bluuebunny/crossref_metadata_2025 huggingface dataset:
Measurement and Combination of Red Flags to Assess the Risk of Management Fraud: A Fuzzy Set Approach
Authors: Deshmukh Ashutosh , Romine Jeff , Siegel Philip H.
Published: January 2008

Statement on Auditing Standards (SAS) No. 53 requires that the audit be designed to provide a reasonable assurance of detecting management fraud. Traditionally auditors have utilized personal, business, and economic red flags in risk analysis and audit planning. Touche Ross (1974), Coopers and Lybrand (1977), Price Waterhouse (1985), and SAS Nos. 6, 16, 17, and 53 discuss various red flags associated with management fraud. However, the authoritative literature does not provide any guidance on how to measure and combine red flags. The extant literature primarily measures red flags as “yes” or “no” type binary variables. However, red flags are fuzzy in nature and fuzzy set approach can be used to measure and combine red flags. The purpose of this paper is to provide a framework for the application of the theory of fuzzy sets to the problem of assessing the risk of management fraud using red flags. This approach can be used to capture the beliefs of one or several auditors concerning red flags and combine these beliefs to estimate the risk of management fraud. This approach can be extended to build fuzzy reasoning systems that assess the risk of management fraud.
Artificial Neural Systems and Decision Behavior in A Dynamic Environment
Authors: Chandra Akhilesh , Lall Brij M. , Siegel Philip H.
Published: January 2008

This paper explores the role of neural networks for decision making in dynamic environments which are characterized by risks and uncertainties, and also provides experimental evidence from a simulated data. Theoretical support is derived from theories of affective balance, and self‐organized criticality. The simulation is conducted for a two‐person‐constant sum game. The findings of the experiment are helpful in extending to managerial decision making which involves varying degrees of uncertainties. Such decisions are affected by forces both internal and external to the company, and making judgments in such a fuzzy future is highly probabilistic. It is suggested, therefore that neural networks are better able to capture the interactive dynamics of variables operating in a managerial decision environment. In sum, the findings indicate that decisions in general and business decisions in particular can greatly benefit from the parallel computational capabilities of neural networks.
The London International Stock Exchange's Foreign Currency Exposures to the Dollar, Yen and Mark
Authors: Varela Oscar , Naka Atsuyuki
Published: January 2008

This paper studies the exchange rate exposure of investments by the United States, Japan and Germany in the London International Stock Exchange (LSE) from 1982 to 1991. Japanese and German investments are fully exposed to their own exchange rates, and the US is “supernominally” exposed to its own exchange rate. No significant changes in exposure are associated with the Plaza and Louvre Accords. The 1987 worldwide stock market crash exhibits a significant decrease in US exposure, and increase in German exposure. US, Japanese and German investments are also fully exposed to their own exchange rates for the periods before and after the 1986 “Big Bang” in London, except that US investments are “supernominally” exposed in the pre‐Big Bang period.
A SURVEY OF CURRENT PENSION FUND ISSUES
Authors: Zychowicz Edward J.
Published: January 2008

This issue of Managerial Finance brings together five papers that explore the manifold dimensions of pension issues. The papers document and explain the dynamic changes occurring in the management and functioning of private pension plans within an evolving institutional and regulatory framework. Although the papers predominantly focus on the U.S. pension system, the issues addressed and the attendant implications are relevant to economies in the throes of developing or reforming pension security arrangements for market participants.
Mutual Fund Investing Through Employer‐Sponsored Pension Plans: Investor Knowledge and Policy Implications
Authors: Alexander Gordon J. , Jones Jonathan D. , Nigro Peter J.
Published: January 2008

The flow of cash funds from employer‐sponsored pension plans into mutual funds has been an important driving force behind the mutual fund industry's unprecedented recent growth. The increased attractiveness of mutual funds to pension investors is due to a shift from defined benefit to defined contribution plans, to changes in the tax laws, and to the growing recognition of certain types of mutual funds as suitable long‐term investment vehicles. Accompanying the tremendous growth in defined contribution plans, however, has been a shift in investment risk from employers to employees. Using the responses from a nationwide telephone survey of 2,000 mutual fund shareholders, this paper analyzes various characteristics and investment knowledge of purchasers of mutual funds through employer‐sponsored pension plans. The results show that overall, pension investors are as knowledgeable about the costs, risks, and returns associated with mutual funds as investors who purchase mutual funds through other distribution channels. However, when dividing the sample of pension‐plan investors into two subsamples consisting of those who purchase mutual funds solely through the pension channel and those also employing other distribution channels, pension‐channel‐only investors are found to be significantly less knowledgeable. These results suggest that there is much room for improvement in investor education for a large segment of pension‐channel investors.
Survey on the Privatization of Social Security in Latin America: Pension Funds à la Chile?
Authors: Arbeláaez Harvey , Milman Claudio D.
Published: January 2008

