Journal of Financial Crime

Published by Emerald
Print ISSN: 1359-0790
Number of Facilities Struck by International Attacks, 1998-2003  
Federal Reserve Instruments  
The terrorist attacks that have occurred in the past few years around the world have raised international awareness of the danger of terrorism and its complex repercussions on the financial markets. This paper explores the ways in which financial markets reacted to the attacks and the authorities' responses. Well-functioning financial markets, bolstered by the prompt and effective reaction of the relevant authorities, were generally efficient in absorbing shocks stemming from terrorist attacks. The paper discusses market and regulatory responses to the terrorist attacks and the elements that should be strengthened so as to further enhance the resilience of financial markets to terrorism.
Purpose – This paper aims to explore complexities of compliance with international and customary law when faced with terrorist threats. The paper's thesis asserts that terrorism cannot be successfully repelled unless the legitimacy of international and domestic law is adhered to by states out of a sense of reciprocal obligation in accordance with the principle of pacta sunt servanda (pacts shall be respected). Design/methodology/approach – This paper examines US pronouncements in order to assess strategic validity. Findings – While the Middle East, particularly Iraq, has been the focus of the US “War on terrorism,” the paper suggests two questions: what has been the US response to terrorist threats in the Americas? Have US national security priorities post‐9/11 been unnecessarily diverted from the Americas where much needed support is promised but lacking, and instead have resources been concentrated far beyond domestic and international norms? Originality/value – The paper examines the US national security priorities, concluding that they have been unproductively diverted from the Americas to the Middle East in general and Iraq in particular. The US fixation upon Middle East “regime‐change”, while neglecting to recognize the dangerous nexus and presence of organized crime and terrorist organizations in the Americas, is illustrative of how the present administration has diverted its post.
Purpose - The purpose of this paper is to present a discussion of the corrosive effects of corruption and techniques, both criminal and civil to recover the proceeds of corruption. Design/methodology/approach - The paper examines the Canadian and international perspective on the issue. Findings - Civil asset recovery is a viable technique although there are a number of barriers that need to be addressed. Research limitations/implications - Further research on the effectiveness of recovery measures needs to be conducted. Practical implications - The paper examines the practical implications of the asset recovery techniques to address corruption. Originality/value - Perspectives on asset recovery are brought to bear from an anti-money laundering and forfeiture practitioner.
Purpose – The purpose of this paper is to examine legal issues in the USA in relation to corruption involving American corporations. Design/methodology/approach – The paper reviews of actions by the US government, lobbyists and courts with commentary by the author. Findings – All is not well. Originality/value – The paper presents a personal review of US legal issues relating to corruption.
Purpose – The purpose of this paper is to present an alternate view regarding enforcement of currency control laws to the real estate market. Design/methodology/approach – Historical research and comparison of similar although not parallel systems. Findings – Based on historical data, present approaches are not working. Practical implications – Suggests new approach by incentivizing those to the potential crime. Originality/value – The paper will be of value to law‐enforcement policy makers.
Purpose The purpose of this paper is to present a systematic approach to classify financial crime into main categories as well as sub categories. Design/methodology/approach Based on a literature review, the main four categories were labeled corruption, fraud, theft, and manipulation, respectively. Findings There is a massive variety of crime types and crime names in the literature that can successfully be allocated to main categories of financial crime. Research limitations/implications The paper is based on exploratory research to stimulate future research in refining and improving the categories suggested here. Practical implications The great variety of criminal activities is classified in this paper so that practitioners can organize their thinking around crime themes rather than crime examples when mapping crime. Social implications The public and society at large will be able to understand the confusing variety of financial crime in terms of main categories. Originality/value There has been some confusion among both researchers and practitioners when communicating about examples of financial crime. The organizing framework in this paper will help allocate crime examples to main categories of financial crime.
Purpose: The purpose of this paper is to explore the issue of violence with respect to white-collar criminals. Design/methodology/approach: The analysis is conceptual, focusing on the historical underpinnings of white-collar crime and reviewing the evolution of white-collar criminals. Findings: Findings suggest that white-collar criminals do display violent tendencies and, contrary to popular belief, can become dangerous individuals. Practical implications: The paper represents an extremely useful and practical source for fraud examiners and other white-collar crime investigators. Raising the mvareness of investigators dealing with white-collar criminals may prevent them from becoming victims of a violent act. Originality/value: The paper fulfills a need to highlight a dangerous trend with white-collar criminals in that they may be driven to violence against those involved in investigating their crimes.
