Forensic chronicles: top 3 revealed unfair financial fraud schemes in the first quarter of 2025.

This year, we have witnessed many attempts at financial fraud that have affected not only local but also global markets.

Here are the top 3 forensic investigations that have revealed unfair schemes in companies.

But first, let’s take a look at some key trends in financial fraud that took place in the first quarter of 2025:

1. Unfortunately, as long as people work in business, it will always be at risk of attacks by financial fraudsters. Ultimately, biomonitor (human) nature makes businesses vulnerable to greed-driven fraud.

2. Automation of business processes is still a means of reducing the materiality criteria for fraud, so it is important to pay attention to the aspects you automate.

3. Trust remains a powerful motivator for malpractice.

4. The key to successfully combating financial fraud is to continuously improve the company’s internal control systems.

5. As forensic auditors, our duty is to ensure that control mechanisms are effectively implemented and maintained.

After all, what is written on paper must be implemented in practice.

And now, let’s focus on three of the most prominent cases of financial fraud in the first quarter of 2025.

Case #1: Self-directed Party in Purchasing – Insider Procurement Fraud.

For six months, the team worked 24/7, and as a result, we discovered that more than 10 million US dollars had been used inefficiently.

The main participants in this obviously suspicious process were the company’s top managers, and the risk zone was in procurement.

It is worth noting the axiom that companies usually lose money at the point of procurement, when the money goes outside the company, or in sales, when the financial result shows a profit.

Weaknesses in the control system were the main reason why this process was possible. These included the coordination of managers to implement the scheme, unilateral approval of regulations, insufficient attention to primary documents, high trust on the part of the owner and irregular control by internal auditors.

In the last five years, this area has not been audited by external auditors, which has led to non-transparent processes and significant losses.

After conducting a forensic audit, we provided the following recommendations:

1. Implementation of a clear procedure and policy for tender procurement.

2. Rotation of contractors every six months.

3. Review of tariffs for cooperation with contractors.

4. Requirement for 100% availability of primary documentation.

5. Exclusion of contractors from the list of suppliers who do not fulfil the requirements.

6. Implementation of the double eye principle, etc.

Case #2: Financial Tsunami – Financial Sector Weaknesses Uncovered.

After completing the forensics project, I was offered to become a member of the supervisory board of the client’s company. This is quite a popular practice, and I decided to accept the offer.

In this case, we were auditing a company in the financial sector.

The company’s annual revenue reached $6 billion.

During the project, my team and I decided to proceed according to the following plan:

1. Analyse threats, both external and internal.

2. Checking business partners and subordinates of top managers.

3. Analysis of internal control systems.

4. Identification of risky schemes that may lead to the illegal alienation of company assets.

5. Providing recommendations for correcting accounting errors and strengthening control.

6. Increase the transparency of business processes.

7. Improving the level of cybersecurity.

During the analysis, we identified several significant problems in the audited entity:

1. Lack of a clearly defined accounting policy.

2. Decentralisation of budgeting, which leads to distortion of financial results.

3. The presence of non-commodity transactions that created risks.

4. Lack of NDA (non-disclosure agreement) and NCA (non-competition agreement) agreements signed with the C-level.

5. Insufficient automation of accounting and the ability to change accounting data retroactively.

6. Conflicts of interest among employees in terms of related parties.

7. Use of salami scheme when concluding contracts.

8. Lack of accounting for fixed assets.

9. Non-transparent procurement procedure.

10. Absence of SHA (Shareholder’s agreement).

The amount at risk was $16 million.

Although this amount is insignificant compared to the company’s total revenue, given the business’s margin of 2.2%, it is of material and fundamental importance to the owner.

In addition to being used to efficiently structure financial flows and business processes, the forensic audit also serves as a reassurance factor for the owner.

Following the audit, the areas requiring attention become clear, reducing overall uncertainty.

According to statistics, each of us spends a significant part of our life energy on issues related to uncertainty. The conclusion is obvious.

Case #3: Agricultural Bacchanalia – Hidden Losses in Agricultural Business.

And finally, the third project we audited was in the agricultural sector.

The storyline of this project was as follows: the majority 75% shareholder withdrew from operational control before the war started.

Over the past 4 years, the company had not shown any operating profit, and the Client did not distribute dividends because there was nothing to distribute.

Given the fact that competitors in the same region demonstrated operating profit, the Client had questions about the reality of the financial result.

As a result of the forensic procedure, the identified amount of risky transactions was approximately 10% of the company’s revenue.

Among the identified risks, my team and I identified the following:

1. The absence of an accounting policy at the enterprise, which logically led to a distortion of the financial result;

2. Incorrect depreciation calculation;

3. Lack of primary documents for a number of material transactions with counterparties;

4. The presence of off-balance sheet assets that are not on the company’s balance sheet, obviously purchased for cash;

5. The presence of cash transactions that could potentially not be reflected in the accounting;

6. Fuel and lubricants are accounted for with accounting errors;

7. Problematic receivables that are not handled by the legal department at all;

8. Incorrect formation of production costs, which also led to a distortion of the financial result;

9. Mismatch between the VAT reflection in the declaration and the company’s accounting;

10. Penalties for late payment of taxes;

11. The risk of non-commodity transactions;

12. The risk of selling products for cash without reflecting them in management accounting.

One of the most significant parts of a forensic audit report is usually the recommendations made, so in this case they were as follows:

1. Conduct tax and financial audits at least once a year;

2. To prescribe the accounting policy at the enterprise;

3. Control accounts receivable;

4. Regularly conduct an independent inventory of current and non-current assets;

5. Restore primary documents and partial accounting;

6. For the owner to appoint his own financial controller (FC) instead of a relative of the partner’s FC is an obvious conflict of interest.

Leaving operational control equals loss of business

To prevent this from happening, you need to undergo a regular financial check in the form of a forensic audit procedure or at least a mandatory audit of financial statements.

Conclusion:

No company or individual is immune to errors, but those who commit to the principle of continuous improvement (kaizen) stand the best chance of thriving. In today’s competitive environment, only those willing to make extraordinary efforts can truly succeed.

This is the way of experiencing and sometimes losing the seemingly closest environment, but the current competitive environment dictates this approach to the top three strongest companies.

The process of development is always a dynamic process through the implementation of extra efforts, because ordinary efforts are no longer enough, only extra efforts are taken into account, and no one is interested in static, just like the first three players from the end…)