Showing posts with label fraud. Show all posts
Showing posts with label fraud. Show all posts

Tuesday, July 21, 2015

A New Proactive Responsibility For Bankers in the Face of Cross Border Frauds

Let's face it - no one,, (whether an individual, a government or an organization)  is immune to or safe from a breach, an attack, a scam, a rootkit or a virus / APT or whatever you may call it. 
A crack is a crack is a crack is a crack (calling it a hack is sacrilege) 
And this is a global problem which is growing (exponentially) by the day, by the hour, minute, second and even nanosecond. Everyone has to face the threat, directly or indirectly, and no one ever knows when he/she will fall victim to an attack or an incident, and it really does not matter whether you are hyper intelligent or live inside Fort Knox. 
We do not have to go too far into history to see institutions like OPM, SONY, White House; global security organizations like RSA, The Hacking Team, HB Gary, NSA etc - the list is really big and includes banks etc.
In this global cybersecurity threat and crime maelstrom the Law Enforcement Agencies (LEA), Intelligence and Defense Agencies are first and foremost affected. They have a responsibility to investigate cybercrimes perpetrated across international borders, using sophisticated attack techniques or compromising insiders into malicious acts, voluntarily or involuntarily. Invariably while following cross-border leads, the LEA meets with insurmountable challenges and lengthy procedures (or red-tape even non-cooperation). And, if the request is to an unfriendly nation, the case might as well be closed and filed away!
Example challenges faced by LEA are in (1) following a money trail, (2) getting source IP information, (3) user name and address, etc. 
We will only look at "following the money trail" - in this case the victim may know the name of the bank where the funds were fraudulently transferred. However, when the bank is advised about the same they may not take any action until there is an order for the same in compliance with their locally applicable laws and regulations.  
However it is time for these officials, across the world, to raise a red flag at their end when they receive a communication directly from the victim (or victim country LEA).
Imagine if a bank manager gets a mail from a victim who informs about a fraud which has been perpetrated and where the funds have been transferred to that particular branch of the bank. The branch Manager may not be able to stop the account from operating but he/she can inform the local LEA about the suspect transaction. In addition, he/she can proactively guide the foreign victim and LEA about the quickest procedure to get the legally appropriate instructions for necessary action. 
The only (simple) reason why this bank manager in a foreign country should stand up and raise a red flag on the account, on the account holder and the transaction(s) is .... it can happen to him/her too. 
Yes, there is no guarantee that this bank branch, anyplace in the world, may fall victim to a fraud or a bank client may fall victim - then this manager will be running the same hoops as the victim / LEA who had connected earlier. 
This is not a call to disclose information, neither a call to work against the law or invade the account holder's privacy. It is not an aggressive look into transactions which is done through Risk Management and AML practices. In these changing times, it is an acceptance of responsibility by the banking professionals to set up a simple deterrent control. Criminals will slow down on using accounts in foreign lands once they are aware that ANY transaction can be notified to LEA proactively. 

Thursday, January 15, 2009

Governance... whats that ! Happy New Year !!

The New Year has got off with a bang. India's Big-4 IT company has shown that it does not have underwear - the king without clothes and all along we believed that they were the best. Satyam Computers is a billion dollar plus company doing great business, employing 50,000 people across the globe....... and living a fraud.

The boss man at Satyam confessed that he has been cooking the books of accounts since the past 7 years or more. And this fudging has snowballed into a huge $ 1.2 billion hole in the company's statement of cash in hand and bank deposits. If this was not enough, Raju also said that revenue figures had been and margin statements for the quarter were inflated !

Satyam board had approved the purchase of companies owned by Raju's sons and the shareholders smelt a rat and Satyam's stock tumbled 55% on NYSE. The decision was withdrawn in an hour but this action brought greater scrutiny and the house of cards collapsed within a few days.

Governance norms were thrown to the wind by this company which was recently recognized by an award for good Governance (Golden Peacock).

What is surprising is that the directors, auditors, accountants and managers all say that they did not know about this. And this fraud has been going on for so many years now. So we must assume that Raju is super human and a super-genius to be able to put a mask on so many players at the same time and be able to successfully cloak numbers in the account statements repeatedly.

According to Raju he could not get off the tiger he was riding. It is common knowledge that you sleep with the devil and you get burned. He started a con job and the con grew bigger and bigger and there was no way he (or his cronies) could handle it.

And all these cronies are crying out loud claiming innocence. The auditors say that they relied on documents provided by the management ! The CFO says he did not check the balance sheet and that it was prepared by his VP !! The Directors say they accepted what was presented to them - ta face value !!! It is highly irresponsible to sign on public documents asserting they are correct and then not being able to stand by the same documents. All these people were busy being wined, dined and rewarded with cash and gifts and never gave a thought to their responsibility towards the shareholders.

Hope they are brought to book too, and get to see a jail from the inside. The reason is that this is a typical line of thought - nothing will happen it is India. Our investors association hardly has any teeth to fight for rights and bring these large corporations to closure. Well for once they were wrong because they did not factor shareholder anger in the US.

And thank God for this wake up call. Companies must embrace the practices of good governance not for complying with public sentiment and regulatory requirement. Any corporate leader with a decent amount of common sense can reap benefits of good governance by way of efficient processes and increased brand value which will provide ROI in the form of savings and stakeholder / customer confidence. The trick is in implementing governance initiatives in the spirit and do not worry you are not exposing yourself but you will be cleaning your act.