Frauds ,Detection ,Prevention

World Of Frauds.........(Check video's section of the websit

Objective of this website

This site is intended to share Financial Frauds,Scammers,prevention,

detection,and various Fraud news all over the World.

This site also brings to light latest trends and developments in the financial world not amounting to frauds but as general update of information like Bitcoin,digitization,Crypto_currencies and any of the articles and news relating to financial world.

All the contents and information on this website are gathered from News items,internet sites,cases as reported on various websites,journals,news magazines and blogs. The sole objective is only to share such information at one place.

Disclaimer

All the contents of this website are a compilation of information from various sources , News Items and other Media.

The objective on this site is to share such information and give the readers an insight into the world of Frauds and help in prevention,detection and timely action.

The website is only to Educate public and to act as red alert based on various instances of fraud and cyber criminals by explaining the methodology and giving references to already reported websites for better understanding.

About The Author

K.NARAYANARA0.B.Com;FCA;FAFD;CFFE

Successfully completed a 5 week certificate Coursera Course of West Virginia University, USA, on Forensic Accounting and Fraud Examination.

Completed ,FAFD, post qualification certificate course of ICAI, India.

Associate Member ACFE-US.

Qualified Chartered accountant -

The Institute of Chartered Accountants of India.

Associate Member_ Association of Certified fraud examiners-ACFE (US).

Certified Financial Fraud Examiner-IFS-Pune-India.

Successfully completed a one year online PG Diploma in Certified Financial Fraud Examiner course of IFS-Pune-Recognised by the State of Maharashtra, India.

Well experienced in Finance, Accounts, Auditing.

Contributing articles on Fraud detection, prevention, occurrence and news on Financial Frauds and other scams across the World. Also any other related financial information.

Index - Main Articles-2016-17

1.Forensic sciences-Chain of custody.

2.Role and importance of Forensic Accounting & Fraud examination

3. Fraud Detection & Symptoms of Fraud

4. Business E-Mail Compromise

5,Fraud Triangle

6.Work Place Fraud

7,High Profile Financial Frauds

8.Panama Papers

9.How to defend against social media frauds

10. Online dating scams

11. Intellectual Property-rights frauds

12. Forensic Accountant & Audit Vs.Internal Auditor

13.The Top Ten Indian Frauds and Scams-(In 2 sections )

1. FORENSIC SCIENCES-CHAIN OF CUSTODY

1. CHAIN OF CUSTODY

Forensic Sciences-Chain Of Custody:(A Brief Note) In forensic sciences the most important aspect is Chain of Custody. What it means is the total flow of actions taken from beginning till the end. All the steps taken at the outset till investigation process the flow of events must be properly documented. The reason being all forensic cases end up in courts, and the judiciary will take their deliberations and final conclusions based only on Facts and Evidence, to the satisfaction of the courts. Hence to present a case “Chain of Custody” is very important process. If there is no proper and clear chain of custody latter there will be allegations of improper care of the evidence collected which may result in the courts acquitting the guilty in the case involved, due to poor evidence and poor chain of custody.

Basically Chain of custody involves the following stages:

Record keeping
Usage of strong and reliable tools and techniques
Isolating and keeping separate properly secured all the gathered and available evidence.
Clearly showing from whom evidence is received and to whom passed on

The integrity of the evidence should be maintained without tampering or compromising in any way. For example, if there is a murder in a forest, chain of custody documentation and evidence collection starts from the scene of the crime in the forest and goes on till the specimens are sent to a lab, even abroad, where necessary; At every stage a document is prepared showing full details of each person at different stages of evidence collection, of their names, designation, place where evidence was collected, what has been collected and to whom it is forwarded next. This documentation is highly needed to fix responsibility on the person .It thus safe guards the evidence and helps in detecting the crime .Such evidence can also be effectively produced in courts. A good chain of custody is not only a good organized management policy of documents but also stops any attempt by the defense that the evidence is of “reasonable doubt”, regarding the integrity of the samples and evidence produced by prosecution, as the party offering the evidence has the burden of proving that the evidence is genuine and authentic. Field staff is responsible for properly identifying the evidence collected by Labeling the samples collected and also attaching photographs of the crime scene, evidence collected and any other relevant items of evidence collected. All labels, markings must be done with water proof and non-erasable inks. All such evidence and samples should be sealed in a transparent cover and properly sealed and stamped with the company seal. The written document should be properly signed and names written clearly by both the original evidence collector and the next person to whom the evidence packet is passed for further processing, so that there will not be any doubts about the origin and subsequent flow and change of hands and also protects from tampering of the evidence . Thus basically a proper chain of custody will show 1. Who collected it 2. Who received it 3. Who processed it and finally 4.who saved it. This will fix responsibility in the event of any suspicion of tampering with the samples and evidence collected, There are instances of cases where the guilty are acquitted, due to lack of proper chain of custody and prosecution could not prove their case in the courts.

Thus chain of custody involves:

. Integrity of custody-for control of evidence.
Anyone who collects the evidence should carefully preserve the same in the same condition as it was found till latter date when it is used in a court of law and for further analysis, without tampering.
The collected evidence must be properly cataloged, sealed and stored, by the concerned person who forms the chain of custody.
The collected evidences should be sealed in a transparent evidence bag. The details like who collected, what is collected, date of collection, to whom addressed should be clearly written ,and signed off by the person ho sealed and also by the person to whom the bag is addressed.
It is highly essential to follow the above processes of chain of custody by all the concerned persons through whom the evidence collected changes hands ,as it may take several number of days, or weeks or months or years before the case is closed.
The first responder plays very important role in a chain of custody as the evidence collected at the first instance should be carefully cordoned off, photographed and the environment also should not be disturbed.
The first responder should call and keep everyone concerned informed and maintain a call log sheet.
He should know immediately whom to call and inform, without tampering evidence.so that one can gather as much information as possible and inform as many people a possible.
The chain of custody document is a legal document.