Purpose To demonstrate that Malaysia has taken serious measures to improve corporate governance landscape. Design/methodology/approach Enforcement actions are used as a case study to show the effect of certain measures undertaken by the regulatory authorities to combat economic crime. Findings There was a drop in prosecutions and other enforcement actions following the introduction of compulsory directors trainings. Research limitations/implications Recommendations are made for a smart partnership between the government, regulators and the private sector to improve governance in the markets. Originality/value Corporate law and securities law require a sound framework that would promote a safe competitive and orderly market for investors in Malaysia.
Discusses in a wideranging way the background to official regulation of markets, going back to 17th century Britain’s outlawing of stock-jobbing, and the “blue sky” frauds in 19th/20th century USA; however, policy has generally been to avoid heavy-handed interference as counter-productive. Assesses how far this approach has changed in recent years and the chances of success for attacking terrorism through money laundering control. Moves on to the long history of economically motivated crime, corruption, smuggling and trafficking, and the impact of technology. Reviews finally the techniques of money laundering, relating it to the evasion of sanctions and embargoes, and the attempts to counter it and pursue the proceeds of crime, stressing the differences between terrorists and ordinary criminals.
In the words of the song, ‘Money Makes the World go Round’. In the business of investigating and prosecuting serious and complex financial fraud, especially the international variety, the money goes around the world pretty effectively as well. And the more it can do so without the movement of the funds being detected, the more effective is the flow of mis-appropriated money and the less likely the fraud will be detected and the fraudster brought to book.
This paper analyses previously unpublished and uncollated statistical data relating to the incidence of counterfeit currency in Cyprus from January 1981 to September 1992. Among other factors, it examines comparative values by currency type; seizures, investigations, prosecutions; cases by district, location and month; and the nationality of offenders. It was found that, as in other countries, the most counterfeited note is the US$100 bill. There is no apparent link between tourism and the passing of counterfeit currency and Lebanese and other Middle Eastern nationalities are those most frequently prosecuted. Despite the relatively small scale of the problem of counterfeit currency, there is an upward trend and convictions appear to be difficult to obtain.
Serious fraud trials are the sum of their component parts such that examination of one particular area often repays attention. The Roskill Fraud Trials Committee's criticisms were the backdrop for the Criminal Justice Act 1987 and the enhanced investigatory powers that are to be found in s. 2 thereof. Seven years after the enactment of the 1987 Act it is apposite to examine whether in derogating from the confines of traditional criminal evidential practices a certain level of procedural and substantive fairness has been maintained. The Police and Criminal Evidence Act 1984 and its application to the rights of a suspect are also of importance. A critical examination of the above issues demands steering a careful course between normative rules and theory: in this area above all others it is impossible and undesirable to divorce one from the other.
The directors of a company owe certain duties to the company itself as a legal entity distinct from its members. They also owe duties to its shareholders in prescribed circumstances, and to a lesser degree to the company's creditors. This paper, inter alia, examines the circumstances in which breach of the duties owed by the directors of the company to its creditors may give rise to criminal responsibility. Central to this analysis is an exposition of the concept of fraud and its associated concept of dishonesty generally and an analysis of the interpretation by the courts of the nature and ambit of s. 458 of the Companies Act. Finally consideration will be given as to how this offence may be affected by the proposals of the Law Commission in its Consultation Paper No. 155 as to the future role of fraud and dishonesty in offences.
It has been commented that the topic of enforcement needs little introduction ‘since it is readily apparent that the imposition of the [then] new regulatory structure will prove to be a largely futile exercise if regulation cannot be effectively enforced’. Indeed, Professor Gower has made the comment that ‘it is not much use having regulations unless they are enforced’.
Nigeria has been invaded by ingenious and dare devil fraudsters comprising her own nationals and aliens. The proportion and frequency of the activities of these syndicates in perpetuating organised economic crimes are alarming not only to Nigerian society but to the international community. The frightening degree of sophistication in the mode of operation aided by modern communication gadgets, electronics, telecommunication equipment such as telex, fascimiles, computers etc have ensured the speedy commission of criminal activity. Huge sums of money and much property has been lost through dishonest means and wrongfully acquired by these parasites. This dangerous trend must be arrested if sanity, security, confidence and a viable economy are to be restored. It is clear that the statutory provisions governing economic crimes, particularly obtaining by false pretences, stealing and theft of funds, other crimes committed with the aid of forgery, offences relating to consumers' fraud in the form of false advertising, production or supply of substandard goods, tax evasion, fraudulent/fake/disguiscd bankruptcy, over-invoicing, maritime fraud schemes, falsifying books of account, bank frauds, false statements made to auditors or inside a company's prospectus and the penalties stipulated therein are now inadequate for the containment of these economic and organised crimes. Therefore, legislation more punitive, more drastic, even ruthless is required to eradicate or save society from the scourges of crime and express the dislike, anger, disgust and vengeance of the public. The piece of legislation styled Advance Fee Fraud and Other Fraud Related Offences, Decree No. 13 (1995) ‘AFFAOFRO’, hereinafter called the ‘Decree’, is a remarkable one which wields a sledgehammer. It is a statute of very strict liability by virtue of several ranges of stiffer penalties stipulated for the various categories of offences. Below is an examination of the framework of the more noteworthy provisions and the resultant impact on the existing common law, statutory rules and recommended reforms.