This paper surveys the social security system in several Latin American countries. Specifically, the cases of Bolivia and Brazil are documented in order to determine if the Chilean model is a viable one in the Latin America and Caribbean region. An institutional approach suggests that while there has been a marked interest in tailoring pension funds a la Chile, policy makers of the region must be aware of the similarities and differences in the politico‐social‐economic environment. The macroeconomic transformation undertaken in Chile was a unique one obeying to specific conditions of time and process. It is indicated, however, that even in the case of developed nations, some features of the Chilean model may be very appealing as well.
Underwriting Costs and Market Value Effects of Raising Bank Capital
Authors: Wansley James W. , Dhillon Upinder S.
Published: January 2008

This study examines the direct (out‐of‐pocket) flotation costs of new capital issues by bank holding companies between 1980 and 1986 and the total costs including any market effects of security issuance. A regression model is developed that relates the direct selling costs to the type of security being issued, the exchange on which the parent bank holding company is traded, information specific to the issue, and information specific to the firm. The model is highly significant, explaining over 80 percent of the variation in issuing costs. These direct costs, however, are small for equity issues when compared to information effects (stock price responses). When these costs are included, the costs to bank holding companies of issuing equity increase substantially and the direct costs of issuing preferred and debt are, generally, more than offset by positive stock price effects.
Firm Valuation of Advertising Expense: An Investigation of Scaler Effects
Authors: Agnes Cheng C.S. , Chen Charles J.P.
Published: January 2008

Previous research and logic indicate that capital markets generally value spending for advertising and promotion; however, empirical results from these studies are far from consistent. While most studies find a positive relationship between a firm's advertising spending and its market value (Hirschey, 1985; Jose, Nichols and Stevens, 1986; Lustgarten and Thomadakis, 1987;Morck, Shleifer and Vishny, 1988; and Morck and Yeung, 1991), others find a negative relationship when control variables are added to the empirical model (Erickson and Jacobson, 1992). Differences in model specification may explain these conflicting results. Previous studies have included a variety of control variables such as return on investment, market share, research and development (R&D) spending, and book value (Erickson and Jacobson, 1992; Chauvin and Hirschey, 1993; Hirschey, 1982) when testing the relationship between promotional expenses and market value. Different firm characteristics (e.g. sales, total assets, book value of equity and price) have been selected as scalers for empirical measures of both the dependent and independent variables. Although these studies investigated an essentially identical theoretical relationship, variation in model specifications renders interpretations different.
Asset Location in Corporate Insolvency
Authors: Wheeler Sally
Published: January 2008

This paper considers the methods open to a liquidator to discover and recover assets. In particular, it focuses on the powers conferred on the liquidator in the 1986 insolvency legislation and their effectiveness in commercial reality.
Computer Crime: Developments in the Netherlands
Authors: De Mulder Richard , Kleve Pieter
Published: January 2008

For years now, an argument has been raging over whether products which are the results of new technical developments, such as computer software and data, are adequately protected by legislation drawn up long before such products had become commonplace. The question has arisen whether various forms of undesirable behaviour committed by means of information technology could be prosecuted under existing legislation. It is contended in this paper that, with the possible exception of hacking without causing damage, behaviour popularly referred to as computer crime already falls within the ambit of the existing criminal law code in the Netherlands. Additional legislation, which has now been passed by the Lower House of the Dutch Parliament, is to a large extent irrelevant. It will be interesting to see whether needless complications will ensue when this legislation comes into force.
Are you an Unwitting Victim of Insolvency?
Authors: Day Justin
Published: January 2008

Victims of insolvency are not just those provided for in the legislation. This paper explores just who are the victims of insolvency and what their statutory remedies are.
Carrefour of Fraud in Europe
Authors: Hulbert John
Published: January 2008

The increasing liberalisation of all forms of trade, including the financial services sector, is encouraging the internationalisation of the European insurance industry, making it more vulnerable to fraud. This paper discusses the current problem with fraud in the sector, and considers the implications of moving into new markets. It then looks at future fraud prevention methods such as screening of applicants and stresses that there is an urgent need for the situation to be reviewed.
Chinese Walls in the Law Firm: Locked Door or Open Sesame?
Authors: Middleburgh Jonathan
Published: January 2008