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2. ROLE OF FORENSIC ACCOUNTING AND FRAUD EXAMINATION

Role and importance of Forensic Accounting and Financial Fraud Examiner:

Introduction:

At the outset it may be said that both Forensic Accounting and Fraud examination are related though different. Fraud examiner need not necessarily be a professional accountant like ACA or CPA, while the former they are mostly professionals involved in the investigations. While forensic accounting refers to various areas as discussed hereunder fraud examination is mainly focused at anti-fraud related matters.

Role and significance of Forensic Accounting and fraud examiner :

Forensic accounting is a legal term. It is in its simplest form application of accounting techniques and concepts in issues concerning legal matters. The requirement comes due to high rate of white-collar crimes like embezzlement, fraudulent financials and various other financial wrong doings. The Forensic Accountant is called upon to investigate various financial frauds by the employees, clients, Customers either indepedendetly or in collusion one another and misappropriating the assets of the company. Forensic Accountants also help the Government in the enforcement of regulatory requirements. Many a bank fraud is common with the collusion of the borrower and bank staff etc. where the expertise of the Forensic Accountant comes in unfolding the fraud and helping the corporates nail the fraudsters. Forensic Accountants help is needed in price fixations, stock market manipulations and at times even manipulation of the financial figures by the managements to window dress the balance sheet and profit and loss account figures to hide real facts from the stake holders and general public, for the funds misused or misappropriated by the top managements.

To understand better Forensic Accounting may be subdivided four categories:

1. Litigation support 2.Investigative and assisting in the disputes 3.Frauds Detection and finally 4.Computer forensics. The litigation support is provided to the legal profession by giving support of documentary evidence to support or rebut a claim. Also assisting in designing relevant questions to be asked at the time of trial in courts of law. Under the second category the Forensic Accountant helps in minimizing future damages and risk of loss. Because of their expert knowledge he is effectively used in fraud detection. The need for forensic accountants arises in educating, preventing, detecting and prosecuting the fraudsters. Their role is of utmost important in combating financial abuse. In the present day context Forensic Accountants have become part of all major Accounting Firms, specializing in fraud detection and prevention and helping the courts of law by giving Evidence of the financial wrong doings. Courts depend on the expertise of forensic accountants in all financial litigations and disputes. They are needed in all investigating, mergers and acquisitions, employed as tax investigators, economic crime investigators, special audits, civil litigation support and even terrorist investigations and havala transactions.Infact considering the number of financial frauds there is shortage of Forensic Accounting Specialists, as the extreme investigating, collection of evidence and giving evidence in a court of law are beyond the scope of a normal statutory or Internal Auditors. Thus the role of a forensic accountant has become highly specialized function. The Forensic Accountant role can be summarized as giving preliminary advise, identifying preliminary documents ,preparing a detailed balanced report of his findings with supporting documents briefing the legal counsels on the financial accounting matters and also engaging himself in criminal investigations. The importance and need for a forensic accountant has become necessary due to failure in the routine audits, the intense economic pressures with companies facing bankruptcies and employees losing jobs, all these in turn giving way for frauds by the employees or even employers The need for the role of forensic accountants arose as the statutory and internal auditors act only as watch dogs but to detect and unearth frauds in accounting we need bloodhounds, and a forensic accountant acts like a blood hound in bringing the fraudsters to book, with his specialized experience and skills. Forensic Accountants thus take more proactive and skeptical approach. The role of a forensic accountant was recognised since 1824.However the real need came in the 20th century in 2001-2002 with huge financial frauds coming to light, like Enron, World com. Companies, when companies disclosed billions of dollars of financial frauds.

The role of a forensic accountant has gained lot of importance due to multiple types of frauds like,

1. Employee embezzlement 2.Vendor fraud 3.Customer fraud 4.Financial statements frauds by Managements and stock market scams. Thus a Forensic accountant primary job is to make a financial analysis, and submit evidence in a court of law for discussion and ultimate dispute resolution. His role is of utmost important in Litigation support, investigation of employee frauds, Economic offences and in investigation support. His role encompasses vast scope as expert witness and detection of carious frauds as mentioned above. The various steps involved include selection of the expert investigator, collection of all relevant data, Examination, analysis and reporting. A forensic accountant helps in partnership and shareholder disputes, personal accident claims, employee frauds, Insurance frauds, financial statements frauds by managements and not but least Bank loan frauds. The Role of the forensic accountant is highly retained by Police departments, Government regulatory bodies, lawyers, banks, courts and business community. The important role of forensic accountants has arisen from corporate frauds like Enron, Satyam Computers, and many other corporate frauds running into millions of dollars of financial impropriety. The role of forensic accountants in detection of frauds is continuously growing as they are financial detectives and valuable assets to lawyers. The forensic accountant uses all modern techniques and tools in gathering all the information necessary and relevant for his purpose. The various techniques and tools include data mining, finger print identification, laboratory analysis, forged cheques and altered cheques identifying tools, electronic surveillance etc. The importance for the role of a forensic accountant has come as in the present days of competition. There is Risk and Reward for making higher profits and sales/Targets to achieve to meet the sales and the inherent pressures to achieve these may end up in the employees and/or employers to resort to manipulations/embezzlements, collusion with vendors and customers. Hence the role of forensic accountant to investigate and unearth such frauds. Thus forensic accounting can be summarized as submission of all documentary and other evidence in a court of law and who are called upon to give expert witness in the courts. Forensic accounting not only means fraud investigation but also plays a role in divorce disputes, family disputes, mergers and acquisitions and business valuations. The forensic accountants start his work on the assumption that something has gone wrong and to conduct his investigation and support his conviction with adequate documentary and other proofs. The evolution of Fraud examiners has come after late 80s as there were no formal mechanisms to deal with frauds before that, even though frauds were prevalent since the 19th century. But over the years the incidence of frauds have grown in massive proportions that the role of a specialized fraud examiner was recognised by corporations to deal with frauds.

