Financial Crime Scenario in 2010

This week I watched the movie -“Wall Street- Money Never Sleeps”. Michael Douglas and Sala Labouf’s characters brilliantly depict the mindset of the people in financial market and the vices of the financial institutions: fraud, money laundering and speculation. Mind you, Michael Douglas looked sexy as a crook, so more people might desire to become like him, instead of turning into a new leaf.

In this week, I am covering three posts about financial crime:

1.      Dirty Dealing (via Dirty Dealing site)

Peter Lilley the author of the book “Dirty Dealing”, has written a lot on money laundering and financial crime. Visit this site to  understand the various aspects of financial crime. Check out the country wise analysis report of financial crime. According to his estimates financial crime figures are crossing $ 2 trillion and are now widespread. Initially, the employees in banks were the only ones responsible to detect financial crime.  Now it is so pervasive that every employee dealing with financial transactions requires training on financial crime. An extract from his site is given below:

“The relevance of this material was that one key element of the training sessions was describing to attendees how they could identify suspicions or red flags of money laundering: those elements in a transaction, pattern of transactions and/or customer profile or customer’s activities which may indicate possible laundering activity. This is because in the post 9/11 environment, any of the world’s anti money laundering procedures is almost wholly dependent on employees identifying suspicions of money laundering and reporting these suspicions to relevant authorities. Whereas five years ago these “regulated” employees would only be working in banks or other financial institutions, now it is almost any employee anywhere who deals with financial transactions who is under an obligation to identify anything which may be suspicious and report it. In general terms, if you work in an auction house, as an accountant, in an estate agency business, as a car dealer or as a jewelry dealer – in fact anyone working in a field which handles other peoples funds or financial relationships – you will find that you have a legal duty to tell relevant law enforcement authorities about suspicious behavior of clients.”

2.      Who is Most Likely to Commit fraud at Your Company? (via ACFE site)

Association of Certified Fraud Examiners conducted research in 2010 to determine the trends of fraud in USA and other countries. Read the extract below and get the full report to understand ways to protect your organization from financial crime.

Profile of a Fraudster Drawn from ACFE Survey of Experts

The ACFE’s 2010 Report to the Nations on Occupational Fraud and Abuse is based on data compiled from a study of 1,843 cases of occupational fraud that occurred worldwide between January 2008 and December 2009. All information was provided by the Certified Fraud Examiners (CFEs) who investigated those cases. The fraud cases in our study came from 106 nations — with more than 40 percent of cases occurring in countries outside the United States — providing a truly global view into the plague of occupational fraud.

Key findings about fraud perpetrators from the 84-page Report include:

  • High-level perpetrators cause the greatest damage to their organizations.
  • Fraud offenders were likely to be found in one of six departments.
  • More than half of all cases in the study were committed by individuals between the ages of 31 and 45.
  • Most of the fraudsters in the study had never been previously charged or convicted for a fraud-related offense.
  • Fraud perpetrators often display warning signs that they are engaging in illicit activity.”

3.     SEC Failure to Regulate MBS Resulted in “Interconnected Ponzi Scheme with Various Types of Concurrent Fraud” (via New York Finance Blog)

The New York Finance blog post on the foreclosure of mortgages clearly depicts the disregard for regulations by the financial institutions. Presently, since Barrack Obama has vetoed the controversial bill by not putting his signatures, the public has a remedy. Had he approved it, the illegal process followed by the banks for foreclosure, would have become legal with public not having any legal recourse. It would have given more power to the banks. An extract depicting the sentiments of the public is given below:

“Adding fat to the burning fire of consumer anger, Congress ramrodded a measure that would “streamline the recognition of notarizations across state lines”, arguably validating much of the robo-signings.

Obama Avoids Political Suicide With Pocket Veto

The New York Times reports Obama Plans to Veto Foreclosure Bill
White House officials said Thursday that President Obama would not sign a little-noted measure that suddenly gained attention amid questions about some big lenders’ slipshod bookkeeping on home foreclosures, Jackie Calmes of The New York Times reports from Washington”.

From the above posts, it is apparent that financial crime is becoming one of the biggest threats to the world safety and prosperity. We need to address this issue, before the economies of various countries collapse and people come on the streets to fight it out.

Welcome your inputs on what the world should do to set this right?