The Prevention of Terrorism (Additional Powers) Act was rushed through Parliament in just 24 hours and 47 minutes, starting on Tuesday 2nd April. In the House of Commons the allocation of time for the Bill was debated at 3.43 pm, the Second Reading took place at 10.10 pm, the Third Reading at 1.21 am on Wednesday morning, and the Bill completed its passage through the House of Lords at 4.30 pm the same day. The Opposition acquiesced in the Bill being rushed through Parliament by the Government. The legislation allows the police to search clothing following the exercise of random stop and search powers, for which no reasonable grounds are required, and provides for searches of non-residential premises on a warrant issued by a justice of the peace. It also permits searches of any goods on accompanied or unaccompanied vehicles entering or leaving Great Britain or Northern Ireland, and provides a power to impose a police cordon, and for the application of parking prohibitions and restrictions. The stop and search powers were the most controversial feature of the legislation, as potentially involving the greatest interference with individual liberty, and the implications of these powers are considered else-where. This paper will examine some of the less publicised provisions contained in the Act, which have, possibly unforeseen, implications for businesses. This is especially likely given that due to the timetable motion (the guillotine) only cl. 1 of the Bill, on the stop and search powers, was actually considered by the House of Commons in Committee.
In November 1998, the Home Office Working Group on Confiscation, a group convened in 1990 to monitor the operation of confiscation and money-laundering legislation, released its third report, a comprehensive examination of the confiscation and money-laundering control regimes in England and Wales. The report recommends numerous changes, some of which fill gaps in the present framework and others that radically alter the methods deployed to ensure that criminal profits do not lie secure in the hands of their owners. Previous reports heavily influenced subsequent legislative developments so it is anticipated that this document foreshadows the legislative course to be pursued by the Labour Government in the near future.
Advancing technology has improved the ability of financial institutions and their users to conduct cybercommerce. Improved technology, however, has also provided an opportunity for criminals and fraudsters to use computer software systems to transfer their illicit gains and thereby sustain their criminal enterprises. Cybercommerce depends on rapid, anonymous and unsupervised transactions. Such a system is extremely vulnerable to criminals seeking to launder money on the Internet. In a system where there are millions of transactions unsupervised by financial institutions, comprehensive oversight becomes impractical.
Introduces the very wideranging and draconian Proceeds of Crime Act 2002 (PoCA) and its provisions under section 7 for denying the commercial and banking system to would-be money launderers: they are intended to turn bankers, accountants and lawyers into the unofficial policemen of financial transactions, with criminal penalties for non-compliance. Criticises the way in which the Act characterises underlying “predicate” conduct as an essential element of criminality. Gives the background to the Act, noting the novelty for English law that the Act is concerned about crimes committed abroad as well in the UK, and construes some acts as offences because they would be against the law if committed in the UK. Deals also with the concepts of single and double criminality with regard to the Criminal Justice Act 1988 S. 93A(7).
Purpose – The purpose of this paper is to compare a new anti-corruption law approved by the Italian Parliament in November 2012 with Italian treaty obligations, the international evaluation reports on the Italian anti-corruption regime elaborated by the Organisation for Economic Co-operation and Development (OECD) and the Council of Europe, the best practice guidelines and other European models. The year 2012 has marked a turning point in Italian anti-corruption policy. In response to the low ranking that Italy has in all international anti-corruption indices, the critiques expressed in international reports on its anti-corruption regime, and the increasing pressure of public opinion, the Italian parliament approved the new anti-corruption law. Design/methodology/approach – The Law was preceded by critiques in the mass media and has been labelled as a token act. To evaluate the effectiveness of the steps undertaken by the Italian Parliament, this paper compares the new law with Italian treaty obligations, the international evaluation reports on the Italian anti-corruption regime elaborated by the OECD and the Council of Europe, the best practice guidelines and other European models (i.e. the UK Bribery Act). Findings – This comparison gives the author the opportunity not only to identify the strengths and weaknesses of the law but also to suggest efficient solutions that the Italian legislator could have adopted. Originality/value – So far, this is the only analysis in English of the changes introduced in the Italian anti-corruption regime in 2012. Several international colleagues and practitioners have asked the author about the new regime and it was therefore deemed appropriate to address the issue in an academic article.
