Situation:
A U.S.-based brokerage firm suspected unethical activities and compliance issues at their India operations office specifically concerning the involvement of senior management in misappropriating funds and accounting irregularities.
To address these concerns and safeguard their business interests, the U.S. brokerage firm engaged Ankura to perform a forensic review of their India operations, with a focus on uncovering any unethical practices, malpractices, or non-compliance decisions that were detrimental to the business’s best interests.
The review involved examining business operations, analyzing accounting systems and books, scrutinizing custodian data (i.e. laptops, servers, and mobile devices), and conducting background checks on senior management to identify any irregularities.
Our Role:
Ankura worked in collaboration with the client to conduct a thorough review of the India operations. With the assistance of the client and their legal counsel, Ankura coordinated a dawn raid at the India office to gather the necessary information for review. This included collecting custodians’ laptops and mobile devices, extracting data from the existing and legacy accounting systems, SAP and Tally, gathering supporting hard copy documents, such as invoices, and conducting interviews with the management to gain an understanding of the business processes and procedures.
Here is how Ankura performed the forensic review:
- Market Intelligence – The Ankura team conducted a thorough market intelligence operation targeting senior management to uncover insights into their lifestyle and potential involvement in business ventures outside of the India office. This process entailed gathering publicly available information to ascertain the alignment of their lifestyle with their reported income, shedding light on any potential discrepancies. The data gathered enabled us to prioritize custodians for further review.
- Business Understanding – Ankura initiated meetings with the business owners to gain a thorough understanding of their India operations and processes, ensuring alignment with the systems in use.
- Data Collection and Pre-Analytics – Utilizing insights gained from the business process understanding, Ankura identified the systems for forensic data collection. This involved gathering accounting transaction data from both the existing SAP system and the legacy system - Tally. Additionally, Ankura conducted forensically sound data collection from servers, laptops, and mobile devices of senior management to ensure a comprehensive scope of data acquisition and safely secured the hard copy documents and invoices separately. Following data collection, we undertook pre-analytics procedures to process and prepare the collected data for forensic review. This involved processing and hosting email and mobile data on the Relativity review platform, as well as financial accounting data on the database, facilitating seamless navigation and analysis throughout the forensic review process.
- Forensic Review – Our experts conducted a comprehensive forensic review, examining financial books, enterprise resource planning (ERP) systems, and suspect email and mobile data to uncover irregularities.
- For Custodian Data – we leveraged the Relativity platform to facilitate a comprehensive review of emails, chats, images, and documents.
- Financial Accounting Data – we deployed multiple algorithms to scrutinize the data and pinpoint potential red flags.
Subsequently, upon identifying potential irregularities, the team conducted a detailed review of hard copy documents to substantiate findings and conclusively determine the presence of irregularities.
- Custodian Interview – Based on the irregularities identified, Ankura, with the support of the client's legal team, conducted interviews with the identified custodians. These interviews aimed to gather further insights and information regarding the identified irregularities, aiding in the investigation process and potential resolution of the matter.
Our Impact:
Ankura's forensic report, a comprehensive compilation of findings, played a pivotal role in empowering the client to pursue legal action against the identified custodians. The report provided compelling evidence and detailed insights into the irregularities uncovered, totaling U.S. $5 million. Armed with this thorough documentation of wrongdoing, the client was equipped to make informed decisions and take appropriate legal steps to address the misconduct.
Through market intelligence efforts, it was revealed that senior personnel within the India operation had made multiple luxury car purchases and invested in infrastructure projects. These expenditures far exceeded their salaried income, raising significant concerns regarding the source of funds and potential financial improprieties.
Based on the forensic review conducted on the accounting system and custodians’ data, it was uncovered that the accounting books had been manually altered. These alterations were made with the intention of inflating both revenue and expenses, aiming to create a misleading impression of the financial performance of the India office. The motive behind these modifications was to illicitly obtain excess payments from the U.S. office for the operation of the India office. Additionally, it was discovered that actual audited reports were withheld from the U.S. operations.
This excess payment was later used for extravagant purchases including luxury cars and real estate assets worth U.S. $5 million, acquired by the India management through the siphoning of funds from India operations. This siphoning of funds was facilitated through various deceptive practices, including vendor collusion, advances, expenses, performance incentives, loans, and more.
Ankura accomplished the entire forensic review within two weeks, producing a detailed report outlining the tactics, techniques, and procedures (TTPs) employed by the identified personnel for the detected irregularities. Furthermore, during interviews held with the senior personnel, they acknowledged the irregularities and pledged to return the funds and assets to the India operations.
To find out more about how Ankura can help your organization, get in touch with Amit Jaju.
© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
