Compliance functions across industries and organizations have undergone significant transformation over the past several years. Ways of working have evolved to virtual and hybrid spaces, deepening the industry’s reliance on technology, data and analytics. In response, pressure is rising from regulators to exercise sufficient oversight, transparency and control. The SEC has imposed billions in fines over record-keeping issues. Many of these incidents have been the result of informal communication channels — messaging apps or other digital platforms — that have become ubiquitous across virtual work ecosystems. Eric Hines, partner at StoneTurn, a global advisory firm specializing in forensic accounting and compliance, talks about how corporate investigations and forensics have evolved over the past decade.
Q: It’s been three years since the onset of the global pandemic. Looking back at the past few years, what has been the biggest transformation across investigations work?
A: The transition to remote and hybrid workforces has had a substantive impact on corporate investigations. Not only has it dramatically changed the way investigations are conducted — from personnel interviews to document and email reviews — but it has transformed the amount of information collected and exchanged between teams.
I’ll start with the interview piece. Oftentimes, when a forensic investigations team is brought in, whether it’s an internal or external investigation, the team conducts a series of interviews to better understand and assess the situation. When these interviews take place entirely in person, sitting face-to-face in a conference room, an investigations expert can pick up on key details that may happen in a second’s passing: a person’s body language, tone of voice or their reaction to certain questions or being shown particular documents.
Now, many interviews are conducted virtually via video call or sometimes, and less ideally, via phone. While this may save the investigations team travel time and drive the speed at which they might be able to get under the hood of a new project, it has a significant effect on the interview process. From the loss of nonverbal cues to the opportunity for the interview subject to leverage notes or other prepared documents that we can’t see on the screen, forensic investigations experts are navigating new ways of hybrid working in high-stakes situations.
Q: You mentioned information collected and used in investigations as a result of more technology and hybrid workforces. How has that changed recently?
A: The other piece of this digital-first ecosystem we now face is the amount of data and information that we have access to and gets passed back and forth between team members’ hands. This was a transition that was well underway before the pandemic but was catalyzed by the past three years.
Consider how employees interact with one another. Conversations that once may have been exchanged at the office over the water cooler are now taking place across multiple channels, from text and instant chat (like WhatsApp, Slack and Teams) conversations. The result is that more information is being documented and exchanged digitally but still through more “informal” channels, which, in turn, is expanding any one individual’s or organization’s digital footprint.
I like to think of forensic investigations as a pie — each slice of evidence makes up the whole pie. So while technology may be transforming the way investigations are conducted, it’s not eliminating slices of the pie, but rather, some pieces are just getting smaller while others are getting larger.
Thinking back to the interviews point earlier, where at one point in time face-to-face interviews may have made up a significant portion of the evidence pie, it now may make up a somewhat smaller sliver of the pie. This makes room for other investigative research and diligence efforts backed by technology.
Emerging tools like visualization software and customized analytics empower a more strategic and focused use of data and analytics within investigations, allowing investigators to leverage non-traditional data sets to test specific angles. Data and analytics are now a significant piece of the pie, not only because of the sheer amount of information that we have access to in virtual corporate ecosystems but because of opportunities for new and emerging software solutions to provide a clearer window into the business issues and transactions.
Another important piece of this evidence pie that’s favored by technology is the ability for cross-team collaboration. An investigation often requires crossing service lines and the involvement of multiple teams or specialists that may sit in different offices or even across geographic borders. These interactions are now streamlined with technology and virtual partnership.
Financial institutions have been hit with billions of dollars’ worth of fines in the past couple of years for failing to preserve business text messages, and Reuters recently reported that the SEC had expanded its probe into Wall Street's use of tools like WhatsApp and Signal.Read more
Q: With these changes to technology and digital communications, and the cultural transitions that have taken place over the past few years, what are the biggest lessons learned as it relates to compliance and investigations?
A: Whether it’s a matter involving an internal whistleblower or external regulatory investigation, a common theme across investigative work is that issues are rarely siloed or limited to one arm of the business, but rather, issues intersect various parts of the organization. Often, internal leaders see a single issue or focus on just one function when assessing an area of concern, but the reality is that most matters are organization-level matters.
We frequently engage with multiple teams across functions of the business — from HR to finance — to provide a more complete and comprehensive perspective of an investigation. This comes back to data, technology and the information that organizations have access to as processes, communications and ways of working are increasingly digital or hybrid.
The lesson for today’s business leaders is recognizing this changed dynamic quickly and setting up a roadmap for success. This starts with compliance, making sure the organization has the right systems and controls in place to create and establish a culture of compliance and standards across functions. The Department of Justice and other governing regulatory bodies continue to raise the bar in terms of their expectations and the standards that companies and their leaders are held to when it comes to compliance. More sophistication, more data-driven insights and more structure are imperative to safeguard the business and navigate the changing of the compliance and investigation tides.
Eric Hines is a partner at StoneTurn, a global advisory firm, assisting companies, their counsel and government agencies on regulatory, risk and compliance issues, investigations and business disputes. Eric brings over two decades of experience in forensic accounting, controls and compliance, and dispute consulting. He serves as a consultant to attorneys and corporations in matters involving complex financial and accounting issues. Eric also has extensive experience working with and for federal and state government agencies, including the DOJ and SEC.