Fraud Advisory Services

Banks have always been the target of criminals for their very nature is to hold large amounts of money. However, in the 21st century we are not as concerned about bank robbers or bullion heists as about the risk of fraud. Just about every fraud or money laundering activity will need interaction with a bank somewhere along the line. Cash is very difficult to spend in any large quantities but checks and debit/credit cards afford the lavish lifestyles the criminals seek.

Within the bank there is the problem of embezzlement by the staff. Key members of staff are in a position to know the inner workings of the accounting controls put in place to prevent fraud by corrupt members of staff. Corruption could occur by a third party enlisting a member of staff to obtain information of customers accounts. Identity theft and identity fraud are key areas where losses can occur. But id theft and embezzlement is not the prime area of concern in the area of bank fraud.

The need for interaction by the criminals with banks to facilitate their spending of their proceeds of crime gives rise to the issue of anti money laundering controls that every bank must have in place. The bank is effectively tasked with acting as a whistle blower for law enforcement, reporting any suspicious customers or transactions that take place.

Criminals, fraudsters and even terrorists are finding it ever harder to use banks to move their money around the globe. Anti Money Laundering Regulations place restrictions on the ease with which money once was moved. The criminals often turn to fringe banks away from the high street to transact their proceeds of crime in an attempt to escape the gaze of the authorities. Corruption in second tier banks is well reported in the press. For example the Bank of Curacao was closed down at one stage as most of its customers were found to be involved in VAT fraud activities. Companies based in Europe would trade with each other, but the financial transactions were conducted remotely in Curacao. Legitimate looking accounting entries were recorded in the UK, France or Germany or wherever the business was physically taking place.

Other fringe banking systems prone to the attention of the fraudster or money launderer are the money transfer systems that operate world wide. The Hawala banking system is notorious for not leaving any audit trail – transactions between countries at opposite ends of the world conducted by worth of mouth. The word ‘Hawala’ means ‘trust’.

Hawala banking is traditionally used for ex patriot Asians to send money back to their families in Pakistan and India. It uses the transfer of ‘value’ or exchange of debt as one means for moving wealth. Other more formal systems such as Western Union will transfer small sums of cash in the same way, for a price. Both Hawala Banking and some of the transfer businesses such as Western Union have been associated with fraud and money laundering in recent years.

However, a number of more respectable money exchange systems are operating legitimately and taking more and more trade from the large high street banks. PayPal and the Revolution Money Exchange have been carving a growing slice of financial activity in recent years. The allegations of a Revolution Money Exchange Scam reported in 2008 was unfounded and this major USA bank backed organization is probably less prone to bank fraud and corruption than most leading high street banks. Indeed it was probably because the Revolution Money Exchange was paying $25 to new clients opening an account and $10 for each referral brought in that cries of fraud and scam were made. Yet people do not realize that a leading bank such as Lloyds or Barclays might pay $100s and even $1000s to secure a new customer!