According to a recent
article on Bloomberg, banks are
considering using blockchain technology, the same platform used in bitcoin
transactions. This change could prevent losses that are due to one particular
type of fraud. Some companies are applying for and receiving financing from
multiple banks, but are using the same invoice as proof of collateral for all
of the banks. This allows the company to receive much more financing than they
should be able to receive, and the banks lose a lot of money if the company
defaults on their loan. This fraud is similar to if an individual were to receive
several mortgages from various banks for a single house. If the individual were
to default on their mortgage, they would keep a lot of cash, and the banks
would each be left with only a portion of a house as collateral. The losses due
to this financing fraud have been close to $700 million for banks such as Standard
Chartered Plc and JPMorgan Chase.
Every state in the United States has a sex offender registry
that is publicly available for everyone to see in order to identify people who have
been convicted of a sex crime in the past. Could such an approach also prove
effective at lowering financial crime rates? A recent
article in The Wall Street Journal
discusses the creation of a White
Collar Crime Offender Registry in Utah. Utah is the first state to
implement such a registry, making them, according to the article, the “most aggressive jurisdiction in the
country when it comes to publicly shaming financial criminals.” The registry
will list first time offenders of financial crime for five years, second time
offenders for ten years, and third time offenders will never have the option of
being removed. In addition, convicts who fully comply with court orders and pay
their restitutions in full will not be added to the list.
A recent
article in The Economist
discusses how to avoid being asked to commit fraud. It can be very
uncomfortable if your manager asks you to alter the books or do anything that
is unethical. Often there are not only repercussions for committing the fraud
(i.e., fines or jail time), but also for not committing the fraud (21% of
employees who reported unethical behavior at work said they experienced some
form of punishment from their employer). If you refuse to commit a fraud, your
manager may choose not to promote you or may even fire you. Rather than refusing to commit a fraud, the
best scenario for an employee would be to never be asked to commit a
fraud. A study that was done by Dr. Sreedhari Desai (professor at the
University of North Carolina at Chapel Hill) found one approach that dissuades
managers from asking employees to engage in unethical behavior.