Their role is highly utilized in the prime areas of fraud viz:

Embezzlements, cheque frauds, money laundering, misuse and abuse of corporate resources. However a fraud examiner should also have full knowledge of the specific industry concerning the specific industry, for playing a effective role in his fraud investigation. The important skills needed for the role of a fraud examiner includes: 1. They should understand the business and the technology used in the organizations, the software used, as he is dealing with the management as well the technical and software departments of the company. 2. Versatile experience in the field of the industry where the fraud is examined. 1. Should have sound technical knowledge to get the source of required information from the storage and other computer equipment’s and for following the trial of information needed for investigation. 1. The fraud examiner should be well versed with all laws at international level as fraudsters have become more intelligent in their activities exploiting loopholes in the statutes and laws across the world. 1. Data analytics play a critical role for fraud examiner investigations. The role involves in investigate, identify, prevent both financial and legal crimes and frauds. Fraud examiner’s role not only includes unearthing a fraud but also to find out why the fraud occurred. The role of both forensic accountant and fraud examiner is very thin. A financial Fraud examiner focuses attention and his role is to unearth frauds in financial transactions and fraud schemes. The role of forensic accountant and fraud examiner starts when a fraud is committed due to deceptive financial transactions. He will analyses and examine and present the business transactions in a way that is supported, meaningful and understandable. Conclusion: The role of a forensic accountant is highly valuable in forensic accounting, questions to be raised in any fraud assessment, Red flags identification for early detection of frauds with his knowledge of the Accounting Information Systems, and knowledge of various auditing techniques and software skills. They demonstrate their analytical skills, investigative skills, and Organization and communication skills. They have to demonstrate and explain in courts of law the methodology and techniques used to arrive at their conclusions. FORENSIC ACCOUNTANT AND FRAUD EXAMINER IS A DETECTIVE LIKE SHERLOCK HOLMES!!

3. FRAUD DETECTION & SYMPTOMS OF FRAUD

FRAUD DETECTION & SYMPTOMS OF FRAUD

Fraud is willful representation of a fact knowing it to be false and with an intention to make profit and to cause loss to the other party. An important aspect of detection is first to identify the various factors which cause fraud. There are always two elements involving frauds-1.Risk and 2.Materiality as understood by the auditors. There is element of risk of fraud in businesses always and then comes the extent of losses. Fraud is prevented and also detected by stringent internal control systems and whistle blower policies and clear demarcation of the duties and responsibilities and accountability and a structured organization with clear cut laid down policies and procedures. The employees should also be trained in fraud prevention and they should be made aware of the consequences if any fraud is perpetrated by any one. Fraud must be proved by showing the defendant’s action in 1.Prove a false statement has been made 2.The person knows that the statement he is making is false 3.The person has intentions of deceiving another 4.The plaintiff has relied on such misstatements believing them to be true and finally 5.There is a financial loss or injury to the defendant. The detection and prevention of fraud are basic for a smooth functioning of the economic system. The symptoms of fraud or red flags of fraud: It is always better to prevent fraud than doing postmortem of the occurrence of a fraud after the organization or a individual or group of persons suffered monetary or other losses due to fraudulent activities. There are different kinds of fraudsters –like “Accidental fraudster”, “Predator fraudster” etc. 1. Accounting Irregularities 2. Weak Internal control systems 3. Tips and whistle blowers 4. Luxury life styles 5. Unusual and odd behavior 6 .Analytical irregularities-like sharp changes in debits or credits of an account etc. Circumstances that are too unusual which may result in concealment, theft or conversion. Frauds Involve among other things: 1. Misappropriation of assets 2. Fraudulent financial reporting 3. Corrupt business practices As enumerated above for various types of frauds there are different red flags indication a possible fraud. 1. Financial transactions red flags: a. Regarding structure of the organization’s personnel b. Red flags within the organization’s operations c. Red flags within the financial systems and performance d .Long pending unreconciled balances e. Ghost employees f. Inventory shortages g. Customer complaints h. Unusual pricing overrides, discounts. i. Disclosure frauds 2. Unusual Behavioral Red Flags a. Living beyond the means b. Domestic and financial problems c. unwillingness to take holidays d. Pressures from within the organization e. Past legal problems 3.Fraud Triangle: a. Opportunity to commit fraud due to weak internal controls b. Personal and domestic pressures-health, family issues, financial issues. c. Attitude towards the Management-discontentment. 4.Different ways of unfolding the frauds after red flag alerts: a. Interviews with employees-present & past, third parties, informants, witnesses etc. b .Phone records-Mails ,Media, Public records, security check records c. documents analysis, data analytics e. Data Mining techniques. Thus frauds should first identified,next steps are taken to prevent frauds and action should be initiated immediately on identifiation of syptoms as enumerated above.

