Navigating the complexities of financial investigations takes a high degree of expertise, 
particularly when illegal activity is suspected. Key to the process of identifying potential fraud is approaching such investigations with the utmost levels of integrity and neutrality, with no agenda but uncovering the truth. Kroll recently announced the appointment of Pamela Parizek as managing director and North American lead for Financial Investigations in its Business Intelligence and Investigations practice. Consulting recently caught up with Parizek to talk about the financial investigations landscape, the consulting opportunities in the current climate, and the biggest regulatory challenges clients are grappling with.
Consulting: How would you characterize the overall state of the financial investigations landscape?
Parizek: The landscape is competitive but there are tremendous opportunities for financial investigations professionals. By all accounts, there will be increased regulatory scrutiny and aggressive enforcement by the SEC, DOJ and other regulatory bodies. We already are seeing financial accounting and disclosure cases associated with COVID-19 and allegations of PPP fraud, and expect an increase in investigations and regulatory enforcement actions relating to alleged bribery and corruption, money laundering, and sanctions violations. With respect to financial fraud, we expect to see increased use of risk-based data analytics to identify anomalies, a continued focus on insider trading and trading practices, and increased scrutiny of financial services industry market participants, especially related to the adequacy of remediation of regulatory findings and compliance with cybersecurity requirements.
Consulting: Talk about some of your plans or goals for Kroll's NA Financial Investigations Practice, including how the experience you're bringing to bear will factor in.
Parizek: My mandate at Kroll is to expand our existing financial investigations service line into a multi-disciplinary, multi-jurisdictional practice to serve the regulatory and global investigations needs of our North American client base. Our primary service offerings – corporate investigations, independent compliance audits, and regulatory advisory services – are designed to respond to the needs of companies who seek compliance with financial and regulatory requirements, in line with the new administration's regulatory enforcement agenda.
Our professionals are former prosecutors and regulators, industry veterans, and seasoned consultants who are experienced in helping clients navigate complex issues that take into account the interests of all stakeholders. Our collective experience, coupled with our commitment to integrity and transparency, allow us to serve as trusted advisors.
My legal, accounting and regulatory background enables me to work with various stakeholders, including boards and management, outside counsel, independent auditors and government agencies, to obtain consensus and resolve complex problems. My experience as an independent compliance advisor to regulated entities and multilateral organizations has instilled a deep respect for assuring that our teams meet all necessary qualification and independence requirements to maintain credibility with all constituents.
Consulting: What are some of the biggest challenges clients are currently facing around identifying fraud, waste, and abuse in their organizations?
Parizek: The most significant challenges clients are facing today are insufficient resources due to downsizing, layoffs, furloughs and salary reductions resulting from the financial impacts of COVID-19. These cuts have impacted all three lines of defense, at a time when individuals are struggling to make ends meet, and may have motive, opportunity and rationalization to engage in fraudulent conduct. With these resource constraints, it is critical to leverage technology to make fraud prevention and detection more efficient and effective. It is also an opportune time for clients to consider outsourcing and co-sourcing arrangements until conditions stabilize.
Consulting: How does the current political climate in the US impact the prevalence of fraudulent activity or other impropriety in business operations? And what opportunities that creates for financial investigation/forensic accounting experts?
Parizek: As the political climate evolves under the new administration, there will be a resetting of enforcement priorities, ranging from conflicts of interest to abuse of authority to fraudulent financial transactions. As prosecutors investigate these issues, there will be ample opportunity for forensic accounting experts and forensic technology professionals to play a key role.
This is not a political issue. There are plausible claims that violations of law may have occurred. Veteran prosecutors and regulators will do their jobs, follow the guidelines of their respective agencies, and follow the evidence wherever it may lead. The objective assessment of evidence obtained in an investigation, and the due process of law to substantiate that evidence, are hallmarks of our democracy.
The same ethical principles guide the work of forensic accountants. Forensic accountants are fact finders, not advocates. Our role is to understand the facts and uncover the truth, wherever it may lead. This is the reason conflict of interest rules are so important. Independence means no previous personal or professional relationships, no personal agenda, and a commitment to the integrity of the investigatory process.
Consulting: What are some of the biggest regulatory hurdles you're seeing clients grapple with?
Parizek: From a regulatory perspective, clients are struggling to obtain assurance that their compliance programs and controls are up-to-date, fully implemented, and operating effectively. Areas of challenge tend to be around systems for record-keeping, fraud detection, cybersecurity, data protection, and for many companies, keeping up with changing regulatory developments.
An independent compliance audit is one way to ensure that organizations are in compliance with federal, state and corporate rules, regulations and standards. The scope of an independent compliance audit will typically include a review of personnel, compliance policies and procedures, internal controls, governance framework, and technology systems. The ultimate goal is to confirm that regulatory requirements are met and any deficiencies are properly remediated and sustainable. To further promote compliance with regulatory requirements, corporate executives should reinforce the critical importance of a strong ethical culture as a business imperative.
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