, following the money will help catch the criminals.

Sources:

https://www.fbi.gov/investigate/white-collar-crime

https://www.acfe.com/whitepaper-fbi-following-the-money.aspx

https://www.justice.gov/usao-wdwa/financial-litigation-unit