Introduces the UK Financial Services and Markets Act 2000 (FSMA), a determined effort to modernise financial regulation which creates the Financial Services Authority (FSA) as a monolithic regulator and the Financial Services and Markets Tribunal as an appellate channel. Shows how the Act represents a shift from self-regulation to statutory regulation, remedying the shortcomings of the 1986 Financial Services Act. Outlines the FSA’s powers, and how they might conflict with the European Convention on Human Rights. Compares the FSMA with the Canadian approach to the questions of balancing regulation and public confidence in the market on one side, with protection of individual rights on the other; these concerns are embodied respectively in the Securities Act and the Canadian Charter of Rights and Freedoms.
The issue of fraud and the abuse of the social welfare system has become increasingly topical in most industrial countries with the greater difficulty in funding public sector expenditure. With large budget deficits, low economic growth and high unemployment, tolerance for different forms of abuse generally decreases. This trend also applies in Sweden.
Purpose – The purpose of this paper is to examine the impacts of loss-premium comparisons (loss-premium comparison refers to the amount of an actual loss compared to the premium level) and insurance coverage on customer acceptance of insurance claim frauds, based on Adams’ equity theory. Customer perceptions of insurance frauds have been studied in recent years. Design/methodology/approach – A questionnaire was used as an instrument in the research. The hypotheses were tested using a 3 loss-premium comparisons (the actual loss amount was lower than, or equal to or higher than the annual premium) × 2 insurance coverage (the loss is covered or not covered by the insurance policy) experimental design in a claim application context. Findings – The results showed that loss-premium comparisons and insurance coverage significantly affect the final claim amounts. According to the results, age and education may relate to customer acceptance of insurance claim frauds. Originality/value – This study proposed a first empirical investigation into the relationship between loss-premium comparisons and customer ethical decision making in the customer frauds. Insurance coverage is also specifically considered in the study.
The law relating to tracing is complicated, littered with inconsistencies and possibly now verging on a state of disarray. The complications are ever increasing as the topic becomes inevitably intertwined with the law relating to constructive trusts and restitution. This article concentrates on a specific aspect of the law of tracing, namely, the extent to which one can trace money paid into an overdrawn bank account.
In the USA, as elsewhere in the world, the public interest in effective law enforcement is often in conflict with the public's concern for the privacy of personal financial and other sensitive information. During recent decades, the federal government has compiled increasing quantities of data on its citizens. This has proven necessary to determine who qualifies for various benefit programmes, to monitor compliance with anti-discrimination statutes and to pursue various other social goals. In addition, improved technology has greatly increased the capability of the government to compile and retrieve information about individuals. This burgeoning governmental information gathering, however, has brought with it an increasing concern over its potential to intrude into the private lives of the citizenry.
Shows how the Securities and Exchange Act and the Racketeer Influenced and Corrupt Organizations Act 1970 (RICO) in the USA impose additional burdens on auditors in the detection of accounting errors, irregularities and fraud, compared with other countries like the UK; this is in addition to the generally high levels of US litigation against professional people because of factors like contingency based legal fees, class actions, and jury trials. Outlines the history of protection of investors by law since the stock market crash of 1929, the Acts’ provisions, and cases arising from them: the Securities Act is concerned with disclosure, and the Exchange Act with trading in securities. Moves on to the provisions of the RICO, which makes accountants criminally liable for mail and securities fraud and for knowingly issuing negligent audit reports, arguing that the original intentions of the Act have widened so far that accountants have become insurers of business failures at triple the losses suffered by the businesses.
Discusses how stability has become a value of civilisation and supposedly an effect of global interconnectedness, though the terrorist attacks of 2001 indicate that destabilisation is also possible. Explores the nature of stability, how it relates to the global financial system and to the rule of law. Goes on to the nature of terrorism and how it compares with organised crime and white-collar crime in terms of risk and adherence to the rule of law. Outlines how the law is responding to the threats to stability, including the USA PATRIOT Act, the 2002 Terrorism Risk Insurance Act, and suggests how terrorist activity may be predicted. Compares the financial losses from terrorism with those from natural disasters, and describes private business’s use of risk management. Indicates why anti-terrorist measures are likely to be of limited effect, and the risks of legal reforms against terrorism: these include restrictions on human rights and privacy.
