On Financial Fraud
There are some good lessons in this article on financial fraud:
That’s how we got it so wrong. We were looking for incidental breaches of technical regulations, not systematic crime. And the thing is, that’s normal. The nature of fraud is that it works outside your field of vision, subverting the normal checks and balances so that the world changes while the picture stays the same. People in financial markets have been missing the wood for the trees for as long as there have been markets.
[..]
Trust—particularly between complete strangers, with no interactions beside relatively anonymous market transactions—is the basis of the modern industrial economy. And the story of the development of the modern economy is in large part the story of the invention and improvement of technologies and institutions for managing that trust.
And as industrial society develops, it becomes easier to be a victim. In The Wealth of Nations, Adam Smith described how prosperity derived from the division of labour—the 18 distinct operations that went into the manufacture of a pin, for example. While this was going on, the modern world also saw a growing division of trust. The more a society benefits from the division of labour in checking up on things, the further you can go into a con game before you realise that you’re in one.
[…]
Libor teaches us a valuable lesson about commercial fraud—that unlike other crimes, it has a problem of denial as well as one of detection. There are very few other criminal acts where the victim not only consents to the criminal act, but voluntarily transfers the money or valuable goods to the criminal. And the hierarchies, status distinctions and networks that make up a modern economy also create powerful psychological barriers against seeing fraud when it is happening. White-collar crime is partly defined by the kind of person who commits it: a person of high status in the community, the kind of person who is always given the benefit of the doubt.
[…]
Fraudsters don’t play on moral weaknesses, greed or fear; they play on weaknesses in the system of checks and balances—the audit processes that are meant to supplement an overall environment of trust. One point that comes up again and again when looking at famous and large-scale frauds is that, in many cases, everything could have been brought to a halt at a very early stage if anyone had taken care to confirm all the facts. But nobody does confirm all the facts. There are just too bloody many of them. Even after the financial rubble has settled and the arrests been made, this is a huge problem.
echo • July 25, 2018 7:09 AM
Heck, oh, mighty! Judging by the quotes the article looks good. I certainly agree there are issues with authority and division of labour and certainly too many facts to consider.
From the other side of the fence trying to get a lawful tranaction cleared where the processors are over-zealous and discriminatory? I have given as much information as I can without writing a book and a list of statutory bodies and have included the police if they wish to verify the transaction. I even said I would give them names and numbers of individual police officers and am available if they wish to make an appointment. Everything is open book at my end. Cue complaints in 5…4…3…2…1… I have spent three days so far collating and drafting a core document to approach another finance processor and also serve as a submission to the regulator and ombudsman. It’s long enough as it is and I haven’t listed detailed citations covering the exactline of statute or other relevant material. As much as I want to push this out the door I’m letting it rest so I can review and rewrite if need be and decide how much granularity I want to provide at this stage. I would rather not have to dig deeper because this kind of material can blow up to the size of a mountain very fast.
I also have additional complaints in hand about lawyers on a security related issue and am referring them to the ombudsman. Basically, they wouldn’t accept a one page document in electronic form in any format or via media while other lawyers do. Oddly, they are happy processing messages via their website or email. Investigating how lawyers manage the whole area reveals very low quality guidance and expertise.