4. BUSINESS E-MAIL COMPROMISE

BEC

Introduction about “Fraud”: What is Fraud? Fraud is trickery and is used to gain dishonest advantage by the perpetrator of fraud over another, the victim, resulting in monetary losses to the latter. The perpetrator commits an act knowing it to be false and the Victim acts on such act believing it to be true and incurs financial loss. Thus, the fraudster, gains, at the cost of the victim. Fraud is rampant all over the world. “The incidence of fraud has become so common that its occurrence is no longer remarkable only, its volume and scale.”-Alvin Toffler. Who commits fraud? Almost anyone can commit a fraud. Most fraud perpetrators have profiles that look like honest people. Fraud Triangle explains that, people commit fraud due to 1.Oppurtunity 2.Rationalisation and finally 3.Pressures-Financial, health and family. An Employee, Management, Vendor, Customers, agents, or external party, all either individually or in conspiracy with others, may, commit fraud. The frauds occur in Corporates sector Banking, Insurance, or may take the shape of Cyber-Crimes, Bribery, and Money laundering, Corruption and kickbacks. Forensic accountants and Fraud Examiners are experts in the field, who assists company management, lawyers and courts of law in investigating and unearthing frauds, in giving evidence and suggesting preventive measures. He may be called upon as an expert witness in a court of law, at the time of prosecution and conviction of the fraudsters. Business Email Compromise-BEC: Definition and Meaning: A sophisticated scam targeting businesses and individuals who are dealing with suppliers, foreign or inland, and who regularly perform wire and online remittances and transfers. An e-mail from the fraudster tricks the victims to send money and other sensitive corporate data to these cyber criminals. This E-Mail scam or Phishing scam can attack the victims in several ways and gather valuable personal information, amounting to Identity Theft, which in turn is used by the fraudster for his gains. BEC is perpetrated by compromising real business e-mail accounts through social engineering or computer intrusion techniques to conduct unauthorized transfer of funds into the fraudster’s intended bank accounts without the knowledge of the Victims. Social engineering is the art of manipulating people who impart with their personal and confidential information, not knowing that they are being manipulated. Computer intrusion means breaking the security and gaining access into the systems of the victim without their prior knowledge. The IC3 (Internet Crime Complaint Center-USA) reported in 2014 that the losses from these scams averaged about $55,000 with some more than $800,000. A report by a security solutions provider highlighted that 180 Indian companies were affected in 2016.Such scams costed $3.0 Billion losses to nearly 500 product vulnerabilities in 2016. Methods and ways in which BEC is perpetrated by fraudsters: The fraudster e-mails a Phishing document to the intended company by creating a domain similar to the supplier of the company and obtains all the necessary details .Phishing is similar to fishing, meaning, baiting the victims, without their knowledge and gets all relevant details by installing a malware into the victim’s systems. According to IC3 such spoofed e-mails are sent with subtle alterations in the e-mail that it is becomes difficult to the victim to notice the changes and believes that it is from the legitimate address. The fraudsters may send a bogus invoice by creating a domain similar to the supplier and send to the company and may direct the company to make remittances to a specified bank account and thereafter misappropriate the money. The fraudsters also may misrepresent as a CEO or CFO of the intended company and send a request through a spoofed e-mail to the banks of the company to transfer a certain amount of funds to a specific supplier’s bank account and once funds get into the account are withdrawn and the fraudster disappears. The fraudster may hack the e-mail account of an employee of the company dealing with customer accounts and request the customer to direct a payment due into a designated bank account of the fraudster. The fraud perpetrators often do extensive research about the target company through social networks, discrete enquiry, or getting information from an employee of the company who doesn’t suspect and parts with valuable information, before the fraudster operates his scam. Another example of online phishing scam is, with respect to PayPal online transfer of money from one party to another .The user of a PayPal account may get first an e-mail notifying that ”Your Account will expire in less than 24 Hours”, Phishing scam E-mail. This e-mail is not from PayPal. It is a Phishing scam designed to steal your PayPal account login details, credit card and other personal details and account Information. The users connect with PayPal by opening their account which in turn connects to their credit card or checking account. The fraudster first sends an e-mail, purporting from PayPal account, informing, that the customer’s account will expire within 24 hours and hence directs the user to click on a link “Update your Account”.Once the victim “clicks” on that link, a page looking similar to the PayPal account, opens up asking to update all the information, after the user “Updates” his account information with all his personal and bank details and sends the e-mail, he in effect has parted with all details to the fraudster, who uses the information to the detriment of the PayPal account holder causing financial losses. The PayPal website has posted information about how to recognize and report such Phishing e-mail scams. The legitimate PayPal account addresses an e-mail not as “Dear Customer” but by name of the customer as “Dear Mr.Narayanarao”. Once your personal details have been accessed, criminals can then record this information and use it to commit fraud crimes such as identity theft and bank frauds. There are10.7 Million users of PayPal in Asia pacific alone. So it is one website a fraudster tries to make his intrusions as all the users are not cautious all the time, despite warnings. Defense against the BEC scams 1. All e-mails should be carefully scrutinized before parting with any valuable and confidential business information to a third party. 2. Employees should be constantly educated and trained regarding the possible fraudulent schemes. 3. When any e-mail is received informing the changes in bank account and any other important particulars, the suppliers or customers must be immediately contacted by phone and the changes noticed must be confirmed before acting on the mails. 4. All mails should be checked to see that they belong to their supplier or customer as a small change abc_company@abc.in may be changed by the fraudster as abc-company@abc.in. 5. When the company notices any suspicious BEC scam, the same should be brought to the notice of the Police Cyber Crime department of the locality and duly reported and action initiated. 6. Install firewalls or upgrade firewalls on all networks of the company. 7. Install and run anti-virus, anti-malware on the total systems, servers etc of the company. 8. Change pass words from time to time. 9. Keep watch and notice any malfunctioning of the systems, systems hang-up or freezing of systems, unexpected booting, and report the same and initiate appropriate action and find the reasons and record the same. 10. Report any suspicious BEC fraud to the Police and cyber-crime departments for appropriate action. Conclusion: Cyber Criminals take advantage of any opportunity to develop schemes to rob consumers, organizations and individuals. Although the fraudsters have the upper hand in this highly advanced era of online activity and cloud technology together with several social media, an educated community will help curb the damage to a large extent.