Examines how the Royal Canadian Mounted Police (RCMP) successfully implemented a tailor-made Human Resources (HR) management regime with fresh definitions of competences for the new Integrated Market Enforcement Teams (IMETs). Explains that the intention was to increase competences for investigation of white-collar crime in the wake of corporate scandals in the USA, and thus to restore investor confidence in Canada’s capital market. Details the IMET pilot project, including selection of personnel from the RCMP for the six IMETs. Concludes that the new HR regime clearly has the ability to change how people are managed in the investigation field.
The Cuban Liberty and Democratic Solidarity Act (the Act) provides for extraterritorial jurisdiction and sanctions against foreign companies which traffic in confiscated US-owned Cuban property. The Act provides US nationals with a private right of action in US courts against foreign companies which benefit from the use of confiscated property. The Act also authorises the exclusion from US territory of any corporate officers, directors, or controlling shareholders, including their spouses and minor children, of companies which derive any economic benefit from the use of confiscated Cuban property. Moreover, s. 103(a) of Title I of the Act imposes civil liability against any lending institution with a US presence which knowingly makes any loans to persons who benefit from the use of confiscated Cuban property.
Analyses specific sections of the 2001 Act as they concern powers over financial services. Includes Section 311: Special Measures Involving Foreign Jurisdictions, Financial Institutions, Transactions and Accounts of Primary Money Laundering Concerns; Section 312: Special Due Diligence for Correspondent and Private Banking Accounts; Section 313: Correspondent Accounts with Private Shell Banks; Sections 319 (b) and 319 (c): Review of Account Records of Related Anti-Money Laundering Compliance; Section 325: Concentration Accounts; Section 326(a): Verifying Identity of New Account Holders; Section 319(a): Forfeiture of Funds in US Interbank Accounts; Section 319(d): Repatriation of Property; Section 320: Forfeitable Property; Section 316: Contesting Confiscation; Section 322: Corporations Represented by a Fugitive; Section 323: Enforcement of Foreign Judgments; Section 317: Long Arm Jurisdiction; Section 314: Cooperative Efforts to Deter Money Laundering; Section 351: Voluntary Disclosures to Governmental Entities; Section 355: Written Employment References; Section 317: Report on Suspicious Financial Activities; Section 358: Reports to Intelligence Agencies; Section 330: International Investigations; Section 327: Anti-Money Laundering Record; Section 352: Anti-Money Laundering Programmes; Section 321: New Entities Subject to the Bank Secrecy Act and a New Regulator; Section 318: Foreign Banks; Section 356: Securities Industry; Section 318: Money Transmission Business; Section 373: Money Transmitting; Section 357: Transferring IRS Responsibilities; Section 365: Currency Transaction Reporting Requirements for All Trades or Businesses; Section 328: International Wire Transfers; Section 366: Exemptions from Currency Transaction Report System; Section 353: Targeting Orders; Section 354: Anti-Money Laundering Strategy; Section 360: International Lending through International Institutions; Section 361: FinCEN; Section 362: Use of Highly Secured Networks; Section 364: Uniform Protection for Federal Reserve Facilities. Concludes with penalties under the money laundering laws.
Describes how asset forfeiture works in the USA; both civil and criminal forfeiture of property are used to recover property involved in crime that crosses national borders, and each has its advantages. Shows how the Civil Asset Forfeiture Reform Act 2000 (CAFRA) and the PATRIOT Act 2001 deal with transnational crime and recovery, applying them to various possible cases: the criminal proceeds are in the USA but the defendant is abroad, the money is in the USA but the crime was committed abroad, the criminal is in the USA but the property is abroad, the crime was committed in the USA but the criminal and/or the money is abroad, and the USA needs foreign government assistance to restrain property and obtain bank records. Deals with particular issues in the last case, such as bank records, attorneys’ fees, and challenges abroad to the restraint on the merits; lastly, mentions how forfeiture of terrorist assets is now covered. Concludes that the PATRIOT Act and its predecessor, CAFRA, have given US law enforcement new powers to seize and confiscate assets involved in international crime; terrorism is the immediate focus, but all criminal activity crossing frontiers can be combated effectively.
