Financial Audit: The Paper Trail Graph

Auditing a large company is a nightmare of "Missing Links." Money leaves an account as a "Marketing Expense," enters an offshore shell company as a "Consulting Fee," and disappears. An auditor looking at a spreadsheet only sees two unconnected rows. An auditor looking at a Financial Graph sees the Path of Value. Graph RAG allows an AI investigator to ask: "Is there any suspicious connection between our CFO and the vendor we paid yesterday?"

In this lesson, we will look at Audit-Graphs. We will learn how to extract [:PAID_TO], [:BENEFICIAL_OWNER_OF], and [:AFFILIATED_WITH] relationships from corporate filings (SEC) and transaction logs. We will see how to identify "Conflict of Interest" risks by finding a 3-hop path between an internal decision-maker and an external beneficiary.

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1. The Audit Graph Schema

• (:Entity) (Company or Individual)
• (:Transaction) {amount, date, currency}
• (:Bank_Account) {IBAN, bank_name}
• (:Contract) {value, signature_date}

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2. Beneficial Ownership (Finding the "Final Boss")

Criminals hide behind "Shell Companies."

• Company A is owned by Company B, which is owned by Individual X.
• The Graph Power: By following the [:OWNED_BY] relationship recursively, the AI can instantly reveal the Ultimate Beneficial Owner (UBO) of any entity, regardless of how many "Shells" are in the way.

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3. Detecting "Conflict of Interest" (CoI)

A CoI happens when a path exists between a "Voter" and a "Contractor" outside of official channels.

• (CFO)--[:BOARD_MEMBER_OF]-->(Secret_Holdings)--[:INVESTED_IN]-->(Vendor_Y).

The AI Audit: When the system sees a new contract with Vendor_Y, it automatically scans for Paths to Decision-Makers. If it finds one, it flags the transaction for human review.

graph LR
    P[CFO: Sudeep] -->|Approves| C[Contract: $1M]
    C -->|Paid To| V[Vendor: TechCorp]
    P ---|Brother| B[Person: Jane]
    B -->|Director| V
    
    subgraph "The Conflict Path"
    P --- B --- V
    end
    
    style P fill:#4285F4,color:#fff
    style V fill:#f4b400,color:#fff
    note[The AI links the 'Brother' relationship to the 'Payment' relationship]

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4. Implementation: Finding Indirect Ownership in Cypher

MATCH (target:Company {name: 'ShadowCorp'})-[:OWNED_BY*1..10]->(ubo:Person)
RETURN ubo.name, count(*) as layers_of_separation;

// This query recursively follows owner links to find 
// the human beings at the end of the corporate chain.

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5. Summary and Exercises

Financial Graph RAG is the "Anti-Corruption Engine."

• Path Traversal exposes shell company structures.
• Multi-hop matching identifies Conflicts of Interest.
• Recursive Searching (UBO) is the core of modern "Know Your Customer" (KYC) laws.
• Traceability: Every flag raised by the AI can be visually proven by the underlying bank/corporate graph.

Exercises

1. Investigative Task: You are auditing a "City Council." What relationship would you look for between a "Council Member" and a "Construction Company"? (e.g., Joint Investment, Family Link, Shared Address).
2. The "Hidden" Transfer: If money moves through 5 different banks, how would you represent the "Chain of Custody" in your graph?
3. Visualization: Draw a 3-step chain of "Ownership." Who is the "Owner" of the first company in the chain?

In the next lesson, we will look at governance vertical: Regulatory Compliance: Building a Rule Graph.