5. FRAUD TRIANGLE

FRAUD TRIANGLE

“For The Love of Money” Fraud Definition: Fraud is defined as misrepresentation of a fact by the perpetrator of fraud knowing it to be false and the person “Victim” believing it to be true and acting on such belief and incurs monetary and financial losses while the fraud perpetrator gains at the cost of the “Victim”. Fraud is nothing but “people”. Fraud may be committed by anyone .In several cases of fraud, the following characteristics are found in a person committing fraud: 1. 1. 1.Charismatic 2. Dominant leaders 3. Flamboyant and enterprising 4. Dishonest and Rouge Employees 5. Psychopathic Personalities. What is Fraud Triangle? As shown above, a fraud triangle has three components and this term is used in the context of an Employee Fraud, in an Organization. The fraud may take the shape of misappropriation of cash and assets of the organization. What are the components of fraud triangle? !. Opportunity 2. Pressures 3. Rationalization / Attitude. Now, in brief, let us examine the above three components of Fraud Triangle. Firstly, Opportunity is a factor that a long serving employee will resort to in committing a fraud, taking advantage of his proximity to management and control over several operations of the organization. Secondly, Pressures are another cause of fraud, mainly due to financials problems at home, family issue-, children education, health issues, and addiction to bad habits like gambling. Thirdly, Rationalization or Attitude is the third component of the fraud triangle. Here the employee rationalizes and justifies for himself, his fraudulent activities as he misappropriates with an intention of repaying back the amounts, in due cource, which may, ofcource, never, happen. It is reported that at least 30% of the frauds are attributable to the employees. Main reasons for the occurrences of frauds relating to Fraud Triangle Inadequate or poor Internal Control Systems: One of the main causes for their occurrence of frauds as per fraud triangle are either poor or total lack of internal controls .Management may be busy with other personal activities or involved in other business interests, hence ,no monitoring on daily basis or simply placing pure trust on one or a few “trusted” employees. Internal control measures are the most important set of policies for an organization with clear specification of duties, responsibilities and segregation of job responsibilities with different levels of reporting and accountability. Internal audit mechanism is another effective method of reporting to the management on the systems and suggestions for improvement. However only large organizations can afford internal auditors. Preventive Measures:- · Educating the employees on the pros and cons of frauds .The consequences of committing frauds. · Encouraging Whistleblower policy of reporting any suspicious activity in the organization to higher management or statutory authorities and police. · Installing division of duties, strict internal control mechanisms and clear cut organization structure with control points. · Screening of the employees thoroughly and use of psychometric tests to know the behavioral aspects and nature of an employee. The Fraud Triangle can be best explained by the following illustration: The case relates to a medium sized trading company, “ABC Co. Limited “ with over 100 employees in different divisions. There is one senior Accounts Payable Manager, Kiran, working with the company since the inception of the company for over ten years. Kiran being a senior manager and a long standing employee with the company has access to opening new vendor accounts bypassing General Manager’s approval. Also Kiran can easily access the signature stamp of the general manager, as it is not kept in safe custody. Kiran though a good person has a compulsive pathological gambling problem. This problem created an unshakable financial burden on him. As he has control over opening new vendor accounts, he opened a “XYZ Co. Limited” and started payments to the vendor, into his wife’s account, against remittances on fictitious invoices raised by XYZ Company with all relevant documentation in order though, no goods took place. The general manager’s signature was forged and his authorized stamp was misused. This was going on for 3-4 years when the statutory auditors, found huge outstanding amounts against the XYZ Company limited. When brought to the notice of the management, it was found that the vendor never existed, nor any goods received by the company.The funds received against fictitious invoices were always diverted to his wife’s account. Thus the fraud was being perpetrated from 2010-2014, with the company having an operational budget of about Rs.5 crores per annum.Thus several lakhs of rupees was misappropriated by Kiran, till the fraud was discovered. Thus the above example illustrates how a fraud triangle works and the reasons behind such fraudulent activity. The main reasons for misappropriation by fraudulent means by Kiran are: 1 Lack of internal controls which gave scope for creating fictitious vendor. 2. Lack of segregation of duties, as being an old employee, Kiran was given multiple tasks and control and was fully trusted. 3. Easy access of higher authority signature and stamp, which the general manager ought to have kept under lock and key and in his absence should be used by a designated person and made accountable. 4. The extent of blame on external auditors depends on the materiality aspect of the fraud committed, at the time of discovery of fraud, whereas the fraud was being perpetrated past 3 years, prior to discovery and it is the primarily management’s responsibility to put internal controls system in the organization. Hence COSO-COMMITTEE OF SPONSORED ORGANISATIONS OF THE TREADWAY COMMISSION- Has laid out five areas of integrated internal controls Framework: The auditors should test all the COSO components and their effectiveness. 1. Control environment-Main component to establish controls down the line 2. Risk Assessment 3. Control Activities 4. Monitoring activities 5. Information and communications Conclusion: Thus Kiran perpetrated the fraud as defined in Fraud Triangle: 1. Firstly, Pressure-his Unshakable financial burden; due to gambling habits. 2. Secondly, Opportunity to misappropriate as a result of poor internal controls in place. 3. Thirdly, Rationalization-This may or may not exist, in the current scenario, as it depends upon Kiran’s intention of replacing the misappropriated cash. If he had the intention then it is his rationale that he can put back the misappropriated cash. As quoted by a famous philosopher ‘Rather fail with honor than succeed by fraud’- it is vital to ensure the implementation of the preventive measures discussed above to mitigate corporate fraud.

6. WORK PLACE FRAUD

WORK PLACE FRAUD

“Honesty pays, but it doesn’t seem to pay enough to suit some people.”—F. M. Hubbard.