Recent case law suggests a reluctance on the part of the courts to allow the Chinese wall within law firms as a device to prevent conflicts of interest. This paper examines the recent case law and considers whether the courts' reasoning is justified. The author suggests that the validity of the Chinese wall should be considered on a case‐by‐case basis rather than by a near irrefutable presumption against it He then sets out a series of safeguards which might create an effective Chinese wall.
Belgian Legal Policy on Money Laundering
Authors: de Ruyver Brice
Published: January 2008

Growing international pressure in the form of agreements, directives and recommendations has prompted new legislation for the prevention of money laundering in Belgium. This paper considers the various international initiatives and looks at how Belgium has responded. In particular, it discusses the act of 17th July, 1990, and the role of the banking sector.
Auditors' Liability for BCCI
Authors: Mullan Kenneth
Published: January 2008

In an earlier contribution to this journal, the author sought to analyse the legal implications of the recent decision by the liquidators of the Bank of Commerce and Credit International (BCCI), Touche Ross, to issue writs against the Bank of England claiming damages on behalf of a small, representative number of depositors. This paper will seek to complement that analysis by examining the legal implications of a parallel decision by the liquidators of BCCI to issue writs against the auditors of BCCI, Price Waterhouse and Ernst & Young, the joint auditors of BCCI until 1987. These writs allege that the audited accounts would have indicated that BCCI was in trouble and that, as a result, a duty of care was owed to existing depositors and to potential investors. An examination of the case law on the range of duties owed by auditors in carrying out their statutory functions will conclude that the potential actions against Price Waterhouse and Ernst & Young are unlikely to succeed.
‘Towards the New Authoritarianism’: Giving Section 2 Powers to the Police
Authors: Bosworth‐Davies Rowan
Published: January 2008

In this paper, the author traces the historical evolution of the use of methods by the police and the executive to undermine the protective effects of the right to silence. He argues that the introduction of greater protections for accused persons in the provisions of the Police and Criminal Evidence Act 1984 has resulted in an increase in costs of the administration of summary jurisdiction with the commensurate reduction in the numbers of persons being convicted. Hence political initiatives are being undertaken to find an effective way to remove the effects of the right to silence, contained in these protections. He examines the effects of the so‐called s. 2 powers to compel answers to questions, possessed by the Serious Fraud Office (SFO). The paper ends by examining the proposals in the recent Report of the Royal Commission on Criminal Justice and argues that the recommendation to extend the exercise of s. 2 powers to the police is merely another step towards the introduction of an increasingly authoritarian regime of criminal justice.
Insurance Fraud: US Initiatives
Authors: Dixon Mike
Published: January 2008

The petty level insurance fraud, apparently committed by ordinary members of the community, is costing insurance companies millions of pounds a year. Those losses are passed on to the consumer. So it is everyone's loss. This problem appears to be prevalent in all Western countries However, it is in the USA where they appear to have both learnt and lost the most. As the problems in the UK are appearing to reach the scale of those which have already been encountered in the USA, law enforcement agencies and the insurance companies can ill afford to ignore the lessons learnt by the Americans. This paper describes the types of insurance frauds and those measures being undertaken to counter them in the USA. In so doing, the author has created a typology of those counter measures being undertaken.
Counterfeiting in Cyprus 1981–1992
Authors: Nicolaides Andreas
Published: January 2008

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.
Regulating Personal Investment
Authors: Matatko John
Published: January 2008

This paper is concerned with the marketing of packaged retail financial products in the UK, viewed as part of a general regulatory mechanism applied to all investment business services. It considers the general principles which lie behind regulation as well as the particular provisions made in the Financial Services Act 1987. We discuss the problems associated with the operation of this structure of regulation and the reasons for concern which resulted in the Clucas Report (1992) and the subsequent revisions of the regulatory structure which saw the introduction of the Personal Investment Authority in July 1993. In the light of these findings it is difficult to believe that this will be the last of the changes.
You Should Have Read the Small Print: The European Commission's Post‐Maastricht Response to Fraud
Authors: Tupman W.A.
Published: January 2008