Gives the background to the Act, whose Title III was meant in part to deal with financial secrecy jurisdictions. Reviews the antagonism of American courts towards financial secrecy when it interferes with domestic disclosure of documents, mentioning the Aerospatiale, Westinghouse and other legal cases. Discusses the extraterritorial provisions of the PATRIOT Act: indirect regulation through domestic institutions, and direct regulation of foreign financial institutions through the extension of American money laundering regulations. Points out that the first major application of the Act was in fact against tax evasion rather than terrorist finance, and concerned VISA International; the Attorney General’s intention was to use VISA credit cards to identify American tax evaders who have stashed money in financial secrecy jurisdictions, and this may sever the links between these jurisdictions and the US banking and financial system. Sets the Act in the context of previous American attempts to legislate outside US jurisdiction, such as the Helms-Burton Act. Concludes that the new legislation may ultimately hurt long term American interests, both business and diplomatic, all for the sake of impeding tax evasion.
Raises the problem for a bank asked by a third party to freeze the funds of a customer, with special reference to New Zealand; the bank faces liability whichever decision it makes. Mentions the Royal Brunei Airlines and Twinsectra cases, and details a case study (US International Marketing Ltd v National Bank of New Zealand) where the bank refused to transfer a customer’s funds because of a third party request; the customer’s appeal was upheld. Concludes that banks must have “sufficient factual foundation” before they can refuse to comply with a customer’s request for a transfer of funds.
Purpose – To outline the role of the Caribbean Financial Action Task Force (CFATF), which has the remit to spearhead the implementation of internationally recognized anti‐money laundering and combating the financing of terrorism (AML/CFT) benchmarks in the Caribbean Basin region. Design/methodology/approach – The first part of the paper sets out the mandate and structure of the CFATF, and describes the range of activities in which it has been engaged, together with some triumphs and challenges experienced over its history. The second part focuses on a critical component of the CFATF's remit, namely, the conduct of the mutual evaluation (MVE) programme, a peer review process by which member states within the CFATF family are assessed for compliance with AML/CFT requirements. The third part constitutes the conclusion and offers some observations on the way forward for the CFATF in its ongoing campaign against financial crime. Findings – The Caribbean Basin region is ad idem with its international partners in the fight against money laundering and the financing of terrorism. Member governments of the CFATF have embraced this commitment because it is in the region's best interests to protect first and foremost the regional financial system from criminal activity and by extension the global financial system. In so doing we are able to position ourselves as well regulated, clean jurisdictions which are firmly committed to adherence to international best practices. The ongoing stance of the CFATF is one of constant vigilance with regard to international developments, their potential impact on members and the Caribbean Basin region and the way in which the region's interests could be best protected. Originality/value – The task of the CFATF is to ensure that throughout the membership all the domestic stakeholders be it the National Anti Money Laundering Committee, the attorney general's department, the central bank, police, customs, immigration, defence departments, the financial intelligence units (FIUs), the judiciary and the magistracy all must take on the responsibility for ensuring that in the AML/CFT arena a culture of compliance is engendered throughout the national consciousness. The MEV reports on all CFATF members as the outcome of the monitoring for compliance process are now being published on the CFATF web site and will be of value to our international partners and in particular to the global investment community. The Caribbean Basin region through concerted action must strive for a positive and responsible international image and reputation and the publication of this paper is a step in that direction.
Discusses the impact of regulatory and enforcement action on banking and financial services, focusing on Switzerland, which is one of the most developed financial centres. Describes the recent increase in legislation which introduces corporate criminal liability, plus the far-reaching Money Laundering Ordinance with its stronger due diligence requirements. Points out that in the field of financial services, liberalisation and globalisation have been met with more rather than less regulation. Concludes that, while greater regulation can be viewed as a reasonable price to pay for globalised financial services, the over-regulation of Swiss financial services needs to be rationalised.
On 25th June, 1997, the US Supreme Court issued an important decision in which it endorsed an expanded theory of insider trading liability under the federal securities laws. In United States v O'Hagan, the Court held, in a 6-3 decision, that a person who misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information, may be found liable for securities fraud under s. 10(b) of the Securities Exchange Act of 1934 (the ‘Exchange Act’) and SEC Rule 10b-5, which prohibit the use of fraud or deception ‘in connection with the purchase or sale of any security’. In endorsing the ‘misappropriation’ theory, the Court resolved a longstanding split among the federal Circuit Courts of Appeal and upheld an important tool in the prosecution of securities fraud. Separately, the Court held that the Securities and Exchange Commission (SEC) did not exceed its rulemaking authority under s. 14(e) of the Exchange Act when it adopted Rule 14e-3(a), which prohibits trading on the basis of material, non-public information concerning a tender offer, without requiring the government to show a breach of fiduciary duty.