Fraud Is any act by one person with an intention to deceive another for a monetary gain and the other person, ”Victim” incurring a monetary loss, by believing the facts stated by the former as true. Thus there is a Fraud Perpetrator and a Victim. There is “ trickery” used to gain a dishonest advantage which is financial over another. We shall examine briefly what is workplace fraud and how it occurs and the reasons for its occurrence, red-flags, prevention and remedies for cure and minimize such occurrences. “Trusted Employees” in organizations are in several instances, given the “keys to the kingdom”. No doubt Trust is important but organizations fail to understand that Trust itself is not Internal Control. Stealing at Workplace A survey in 2012 by KPMG of 281 companies in Australia and New Zealand found that respondents had a total loss through fraud of nearly $373 million and Employees were responsible for 75% of major frauds. Internal controls are the controls set up within an organization to check various functions by appropriate delegation and supervision over one employee by another .Internal audit also is part of such internal controls .Internal audit is conducted either by a separate audit department within the organization or by an independent external auditor reporting to the management at regular intervals, on finance and operations. Trusted Employees are often given the keys to kingdom leaving the doors wide open for corrupt or fraudulent behavior. At least 5% of revenue on an average is lost in organizations due to Frauds at Workplace. (As reported by Association of Certified Fraud Examiners-ACFE., USA).These acts of fraud are a real threat to globally active businesses whether large or small. While Cybercrimes are number one threat, next comes frauds perpetrated internally within an organization at the workplace. The workplace Frauds are generally found in Sales department followed by the accounting, operations Procurement department and marketing respectively. Workplace fraud is quite complicated to deal with and for running the organisations. However with proper identification of the causes and risk factors and by implementing proper preventive measures employers can successfully limit or minimize such frauds from occurring. Bribery & Corruption at Workplace Workplace Frauds take several shapes like 1.Stealing of inventory 2.Stealing of cash and cheques 3. Manipulating financial figures to meet targets set by management 4.Manipulating travel bills and expenses invoices and claim more than the actual amounts spent on travelling on business purposes 5.Bribing and corruption by colluding with suppliers of goods and services for favoring one vendor against another Fraud Triangle The Common reasons for employee frauds at workplace can be best illustrated by “Fraud Triangle”. It is important to understand the psychology of employees and identify some main causes that lead to workplace frauds by them. This is illustrated by Fraud Triangle as described under: No one wants to distrust or doubt co-workers with their honesty, however circumstances outlined in Fraud Triangle will turn an otherwise honest employee into committing fraud and turning out to be dishonest. “Fraud Triangle” illustrated three important behavioural attitudes of employees that will lead an otherwise honest person to resort to workplace frauds.This fraud triangle is used by socialogists and psychologists to account for the frauds occuring in organisations.It was first designed by American Criminologist Donald Cressey (1953) 1. Pressures: When an employee is under financial & Economic pressures, medical &health, children education pressures at home, bad habits like gambling drugs or alcohol, he tends to manipulate and fraudulently take monies out of the organization with an intention of replacing latter. Also pressures at the workplace compel an otherwise honest employee to cheat in order to meet stiff targets set by the management for getting recognition and incentives. 2. Rationalisation or Attitude: At times an employee justifies his wrongful acts of stealing from the workplace. Attitude refers to disgruntled employee being not happy with the employer and tries to resort to fraudulent means of taking money or assets of the company, again with an intention of replacing at a later date or altogether misappropriate the assets if the disappearance is not noticed. 3. Opportunity: It is but human weakness that when an employee finds an opportunity to steal he does it.Unfortunately this happens most with the long standing and trusted employees on whom the management totally depends due to their other preoccupations or other priorities. In such cases some fraudulent long standing employee may take the opportunity of his position and power and enrich himself at the cost of the organization’s assets. Internal controls discussed above will not be effective or do not prevent entirely workplace frauds unless the organization updates on regular basis last year’s controls to suit new business changes, newly hired employees and other considerations and past experience. Thus Workplace frauds take the shape of 1.Skimming 2.Larceny 3.Manipulation of expenses or fictitious expense vouchers 4.Misappropriation of organization’s assets 4.Fraudulent disbursements 5.Bribery and corrupt practices 6.Collusion with banks, vendors and customers. Red flags for workplace frauds Red-Flags of workplace Frauds: The management should be alert to the red flags and take prompt action to stop frauds at workplace promptly. The managements can effectively deter frauds by identifying the risk areas where fraud may occur, understanding why people commit frauds or corrupt activity. 1. When it is observed that an employee is living beyond his means 2. Where it is observed that there are accounts reconciliation issues between main ledgers and sub ledgers. 3. Where it is noticed that there are complaints from customers and vendors about payments, prices etc. 4. Where some employees, especially, “Trusted” employee who never takes a vacation. 5. Suspense accounts and IOUs. and unadjusted long outstanding advances from employees. 6. Lack of proper internal controls in place and lack of proper code of ethics and employee guidance. The employee frauds may take the form of 1.Skimming 2.Larceny 3.Manipulating expense accounts. Even stealing a stapler or claiming petrol bills of car used for personal purpose though meant only for official purpose is fraud against the organization. In skimming, the fraud is perpetrated before it is booked in accounts and the cash misappropriated is replaced soon thereafter. In Larceny the fraud is perpetrated after entering in books, generally cheque tampering and fraudulent vendor schemes fall in this category; finally an employee may book personal expenses as legitimate business expenses. Prevention-Workplace fraud 1. Know your Employee: The organizations should first do back ground checking of all the employees ,their previous jobs, job profiles, duration of working, the number of job changes, education back ground check for authenticity of the degrees, any previous complaints, family back ground checks-thus screening of employees is the most important primary requirement to prevent workplace frauds. 2. Employee training programs and making them aware of the consequences of committing fraud. 3. Establish well tested internal control systems and update the same from time to time to suit the changing work environment, new employees and other changes. 4. Put in place a whistleblower policy and encourage employees to report in confidence any unusual behavior of other co-workers. Employee whistle blowing policy continues to be on the rise to stop workplace frauds. Major frauds were uncovered in the cases of big corporations like Enron, WorldCom etc. However for whistleblower mechanism to be effective, employees need to be encouraged and assured of secrecy and job security, as many are afraid of retaliation by whistleblowing about a wrong doing by co-workers or managers or even management. A major health care fraud was uncovered by an honest employee, running into millions of dollars; Refer to John .Schilling book “Undercover”, an excellent example of what a whistle blower can do to uncover frauds in an organization. It describes major fraud in an health care organization in US. 5 .The organizations should establish hotlines for reporting and to root out frauds. 6 .The organizations should have systems in place for surprise checks and internal auditing. 7. Employees should be allowed an open door policy to discuss their pressures or difficulties so managements can assist them to cope up with those pressures. 8. All employees must be compelled to go on a yearly vacation. 9.There should be an effective organization chart showing the various levels of employees, the reporting hierarchy and division of work and automatic check of the work done by one by another ,internal checks system, should be in place. 10. A fraud examiner or forensic accountant may be hired for fraud risk assessment in the organization and methods to suggest fraud occurrence. 11. Surprise checks are one of the most important methods of unearthing workplace frauds at an early stage. It is observed that about 60% of workplace frauds are detected by surprise check mechanism. 12 .The Managers should be trained to lead as an example and in the implementation of internal controls. 13. The organization should have a good management policy for protecting the assets and effective document and records retention policy. Thus it may be concluded that Employee frauds at workplace can be avoided or detected at an early stage and prevented to a large extent by organizations setting up good ethical practices, leadership by example and good working environment with code of conduct and constant training and education programs to the employee.