The work of the European Commission's unit to combat fraud, UCLAF, is taking full advantage of information technology in its efforts to improve the collection, collation and detection of fraud and irregular activities in the Member States. This is the first of two papers dealing with the work of UCLAF, and concentrates upon bringing the nature of the problem and the institutional and technological background to the attention of readers. The second paper will concentrate upon an interview with Per Knudsen, Director of UCLAF, in which the impact of the new technology and future developments in detection and prosecution will be the focus.
The Policing of Commercial Malpractice — Public Law or Self‐Regulation
Authors: Linsley Samantha
Published: January 2008

Whilst the criminal justice system has evolved over the last seven years, it can be argued that the ability of the current criminal justice system in England and Wales to deal with the investigation, prosecution and trial of serious and complex fraud can still be challenged. Using material gathered whilst undertaking research for the Diploma in Compliance Studies at Exeter University, this paper makes a number of recommendations in this context. The existence of civil remedies and the regulatory structure created under the Financial Services Act 1986 may offer a limited opportunity to deal with some categories of commercial malpractice in an expedient and cost‐effective manner, outside the scope of the criminal justice system. This paper derives from research carried out with the purpose of reviewing the investigation, prosecution and trial of serious fraud in England and Wales in order to assess whether commercial malpractice is in fact a proper subject for ‘public law’, or whether it could be more effectively and expediently dealt with through civil law remedies, or by the self‐regulatory agencies created under the Financial Services Act 1986. This paper represents a summary of the main findings and interpretations of that research, which included interviews with three experts in the field. In considering this issue, one is bound in two ways. If one concludes that the criminal justice system can offer an effective and efficient method of the disposal of commercial fraud, the arguments for and against the use of the regulatory system become commensurably less significant. If, however, the conclusions suggest that major legislative and procedural changes are required to facilitate the effective and efficient prosecution of commercial fraud, the scope for use of regulatory sanctions where appropriate takes on a greater significance. Thus there are two elements in the writer's conclusion. First, there was concern to assess the veracity of the conclusions drawn by the Fraud Trials Committee in 1986 to the present, and other problems faced by the criminal justice system in the investigation, prosecution and trial of commercial fraud. Secondly, it was important to consider arguments for and against the use of regulatory sanctions for the disposal of commercial crime. The conclusions drawn from a review of the problems faced by the criminal justice system are, it is suggested, fundamental to the question of whether the increased use of regulatory sanctions is necessary, or desirable.
Ostensible Ownership and Motor Vehicle Financing in England: A Dilemma for Legal Reform?
Authors: Davies Iwan
Published: January 2008

This paper focuses upon the common law and developed legislative position to the ostensible ownership problem whereby a non‐owner in possession of a motor vehicle purports to pass a good title in favour of an innocent purchaser. It is argued that the traditional conflict of principle between the nemo dat doctrine and the civilian possession vaut titre approach cannot provide a satisfactory ex post solution to the ostensible ownership problems that arise in the motor vehicle and more general asset finance context. What is advocated is an ex ante solution, namely, a notification mechanism which could resolve the current legal dilemma of determining where the loss should fall.
Civil remedies for theft — issues for banks
Authors: Cannon Lista M.
Published: January 2008

Thefts by employees raise interesting legal and practical issues for banks and other employers who wish to recover their money in civil actions. Immediately, there is the problem of the variable standard of proof required when pursuing a civil remedy for theft. Where spouses or others participate in the employees' theft the law of constructive trusts may also need to be examined. Additionally, there are important practical concerns associated with the gathering of evidence and the proof of loss. In this paper the writer considers those legal and practical concerns and then, by way of illustration, concentrates on the recent case of Bank of England v Gibson and others.
Purchasing and procurement fraud
Authors: Davies David
Published: January 2008

Purchasing and procurement fraud is a large area of fraudulent activity. It is one of the most prevalent types of fraud affecting British industry today. This paper highlights the key risks of fraud in the purchasing and procurement area and the warning signs.
Liberalisation of Bulgaria's foreign exchange regime and the prevention of money laundering
Authors: Konstantinova Svetla
Published: January 2008

Since 1991 Bulgaria has embarked upon legislative changes which mark the abandonment of centrally planned economic management in favour of free economic enterprise. This has entailed the adoption of a new constitution and changes in laws governing the operation of banks, credit and foreign exchange activities. In particular, the foreign exchange regime seeks to liberalise access to the foreign exchange market whilst controlling those aspects which may lend themselves to attempts to destabilise the foreign exchange regime itself criminal activity and money laundering.
Computer‐related crime: the role of control in its prevention, detection and correction
Authors: Mitchell John
Published: January 2008