Thoreau heartily accepted the motto, ‘that government is best which governs least’. Our forefathers braved treacherous oceans and alien lands emboldened by that belief, after enduring the Crown's heavy hand invading and restricting their religious and personal lives. That is why, among the many freedoms embodied in our Constitution, the right to privacy was included in the Fourth Amendment to protect individuals from arbitrary intrusion by the state. The right has been fundamental to the establishment of a more tolerant society devoted to the principles of liberty and justice for all.
Highlights the connexions between terrorism, illicit drugs and money laundering; the author is General Counsel for the Executive Office of the President, Office of National Drug Control Policy in the USA. Describes how money laundering is intimately linked to terrorism and drug trafficking in Colombia, using the example of the Black Market Peso Exchange, a complex underground financial system to evade reporting and record-keeping requirements of the Bank Secrecy Act. Indicates the efforts that the USA is making to deprive terrorists of the money they need to finance their activities, including Executive Order 13223 and the PATRIOT Act, and progress in international cooperation to the same end.
On 6th September, 2000 the SEC issued a press release accusing 33 companies and individuals of fraudulently using the Internet to make more than $10m in illegal profits by driving up the prices of more than 70 small stocks. The companies and individuals, including a bus mechanic, a car service driver and a self-chilling can company, boosted the total market value of these stocks by $1.7bn, claimed the SEC, in announcing 11 civil fraud lawsuits filed in federal courts. ‘What used to require a network of professional promoters and brokers, banks of telephones and months to accomplish can now be done in minutes by a single person using the Internet and a home computer,’ SEC enforcement director Richard H. Walker said. Two weeks later, the SEC announced that it had settled an enforcement proceeding brought against a 15-year-old stock trader who, operating from a computer in a bedroom in his parents' home, had earned more than $270,000 in profits over a six-month period by engaging in classic ‘pump and dump’ market manipulation of small over-the-counter stocks.
This paper examines the concept of criminal opportunity. More precisely, it focuses on the nature of such opportunities that are to be found within an IS context, and the threat posed by dishonest staff who may act on them. Although hackers and their activities may be given ample column space in the lay press, the potential threat posed by dishonest staff should not be underestimated. The 1998 NCC Business Information Survey reports that the greatest risk of security breaches arose from the activities of personnel within organisations, accounting for nearly 52 per cent of all (physical and logistical) security breaches detected. Similarly, the 1998 CSI/FBI Survey found that the largest single source of financial loss (almost 37 per cent) was attributable to unauthorised insider access. These facts are not lost on security practitioners who, as a rule of thumb, work on the principle that 25 per cent of people are dishonest whenever possible, 25 per cent are always honest and 50 per cent can be either, depending on the nature of security controls and personal motivation.
As computers and information technology gradually insinuate themselves into every nook and cranny of business operations, management have begun to appreciate some of the risks as well as the benefits. But why are computer systems so vulnerable? There are many reasons why computer systems need to be protected. Computers are so much smaller and more powerful than they were just a few years ago and so much more extensively used as a consequence that the combination of their ubiquity and the importance of the information that they hold is a magnet for accident and malice alike. When we consider that the data that they process often relates directly to money, and in effect is money in many applications, then the attraction is heightened. Converging computing technology with telecommunications has produced real time systems so that there is no longer any delay between the giving of an instruction and its commission. Bank accounts are updated instantly, whether the instructions were bona fide or fraudulent. Even more mouth watering is the opportunity to initiate the process in one country, debit the account in a second country and post the proceeds to an account in yet a third country. Systems are no longer secreted in a whitecoat computer room environment — the terminal on the teller's desk might, with a little tweaking and know-how, lead into the sanctus sanctorum of the corporate information heartlands, with devastating effects.
There has been a gradual change in the perception of the role of the justice system in the development process. In earlier days, there was a general perception that justice and development involved distinct and separate activities. By the 1990s, this perception had evolved radically: as more and more evidence emerged of the close interaction between justice and development, the legal and judicial sector had already begun to move to the forefront of development.