7. HIGH PROFILE FINANCIAL FRAUDS

HIGH PROFILE FINANCIAL FRAUDS

A BRIEF COLLECTION & COMPILATION OF HIGH PROFILE FINANCIAL FRAUDS

THE BERNIE MADOFF PONZI SCHEME -click

The largest Ponzi scheme in the history.A $ 50 Billion Ponzi scheme Cheating for personal gains and luxary living by false promises Over $50 Billion of funds. that was in operation for 20 years!!. Bernie Madoff owned a brokerage firm,a proprietary firm and an Investment Consultancy. Though not licenced ,he collected millions of dollors from family ,friends and other wealthy He registered a Bernard L. Madoff Investment Securities investors and started investing into a Ponzi Scheme which ultimately failed and all his as a brokerage fi rm with $200 of assets andno liabilities. invesstorslost their earnings.He pleaded guilty and without a trial was sentenced in 2009. Bernie had $5,000 dollors as working capital at that time. 150 years in prision.The onset of a major recession marked the beginning of end of Berni. Ponzi schemes are named after a scheme developed by Charles Ponzi. In 1920, Ponzi promised to double the money of investors within 45-90 days . However, he never invested the money. Instead, he deposited their money into his bank account and paid investors the promised return using new investor income. Over $50 Billion of funds were involved.

HEALTH SOUTH FRAUD -click

Fictitious Transactions and bribery by CEO Richard Scrushy. Fictitious transactions and accounts to boost the company’s earnings to show better position 1.4 Billion Dollors than what is real-Window dressing-using creative accounting methods and ultimately fraudulent Equivalent to the eanings of the company from 1996-2003. accountiong.Fraud went undetected till 2003. E&Y,auditors, also settled the shareholders’ class action lawsuit for $109 million, reaffirming their gross negligence in their audit of HealthSouth. 1.4 Billion Dollors Equivalent to the eanings of the company from 1996-2003 were lost.

THE SATYAM FIASCO-Indian Listed Company Founder chairman-Mr.Ramalinga Raju -click

Largest Fraud in the Indian Corporate Sector Mr.B.Ramalinga Raju was the founder of Satyam Computer Services in 1987. Accounts Books were "Cooked". At the beginning it employed about 50,000 employees and covered over 65 Countries. MAYTHAS Acquisition was to conceal the fraud. In 2008 the company was awarded the "Global Peacock Award" by the World Council The attempt that failed to Cover Fictitious Assets with Real ones for Corporate Governance. through the( Aborted) Deal of Maythas. Problems started in 2008 when he planned to buy Maytas properties for $1.3 billion Books were being cooked since 2004 till the Fraud is out in 2008. and a 51% stake in Maytas Infra for$300 Million. The deal was aborted on account of opposition by the Investors.Thus started the downfall of Satyam and subsequent Relevation by the chairman Mr.Ramalinga Raju bywriting a letter to SEBI chairman and stock exchanges,rvealing the fraud committed. The fraud of manipulation of books of a ccounts to show a better position than the real and thus the purported acquistion of share in Mytas and Mytas infra,to cover such gap' and "BigHole" in finances by fudging of books along with the help of PWC Auditors.The persons responsible for the massive Fraud are: 1.Mr.Ramalinga Raju-Founder Chairmam 2Mr..B.Rama Raju-Brother of Founder 3.Mr.V.Srinivas-CFO 4.S.Gopalakrishnan-PwC Auditor 5.Mr.Srinivas Talluri-PwC Auditor. 1.Inflated Cash & Bank balances(Rs.5,040Cr) 2.Accrued Interest that was non exitent 3.Under stating liablities(1,200?Crores) and over stated Debtors (Rs.about 500 Crores) 4.Wrong reporting of Revenues by about Rs.600- Crores. 5.The Employee numbers in flated by 13,000.

WORLDCOM -click

Fradulent accounting Methods In 2002 an internal auditor report showed use of fradulent accounting methods, to hide its declining financial condition.Its assets were inflated by 11 Million dollors with 3.8 Million dollors in fradulent accounts. The Company was purchased by xxxx communiucations. This company scandel has resulted in the introduction of Sarbane Oxely Act with sweeping business regulations since 1930s.

BRE-X MINERALS LIMITED -click

It is the Canadian Mining Company-Worst mining scandal. Bought a Purported Goldmine company in indonasia in 1993. .In 1995 the company announced the discovery of a veritable treasure chest that resulted in the company's stock soar high. However this turned out to be the worst mining scandal in Canada of all time when it was discovered the workers and miners falsified crushed core samples Because of this Bri-X stocks became worthless.

URBAN BANK -click

Economic sabatoge. It was the largest bank in the Philipines until it was closed down by the Philipines Insurance Company.Several of its officers were latter criminally charged by the economic sabatage due to their falsyfying supervision and examination of sector report to Monitor their board.Ultimately the bank was closed.

