Follow the Money: Political Corruption

The phrase “follow the money” entered the mainstream almost 50 years ago, when the film All the President’s Men depicted the real-life story of how two journalists pieced together a criminal conspiracy that eventually implicated President Richard Nixon, forcing his resignation. The key to that landmark case was tracing the path of illicit funds to and from Nixon’s re-election committee. Today, forensic accounting remains one of the most reliable tools in the investigation of political corruption.

Political corruption involves the use of public power for private benefit. It can occur at any scale. Corruption cases may involve bribery, extortion, embezzlement, fraud, and outright theft. It can also be more subtle, taking the form of favoritism, nepotism, and patronage. Some political corruption cases are so well obscured that they exist on the cusp of legality. But these are not victimless crimes.

Political corruption undermines the integrity of government and government services; often, those who suffer the most under corruption are the ones who already have the least.

Read on to learn more about how investigators and forensic accountants investigate political corruption and contribute to its prevention.

Meet the Expert: Michael “Bret” Hood, CFE, MBA

After serving 25 years as a Special Agent in the FBI, Michael “Bret” Hood became the director of 21st Century Learning & Consulting, LLC upon his retirement in 2016. Hood serves as an adjunct professor of corporate governance, ethics, and forensic accounting for the University of Virginia and a faculty member for the Association of Certified Fraud Examiners (ACFE). He is also a board member for the School of Accounting at Southern Illinois University.

While working as a leadership and ethics instructor at the FBI National Academy, Hood received two FBI Director Awards for Leadership Development & Leadership Innovation for his work on the FBI’s executive leadership development program. Since his retirement, he has keynoted and provided leadership, ethics, and anti-fraud instruction for Fortune 500 companies, non-profit entities, and governmental organizations. In 2020, Hood was awarded the ACFE’s James R. Baker Speaker of the Year award, and in 2021, he was recognized as the Florida Institute of CPAs Discussion Leader of the Year.

The Landscape of Political Corruption Today

Consider the competition for a lucrative oil or mining contract in a developing nation: the process of awarding the contract to one of several bidding entities may have a different level of oversight than it would in the United States. Money for favors, or threats of force, may influence the outcome and corrupt the process. But the parties involved are not limited to the hypothetical developing nation: today, the competition for contracts is multinational, and cases of corruption are multijurisdictional.

“Most business used to be conducted locally, but with the internet, international commerce, and just-in-time supply chains, the whole world is connected,” Hood says. “With these global connections, you’re going to see corruption increase.”

Today’s political corruption cases are as international as the world’s banking system. That can present some jurisdictional challenges but also open the window for more effective enforcement. One of the largest and most recent political corruption cases was the 1MDB (1Malaysia Development Berhad) scandal, which involved the misappropriation of billions of dollars and implicated several high-ranking political officials, including former Malaysian Prime Minister Najib Razak. The case was investigated and prosecuted not only by Malaysian authorities but by the United States Department of Justice (DOJ), through the Foreign Corrupt Practices Act (FCPA), as a significant portion of the funds were laundered through the American financial system.

“There have been a lot of prosecutions involving the FCPA, and many of the targets have been international companies,” Hood says.

But not all cases of political corruption originate outside the borders of the US. In 2023, both the Supreme Court and the Mayor of New York were probed for political corruption. While probes are not indicative of guilt, they are demonstrative of how investigators, and forensic accountants, play a prominent role in both fighting and preventing political corruption within a broader system of checks and balances.

How Investigators & Forensic Accountants Fight Political Corruption

“Typically, political corruption cases don’t walk in through the front door,” Hood says. “You hear things, you look at things, and you have to cultivate all these relationships to get people to talk. As you start to unravel a corruption case, you usually try to get an insider, someone who either was or is in the organization. Getting them to talk takes a good personality, strong interviewing skills, the ability to listen, and patience.”

The first murmurs of a political corruption case are often found in financial anomalies. Combined with anonymous tips and insider sources, investigators begin stitching together transactions that tell a broader story. The records of those transactions are a trail of breadcrumbs for investigation; they’re also critical evidence for future legal proceedings. And, in some cases, they can assist in the recovery of misappropriated assets.

Investigating and prosecuting cases of political corruption can act as a strong deterrent for other potential bad actors. But forensic accountants or investigators operating in a consultative capacity can also take proactive preventative steps against possible political corruption. Particularly in organizations dealing with campaign financing or government contracts, introducing systems of risk assessment, due diligence, process oversight, and staff training can reduce the frequency of illicit acts (EY 2013).

Challenges and Opportunities in Investigating Political Corruption

Political corruption cases are some of the most difficult cases to investigate and prosecute, taking place in politically charged environments that are prone to bias and subjectivity. Given these cases’ implications on power, there may be pressure on an investigator or forensic accountant to either find or not find a particular piece of evidence. There will almost certainly be pressure on witnesses and co-conspirators to obstruct the path of justice, too. These factors all contribute to a non-cooperative environment that requires extra effort.

“The standard in a criminal trial is beyond a reasonable doubt, but when you get a suspect with some notoriety, who will be in the press as you investigate or charge them, then you know everyone’s going to be focusing on your case,” Hood says. “You end up needing possibly more than beyond a reasonable doubt because you’re going to be second-guessed. You’re going to have the whole world looking at your case.”

Political corruption cases are made even more complex by the fact that many forms of financial crime are, at a certain level of sophistication, almost legal: they involve complex financial structures, shell companies, and tax loopholes. In all that legal gray area, illicit actors have a lot of room to maneuver, while investigators often need to prove definitively that a quid pro quo occurred, and intent can be tricky to prove.

In some ways, however, political corruption is easier to track and investigate than ever before. The proliferation of a digital financial system has meant that practically no transaction of a certain size goes without a receipt. When people won’t talk, money does. Even the cryptographically secure world of blockchain, with its ties to illicit finance, comes with a publicly available ledger of every transaction that occurs upon it. Sifting through those transactions, especially on more privacy-minded blockchains, can seem like an impossible task—but not to forensic accountants, who are integral to preventing and investigating cases of political corruption.

“Any case you work—whether you work in the private or public sector—the one question everyone wants the answer to is what happened to the money?” Hood says. “Whether you work in fraud or corruption, you want to know how they got the money, what they did with it, and whether there’s any left.”