This three‐part briefing deals with the prevention, detection and correction of computer related crime by the application of straight‐forward control techniques. No attempt is made to identify the scale of computer abuse as the main thrust is that the implementation of controls to prevent mistakes will also help to mitigate abuse. The briefing raises a number of issues that are relevant to dealing with computer abuse as a control issue. First, it identifies the position of the computer in an abuse event as being either the object, subject, instrument or symbol of the crime. Secondly, it suggests that fraud is only achievable where the three attributes of ability, opportunity and conversion of assets come together, but that non‐fraud attacks only require ability and opportunity. Thirdly, it hypothesises that the number of crimes will be inversely proportional to the skill required to do them and proves the hypothesis by reference to the published cases. Finally, it makes the point that for real‐time systems, prevention of abuse by the authorised user may not be possible due to the very nature of the system. Under such circumstances the organisation has to rely on detection mechanisms with all the problems of living with a window of exposure.
Civilising the Law — The Use of Civil and Administrative Proceedings to Enforce Financial Services Law
Authors: Rider Barry A.K.
Published: January 2008

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.
Banking Fraud — The Euro‐Regulatory Response
Authors: Walker George
Published: January 2008

Although considerable action has been taken in an attempt to identify and correct the regulatory gaps in domestic and international banking supervision exposed by the collapse of the Bank of Credit and Commerce International (BCCI) in July 1991, the response of the European Community in the form of a proposed Prudential Supervision Directive — the so‐called ‘Post‐BCCI Directive’ — is still locked in the complex decision‐taking procedures of the Community which were further revised by the Maastricht Treaty on European Union in December 1991.
A Re‐examination of Banking Supervision in the United Kingdom
Authors: Mahmood Shiraz
Published: January 2008

Supervision of banks in the UK is conducted by the Bank of England. The Bank which was created by Royal Charter in 1697 was nationalised by the Bank of England Act 1946. This Act gave the Treasury the power to require the Bank to act in the ‘national interest’, however, this power has never been utilised and the Bank has retained a high degree of autonomy from the Government, thus enabling the Bank to apply a laissez‐faire approach to the supervision of banks. Traditionally the Bank has never favoured a heavy‐handed approach to regulation, but has relied upon the use of moral suasion in its capacity as lender of last resort. The Bank's supervisory philosophy has been summed up thus:
BCCI — Four Years On
Authors: Whitby David
Published: January 2008

Nearly four years have passed since the Bank of England closed down the London offices of the Bank of Credit and Commerce International (SA) along with the majority of the BCC branches and affiliates in over 70 foreign jurisdictions. The exercise has been only partially successful, and details of the liquidation process remain shrouded in a ‘conspiracy of silence’.
Tax Spinning in the Brent Spot Market
Authors: Tem Emmanuel
Published: January 2008

With the growing insecurity in term contracts, especially during the 1979 oil crisis, many oil companies increasingly turned to the spot market, not for balancing their crude requirements at the margin but as a mainstream source of supply. Spot markets have a number of sources; they are fed by the balancing availabilities and requirements of producers and refiners. During periods of depressed prices, they receive a boost from large exporters in search of higher prices. North Sea oil production has been vital to the growth of the market. Being a non‐OPEC source and close to markets, production from this source has been close to maximum rates in order to service high fixed investment costs.
Illicit Payments Abroad
Authors: Andenas Mads
Published: January 2008

1994 has seen the adoption of an OECD Recommendation on Bribery in International Business Transactions and a Council of Europe Resolution on Corruption. The issue now is how effective are these international initiatives. The first test is how the member states of these two organisations move to implement new policies.
Injunctive and Restitutory Remedies of the Securities and Investments Board
Authors: Harwood Richard
Published: January 2008

The Securities and Investments Board (SIB) is the senior regulator of investment business in the UK. It has considerable civil powers to restrain contraventions and secure compensation for investors.
International Financial Crime and Documentary Credits
Authors: Alexander Kern
Published: January 2008

Since the collapse of communism in the former Soviet Union and in Eastern Europe, the rise of organised crime has been swift and substantial. It has taken control of many sectors of the economy in these countries and, because of its newly amassed wealth, it has attained significant political influence. Organised crime groups have used their political and economic influence to persuade certain provincial governments in the former Soviet Union to assist them in transferring their ill‐gotten proceeds to apparently legitimate investments in western countries. Some provincial governments, acting on behalf of certain organised crime groups, have exploited their ongoing relationships with leading international banks to obtain documentary credits to transfer billions of dollars of criminally derived money into investments in developed countries.
The Trials and Errors of the Guinness Four
Authors: Sarker Rinita
Published: January 2008

