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Financial Investigation Sources of Information

by the Bureau of Alcohol, Tobacco, and Firearms, Audit Services Division

For more information on this document, please contact your local ATF field office.

Tax Returns

Banks and Lending Institutions

Loans

Credit Cards

Other Records

  • State and Local Government/Court
  • Bankruptcy Court
  • Civil Court
  • Workman's Compensation Board
  • Accountant's/Bookkeeper's Records
  • Suppliers of Goods & Services Records
  • Sales Invoice
  • Accounts Receivable
  • Forms of Payment
  • Correspondence File
  • Financial Crimes Enforcement Network (FINCEN)
  • Credit Bureaus
  • Internet
  • Utility Records Billing Statements


Tax Returns

Tax returns, both state and federal, provide substantial information. Federal tax returns, filed with the Internal Revenue Service (IRS), can only be obtained with a federal court order. When federal tax returns are obtained from court order they may only be used in federal court. If a state trial is anticipated, tax returns should be obtained from state tax authorities.

Tax returns filed with the IRS and state taxing authorities should be compared to tax returns used to obtain loans. Often the banks have returns that have been embellished. This may lead to bank fraud charges.

Form 1040 is a personal tax return. The form contains a Schedule C. This schedule contains information about income and assets. Inventory levels may be established from the return. The inventory amount on the return will help substantiate the inventory on the insurance claim. Depreciable assets are listed on the return as a deductible expense.

Corporate F1120 & F1120S and Partnership F1065--These returns have balance sheets. The Balance Sheets will identify the purchase price and book value of assets at the time of the fire. Balance Sheets can be used to establish the gain from the fire. The owner's investment may be established from these returns.

Payroll F941 & Unemployment F940 Returns will establish employment levels.

Sales Tax--records will establish business trends.

Real Estate--taxes help put a fair market value on property. If the property is over insured these bills will assist.

Banks and Lending Institutions

A. Bank Statements--Provide the forensic accountant with a monthly summary of owners and/or businesses financial transactions (deposit and expenditures). In addition to providing the name of the bank, the name of the account, and the account number, bank statements also show check numbers, date of checks, deposit amounts, check amounts, monthly balances, and possible cash flow problems (Non Sufficient Funds checks, negative balances, etc.)

  1. Canceled checks- Provides the forensic accountant with the following: the name of the bank, name on the account, the account number, payee name, check approving authority, and the memo notation section.
  2. Deposit tickets- show type and amounts of deposits (checks or cash).
  3. Deposit items- same as above
  4. Debit/Credit Memos- (loans, bank charges, return checks.)
  5. Cash Transaction Records (CTR)- deposits & withdrawals
  6. Wire Transfer Records- appear on bank statement
  7. Safe Deposit Log- shows number of trips to deposit box (date & time).
  8. Certificate of Deposits (CD's)- conversion of cash into investment.

Loans

Shows obligations (details) of owner and/or business as well as potential assets. In addition, loans include, as well as provide the forensic accountant with the name of the lending institution, name of the borrower, date of loan, monthly payments, interest rates, collateral, and terms of loan (length/period of loans).

A. Application- Primary source documents for the following: Name, address, city/state, telephone number, social security number of the borrower; credit references; amount needed or sought, employer's name; debts of the borrower; and the annual income of the borrower.

*Documents that may accompany the application include:

B. Financial Statements

C. Tax returns

D. Loan officer notes

E. Payment history

F. Dun and Bradsheet, TRW (credit) reports

Credit Cards--Show mobility and/or location of the individual(s) during time of purchase(s).

A. Application- may contain same information as loan application.

B. Monthly statement- show purchase history (dates, amount, items

Purchased, etc).

C. Payment history- self-explanatory.

Other Records

State and Local Government/Court records would include, but are not limited to, such records as: deeds, that would reflect any liens on the property, current and previous ownership history, purchase price, mortgage, and the lender holding the mortgage.

Bankruptcy Court reflects the type of bankruptcy filing, whether it's corporate or personal, restricting on out of business, schedule of credits and debts.

Civil Court actions or suits of a business or personal nature can be determined.

Workman's Compensation Board reflects claims against a business or brought as the injured party and subsequent ruling. From a college(s) or private school(s) the financial application/documents that include tax returns, financial statement, payment plan, loans and aid. Corporate documents at the Secretary of the State office indicate corporate officers, associated corporations, if the corporation has filed with the Secretary of State for the year, and stocks and shares distributed by the corporation. Additionally, the local property tax collector reflects the amount of tax and if current. The building department and accessions office maintains records of changes to the property and possible violation. The Board of Health reflects violations and inspection reports. The Department of Environmental Protection reflects any inspection reports for hazardous waste and clean up issues.

A local licensing board maintains records of violations pertaining to alcohol, food, and entertainment licenses. And the local police and fire departments maintain a history of incidents relative to a property or business.

Accountant's/Bookkeeper's Records: Accountants/bookkeepers are typically hired to maintain the company's books (journals and ledgers) and to prepare financial statements that reflect its profitability, solving, and cash flow. Other records that may be found at the office of the accountant/bookkeepers include contract files, correspondence files, corporate minutes, tax returns, cancelled checks, bank statements, invoices, and other source documents. The partnership agreement or corporate charter would identify the owners of the business. Depreciation schedules list the company's fixed assets, and can be compared to assets claimed on the proof of loss statement. Perpetual inventory reports and reports of physical inventory counts can be used to plot sales trends, and can also indicate problems with inventory, such as obsolescence or overstocking. These types of records can generate many useful leads when analyzed by a forensic accountant.

Suppliers of Goods & Services Records: Suppliers provide multiple sources of financial information for the investigative team. The following pertinent areas provide specific sources for further analysis.

Sales Invoice: A document that provides details as to the sales transactions between the parties. The invoice will show the amount of the sale, items sold, terms of sale etc. These are excellent source documents which provide the investigative teams with trend analysis.

Accounts Receivable: Details the supplier's financial records, which indicate purchases, made from each supplier. The suppliers accounts receivable depicts specific sales, payment history, and outstanding balances. Cash-on-delivery (C.O.D.) sales would not be shown in the accounts receivable ledger but may indicate financial difficulties.

Forms of Payment: depict the method of payments to suppliers in the form of cash (possibly C.O.D.), check, certified check or credit card.

Correspondence File: contain letters, documents, TRW reports, etc., between the parties. These files may provide documentation such as, placing a customer on C.O.D. basis.

Financial Database Records

Financial Crimes Enforcement Network (FINCEN): provides multiple source of data basis's from different credit bureaus for both businesses and individuals. It will provide credit card companies and numbers along with other pertinent financial data. You must contact your appointed State representative in order to process your request. See EXHIBIT? For specifics.

Credit Bureaus: sources such as TRW etc., summarize financial information for both businesses and individuals in a useful format for the investigative team. These credit reports provide leads such as outstanding mortgages, credit card information (type of card, account number, outstanding balance and payment history), back account data, etc. In addition, any other inquiries appear as "hits" on these reports and indicate other sources of banks, etc. that are also inquiring into credit data.

Internet: This is another possible investigative tool that may provide valuable information and data to the investigative team. The term "searching the web" allows the team to research numerous web sites for information that my impact the investigation. One pertinent web site is FINCLEN at http://www.ustreas.gov/treasury/bureau/fincen.

Utility Records Billing Statements are monthly statements which provide basic data as to quantitative usage and applicable dollar value. Monthly usage aspects may be in the form of gas thermal units, kilowatt-hours etc., that may be used for comparative purposes.

Reprinted with permission from the author.

 
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