Enforcement as a concept imports compulsion to comply with a particular norm. Of course, the nature of enforcement might vary considerably with the norm in question or society within which action is desired. Professor Gower, in his ‘Review of Investor Protection’, expressed the view that a rule that could not be or was not enforced brought the system, within which that rule was supposed to operate, into disrepute. Whether this is true or not may be a matter for debate. Most systems of control envisage rules that in practical terms are unenforceable, but that are expected to have a normative or educational effect. Such functions, in the context of securities regulation, may be thought to be of some significance. Thus, the fact that simply because a rule cannot either in its terms or in practice be sanctioned by a predictable and determinate action intended to promote compliance, does not necessarily undermine that rule let alone the system within which it exists. To assume without more that a rule that cannot be enforced is not a legal rule, or to be precise a rule of law, while no doubt appealing enough to the positivist school of jurisprudence, is simplistic and outdated. Furthermore, in the context of the sort of economic regulation that we are discussing, whether a rule is characterised as one of law or not may or may not have significance. While there is a problem with determining the appropriate degree of interface between rules bearing differing qualities, purely in terms of achieving a defined regulatory objective it might well be that a rule which is not law in the formal sense of having been promulgated by an authority with legislative power, promotes a satisfactory degree of compliance. Therefore, many of the rules that pertained prior to the creation of the regime of regulation under the Financial Services Act 1986 were essentially non-legal in the sense that they did not carry determinate sanctions ordained by a legal process consequent upon a violation and were not promulgated by an authority with legislative power. However, to dismiss them because they were unenforceable at law would give a very false picture of the efficacy of what was for many years a satisfactory regulatory structure. Even today, although the interrelationships of legal and non-legal rules is very much more complex, it is still the case that significant areas of regulation have been left to non-legal authorities.
Compares the approach to disclosure-based regulation of securities markets in Bangladesh with that of India and Malaysia. Describes the present administration of the disclosure regime in Bangladesh, which is split between the Registrar of Joint Stock Companies (RJSC) and the Securities and Exchange Commission (SEC); this mirrors the two sets of laws involved, company law and securities law respectively. Outlines the basic regulatory functions of securities law enforcement: the ability of investors to seek remedies against the infringements of disclosure requirements and the efficiency of the SEC in dispensing justice, and finds that both are weak in Bangladesh. Suggests that more effective regulation in Bangladesh is necessary and that the SEC should be free from government and other interference. Argues that preventive measures should for this reason be the preferred policy; these include investor education and regulatory verification before prospectus issue.
Argues that Canada should follow Australia in forming a one-stop national securities regulation system. Examines the present system, which is complex, since each province has its own securities commission, with resulting problems for ensuring compliance, attracting foreign issuers etc; it also prevents Canada meeting the aims of the International Organization of Securities Commission (IOSCO) despite the existence of the Canadian Securities Administrators. Presents an alternative proposal to the national system; this is improvement of the existing system by fortifying the CSA, and avoids the risks of establishing a new national system. Explains why this solution is not as good as a national system: there will still be 13 separate commissions, and smaller provinces may not conform to CSA decisions.
Negotiable instruments by means of which large sums of money are transferred between banks have long been a source of fascination to the more sophisticated fraudsman. Careful study of the instruments and their conventional usage, combined with the exercise of imagination and knowledge of psychology have produced an innovative and audacious strain of fraud which continues to develop, and which has been dramatically successful.
Advance fee is a phrase — adopted over the years — which has been applied to a variety of offences, generally involving fraudulent activity in relation to financing of large-scale projects, investments, or huge currency transactions and, however well disguised or described, involves the payment of monies in advance of any agreed course of action by the alleged financier or investor, ie the con-man.
A recent civil court ruling heralds a new perception of tax cases by the Swedish courts. The focus is shifted from the company owner to the tax adviser. This opens ways to improve the effectiveness of tax collection and also the prevention of irresponsible tax advising. The reputable accountancy firm Ernst & Young, with worldwide operations, is to pay damages of the equivalent of £1,600,000 to compensate for the effect of failed tax advice.
Examines the status of regulation and protection of whistleblowers in Australia, focusing on intermediaries and their advisers in financial services. Outlines the ambivalence of the legal system as far as whistleblowers are concerned, and the considerable risks they take, with examples of victims; case law is scanty. Points out the limited nature of protection in specific legislation, which is limited to four states and the ACT; but finds some protection in financial services legislation, including the Corporations Act 2001, the Financial Transactions Reports Act 1988, the Proceeds of Crime Act 1987, and the Trade Practices Act 1974. Makes some recommendations for encouraging continued whistling in the interests of an informed market for financial services, and cites UK and US legislation for comparison.
‘Even in the very few instances where the accused has intrusted his defender with a full confession of his crime, we hold it to be clear that he may still be lawfully defended. The guilt of which he may be conscious, and which he may have so disclosed, he has still a right to see distinctly proved upon him by legal evidence … Human beings are never to be run down like beasts of prey, without respect to the laws of the chase.’
Top-cited authors
Anuar Nawawi
  • Universiti Teknologi MARA
Ahmad Saiful Azlin Puteh Salin
  • Universiti Teknologi MARA, Perak Branch Tapah Campus Malaysia
George Gilligan
  • University of Melbourne
Oana M. Nedelescu
Adam Graycar
  • University of Adelaide