The never‐ending Guinness saga has been given a fresh turn of events with the Home Office's decision to refer the cases of Anthony Parnes, Gerald Ronson, Jack Lyons and Ernest Saunders to the Court of Appeal, on the grounds of non‐disclosure by the Serious Fraud Office (SFO) prosecution of evidence material to the defence in Guinness I, in 1990. The Guinness convictions, once proclaimed as the SFO's finest victory, could now turn out to be a political minefield for a Government and criminal justice system already embarrassed by a series of unsafe verdicts. Comparisons with the Guildford Four, however, ring hollow, and the Guinness defendants could yet give new meaning to the phrase ‘travesty of justice’, with potential compensation claims of £30–40m for loss of liberty, earnings and reputation, if they are successful. Only the anger and disbelief of the general public are testimony to the fact that not all of us are prone to severe memory lapse.
The Davie Report — Anodyne for the SFO
Authors: Sarker Rinita
Published: January 2008

Eleven years and three government inquiries later, the verdict and the solution, that of an independent Serious Fraud Office, remains apparently intact. Rex Davie, a former Cabinet Office luminary, has recommended that the SFO should not be merged with the Fraud Investigations Group (FIG) of the Crown Prosecution Service (CPS) much to the dismay of the police, CPS and media, who have been anticipating the untimely demise of the SFO for several months now. While providing the SFO with a much needed morale boost, the Davie Report, like its predecessors, acts more as a temporary pain reliever than as a serious cure for the problems of investigating and prosecuting serious fraud.
The Limits of Prohibition: A Cloud over Compliance
Authors: Nakajima Chizu
Published: January 2008

There are few better examples of public policy being used to cut through what might to many seem to be sound legal reasoning than in the recent decision of the House of Lords in Re Supply of Ready‐mixed Concrete (No. 2), Director General of Fair Trading v Pioneer Concrete (UK) and Another. The case represents a milestone or perhaps more appropriately the end of the road, for a scries of cases involving actions brought by the Director of Fair Trading against a number of companies and individuals for allegedly unlawful restrictive agreements in relation to the supply of ready‐mixed cement. In the present case the two respondent companies were made subject to orders by the Restrictive Practices Court in March 1978 and March 1979 restraining them from, inter alia, giving effect to or enforcing agreements with other parties, relating to the supply of ready‐mixed cement in contravention of s. 35(1) of the Restrictive Trade Practices Act 1976. This provision among other things, renders unlawful certain agreements restricting competition between two or more peresons carrying on business in the production or supply of goods, unless such agreements are registered.
Spotlight on ‘Advance Fee Fraud’
Authors: Lambert Alan
Published: January 2008

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.
Belgium: Belgian Law on Money Laundering
Authors: Garzaniti Laurent
Published: January 2008

Belgium has implemented the EC Directive on prevention of the use of the financial system for the purpose of money laundering (‘EC Directive’) in two stages. First, anticipating the entry into force of the EC Directive, the Law of 17th July, 1990 introduced the concept of money laundering into Belgian criminal law. Secondly, the Law of 11th January, 1993, created a requirement that financial institutions establish certain internal procedures intended to identify money launderers and report any transactions which they suspect may relate to money laundering to a newly created authority.
Denmark: Company Draining
Authors: Vinding Kruse Sysette
Published: January 2008

A new phrase has been introduced in Denmark in the field of financial crimes called ‘Company Draining’, and the Public Prosecutor of Commercial Crimes is presently investigating 2,000 cases involving considerable amounts of money (milliards of DKK). The money drained from the companies is money owed to the fiscal authorities. The method is as follows. A company closes down its business and pays its creditors. Left in the company is a sum of money owed or partly owed to the fiscal authorities but not payable until a certain date in the future due to the tax legislation.
The Impact of Recent Money Laundering Legislation on Financial Intermediaries
Authors: Clark Nicholas
Published: January 2008

The Criminal Justice Act 1993 (CJA 1993) introduces a wide array of offences designed to combat the threat of money laundering. While not the first piece of legislation with such a purpose, the CJA 1993 is a major bulwark in the United Kingdom's anti‐laundering legislation, creating several offences for what might at first seem barely criminal behaviour. Furthermore, the Money Laundering Regulations of the same year place an onerous burden on financial institutions to put in place systems to combat laundering.
Insurance Fraud
Authors: Dixon Mike
Published: January 2008

There is no doubt that the cost of fraud against insurers is growing, recent estimates by the Association of British Insurers suggest that as much as £2m is lost every day to fraudsters. Fraud occurs in many different forms against insurers and the varying scams are as legion as any other form of financial crime. As with many other financial crimes, there is evidence to suggest the fraudsters' ventures are taking on an international flavour. Life insurers have to contend with counterfeit or bogus death certificates from certain third world countries, while general insurers have to sift their way through millions of pounds worth of false or exaggerated travel insurance claims every year. Travel and holiday insurance policies are considered to be the worst affected areas for fraudulent claims.
Illegitimate Last Voyage Orders: The Gregos
Authors: Oberholzer Gerhard , Pal Partha
Published: January 2008

A time charter allows the charterer of a vessel to have its use for a predetermined period of time. The charterer is entitled, subject to certain restrictions, to employ the vessel as he wishes during the charter period, but is under an obligation to redeliver it to its owner upon the termination of that period. Timely redelivery is of considerable commercial importance to the shipowner, for the vessel may have been committed to another charter commencing immediately upon scheduled redelivery. On the other hand, the charterer will wish to maximise the number of voyages undertaken during the charter period. Given the large amounts of money involved in chartering a vessel as well as the degree of profit or loss that could be at stake in a single voyage, a charterer may find himself in a position where he feels obliged to give last voyage orders knowing full well that the vessel cannot be redelivered within the contractually agreed time. In Torvald Klaveness A/S v Ami Maritime Corporation, The Gregos the House of Lords attempted to reconcile the competing commercial requirements of shipowners and charterers and considered the effect in law of a charterer ordering a vessel on a so‐called illegitimate last voyage.
The Right to Silence, Section 2 and Recent Case Law
Authors: Savla Sandeep
Published: January 2008

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 (PACE) 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 prescriptive rules and theory: in this area above all others it is impossible and undesirable to divorce one from the other.
Blowing the Whistle on Fraud
Authors: Sarker Rinita
Published: January 2008

Employees who blow the whistle at work on serious fraud and malpractice out of concern for public interest, are to be afforded new protection against reprisals and unfair dismissal in the Whistleblower Protection Bill, introduced in Parliament on 28th June, 1995, with all‐party support.
Spotlight on ‘Underground Banking’
Authors: Lambert Alan
Published: January 2008

Underground banking docs not refer to cash dispensers in subterranean shopping centres. It refers to that secretive and mysterious global structure for facilitating the transfer of funds between countries, otherwise referred to as ‘Hawalla’ banking.
What is VAT?
Authors: White Simone
Published: January 2008

Over 50 per cent of the EC budget comes from a proportion of the Member States' VAT. Each Member State has a unique constellation of VAT rate, collection and remission procedures and prosecution policies. Some of these constellations create potential ‘internal tax havens’ within the Single Market. The author argues that an effective strategy to protect the finances of the Community after the transition period would require (i) the harmonisation of some of the collection procedures, (ii) improved mutual assistance and (iii) the setting of some minimum standards of prosecution throughout the Community.
Pyramid Selling
Authors: Sarker Rinita
Published: January 2008

The wake of the recession has witnessed a boom in direct selling schemes also known as pyramid selling, multi‐level marketing or network marketing. Boasting annual sales of £200m, they provide ‘gct‐rich‐quick’ opportunities for thousands of potential entrepreneurs. Alternatively, recent court judgments have labelled such schemes ‘a swindle on the public’, and ‘an illegal lottery relying on misleading literature to obtain subscriptions’. This highlights how loopholes in Part XI of the Fair Trading Act 1973, regulating pyramid selling, have been flagrantly abused by unscrupulous promoters to the financial detriment of an unsuspecting public. In a belated attempt to curb further exploitation, the Department of Trade and Industry (DTI) has published a consultation document outlining amendments to the 1973 Act. However, it is debatable whether the new controls offer the public effective long‐term protection, or in fact, merely shut the gate long after the horse has bolted.
Corporate Criminal Responsibility — Ascription of Criminal Liability to Companies
Authors: Jefferson Michael
Published: January 2008

In English law a company may be responsible for wrongful acts or omissions in two ways. First, a corporation may be vicariously liable for the behaviour of its employees. The company, as a legal construct, is liable if employers who are natural persons would have been so liable. The acts (or omissions) and state of mind of these high‐level employees are imputed to the company. The company is not vicariously liable (ie for what others did) but personally or directly (ie for what it did). The acts of the senior officers were done as the company, which being artificial cannot perform actions or mental calculations. The second mode of liability is sometimes known as the identification or alter ego doctrine. One distinction between the two modes of criminal responsibility is immediately apparent. Under the first the company is liable for the conduct of its employees, however low in the corporate hierarchy. With regard to the second there is a distinction drawn between those who are the directing mind and will of the company and other individuals (cf. Tesco Supermarkets Ltd v Nattrass and Tesco Stores Ltd v Brent LBC. The distinction is often stated anthropomorphically as one between ‘hands’ and ‘brain’ and there is a growing jurisprudence concerned with which jobs in which companies fall within these categories.
Between a Cop and a Customer
Authors: Robert‐Tissott Simon P.
Published: January 2008

Gone are the days when a bank could concentrate on providing a reliable service to its customer, and maintain that as part of that service it could guard the confidentiality of all information learnt in the course of the customer's banking. Formerly, a customer could be relatively confident that information about his or her business affairs would not be disclosed save in fairly limited circumstances, and the bank would not trouble itself as to how these affairs were conducted. Current legislation and regulation requires a bank to be aware of the commercial background to its clients' dealings and, in certain circumstances, to take steps to report criminal conduct or to account to third parties.
Ireland: Delinquent Directors and Others — The Irish Approach
Authors: Linnane Howard
Published: January 2008

Part VII of Ireland's Companies Act 1990 brought about significant reforms to counter the abuse of the privilege of limited liability by directors and other officers. The new measures are based on recommendations in the Cork Report but contain significant differences to the (similarly influenced) British provisions on disqualification.
Japan: Separation of Banking and Securities Business and Conflicts of Interest
Authors: Nakajima Chizu
Published: January 2008

Japan introduced a new piece of legislation in 1992, designed to reform the financial system, the main feature of which was to ease the strict separation imposed on banks and securities companies under Article 65 of the Securities and Exchange Law of 1948 (SEL). The Japanese Government identified as specific problems that would have to be faced in allowing banks to enter into securities business and securities companies in turn to enter into banking, sound management, conflicts of interest and fair competition. However, the fierce opposition from the securities industry to the banks being permitted to enter their lucrative business had more to do with loss of business than issues of investor protection.
Singapore: Financial Assistance and Directors' Duties
Authors: Tjio Hans
Published: January 2008

Rules to preserve corporate assets are a necessary by‐product of limited liability, as well as a means of limiting agency costs arising from the separation of ownership and control. Hence, it is axiomatic that the directors of a company are required to act bona fide in the best interests of the company; Re Smith & Fawcett. The weakness of the common law duty is that courts are reluctant to substitute the business judgments of the controllers with their own. According to Lord Wilberforce, in Howar d Smith v Ampol Petroleum:
Theoretical Perspectives on Regulatory Enforcement
Authors: Gray Joanna , Fennell Elspeth
Published: January 2008

This article argues that a more broadly based understanding of the processes of the enforcement of regulation and compliance needs to be developed. It highlights aspects of two recent newsworthy cases of non‐compliance with financial regulation. It concludes that future practice needs to be informed by research from a wider range of theoretical disciplines than have been employed in the study of financial regulation hitherto.
Nick Leeson — The Implications Now He Has Been Sentenced
Authors: Davies Sheilagh
Published: January 2008

As Nick Leeson begins his six‐and‐a‐half‐year sentence in Singapore the question must be asked — is this really the end of the road or is there greater fallout to come? The two most crucial things to emerge from months of press coverage interviews and negotiation are (1) the status given to the criminal and (2) the impact on plea bargaining; of the two perhaps the first matter is the more interesting, but the implications must be considered.
Periodic Bank Statements in US Cheque Fraud Litigation: The Dangers of Keeping up to Date on One's Account
Authors: Kim Michael S.
Published: January 2008

The risk of cheque fraud is serious for companies that maintain bank accounts with a high volume of chequing activity. Sophisticated criminals could create convincing replicas of a company's cheques, or steal blank cheques from the company and forge the necessary signatures. In some cases, employees entrusted with clearing accounts payables embezzle company funds by writing cheques to dummy payees and cashing the cheques with false identifications. By the time the fraud is discovered, the criminals and the money are usually long gone, and the bank and the company are left to argue over who should bear the loss.