The Société Générale Banking Scandal -click

Jerome Kerviel ,rouge trader and The Banking scandal. Duran is a rouge traderwho tripped the world's financial markets due to his unauthorised trading in securities by using the bank's computers. The fraud came to light when the Bank tried to mask the fraud by unwinding his trades; This resulted in panic all over the Atlantic causing decline in European Markets. This scandal Resulted in $ 4.9 Billion Euros losses to the socity funds.

BARCLAYS -click

Inter bank manipulations It is one of the worlds largest banks.It has hammerred by scandal involving Involvement of CEO Bob Diamond and his subsequent resignation. Inter Bank Rates manipulation where banks made each other money at highrates. The company owned up to the allegations that they manipulated the inter bank offer rate which involved in trillion of dollors of contracts and derivatives. The CEO Bob Diamond resigned and the compan was asked to pay $450/ Million.

VOLKSWAGEN -click.

Unlawfl acts Personal Manager ,Klaus-Joachim Gebauer, procured prostitutes for firm's labour representatives in the interest of the company.it is no surprise Volkswagon came under heavy fire. The unlawful acts have brought the company disrepute and bad publicity.

STANFORD FINANCIAL -click

Missue of money kept in trust $7.0 Billion Ponzi scheme that left several investors penniless even after 5 years of the fraud. Stanford International Bank in Antigua, which was owned by Texas financier R. Allen Stanford. Some 25,000 investors bought in good fath certificates of deposit from Stanford.However these monies were put in hedge funds and lost. About $8.0billion was lost.

LANCE ARMSTRONG- OF LIVESTRONG. FOUNDATION -click

Doping Confessions Lanes doping confessions effected the whole oganisation Being a Tour de France champion may loose title Lance Armstrong had several million dollors investment in SRAM,American Bicycle components and manufacturer. Being a Tour de France champion may loose title and sponsorships.

TYCO -click

Tyco isa diversified manufacturing and service company involved in Fire safety and protection systems,electronic security servicess Medical products and engineered procuts and services. CEO and CFO stealing money as executive compensation at shareholders expense. The CEO spent 2.0 Million dollors birthday bash to his wife on a medeteranian Island. its CEO Dennis Kozlowski and CFO Mark H. Swartz were found guilty of stealing $600 million. by improper accounting practices and misleading investors. From 1996 through 2002 there was violation of Federal Security Laws and acquired 700 companies pursuant In its plan to become aglobal,diverssified manufacturing and service congloromate. Kozlowski became an executive officer of Tyco, and, in 1997, became Tycos Chairman. Kozlowski resigned his positions with Tyco in June 2002 and was subsequently indicted by a New York State grand jury.On June 17th 2005 ,a New York State Jury found Kozlowski guilty of twenty two of the twentu three counts against him. The company overstated its operating income by an aggregate amount of one Billion dollors. Failed to disclose millions of dollors of executive compensation, executive indebtedness, and related party transactions.

ENRON -click

Biggest accounting fraud-painstakingly made accounting Fraud. The Accounting Disaster. It became Jack Of all Trades-Gas,trading futures in Gas, Derevatives,trading in commodities,dot.Com business. Houston,Texas, based energy ,Commodities and services company .Shares dropped from $90 to 0.50$ in October 2001.Filed for Bankruptacy in 2001. Enron employed approximately 20,000 staff with revenues of about $101 Billion. Named America's "Most innovative company"for six consequitive years by Fortune. Enron's assets and profits were inflated or even wholly non existenet and fradulent. In 2001, followed by then CEO Jeffrey Skilling’s resignation was a disclosure of losses incurred by Enron 1st time in 4 years. Furthermore, the losses incurred were to the tune of $586 million which included re-adjustment of earnings since 1997.Relationship with Bankers: Questionable relationship between Enron and bankers Citigroup and J.P Morgan Chase also contribute to the downfall of Enron. In exchange of the potential profits from IB services, the banks had lend money to Enron and promote it’s derivates and securities. The Fall of Enron shook the entire US economy and it’s global perception of ethics.Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002 or Sarbanes-Oxley Act came in 2002. Many of Enron's recorded assets and profits were inflated or even wholly fraudulent andNonexistent. Debts and losses were put into entities formed "offshore" that were not included in the company's financial statements, and other sophisticated andarcanefinancial transactions between Enron and related companies were used to eliminateunprofitable entities from the company's books.The fraud has resulted in $30Million self-dealings by CFO $700 Million Net earnings disappeared $1.2 Billion shareholders equity disappeared About $4.1 Billion in hidden assets.

SIEMENS -click

Bribery & Corruption SIEMENS AG and the Greek Govt. were underfire for bribing and corruption Bribes may be to the tune of $100 Million. which involved deal for security systems in 2004 SummeOlympic Games at Athens .

HELWETT PACKKARD -click

Spying scandal-Phone tapping at the behest of its chair woman-Patricia Dunn. The Helwett Packkard Scandal allegdely carried out at the behest of its chair woman petrusia Dan.She contracted a team of independent security experts to investigate some board members and several journalists by tapping their phone records.It backfired and resulted in Don's resignation and suceeded by CEO Mark Heard.

BARINGS BANK click

Employee Negligence. Oldest Merchant bank in the city of London and Founded by the German born Bearing family. This bank handled Queens personal accounts and also the financier of Napolenic wars.. Thee bank collapsed in 1995 due to one of its employees negligence who squandered 827 million pounds in speculative investment in future contracts at bank's Singapore Office.

SWISS AIR click

Poor expansion programme. Grounded in 2001 due to poor expansion pogramme that resulted in financial crisis and also effected its parent company which was effected by September 2001 attacks.Entire swiss fleet was grounded and offcially dismantled and in 2002 latter acquired by Cross Air.

PARMALAT click

Questionable Accounting practices by the Italian Company. It is a tiny leadig global producer of ultra hot temperature Milk and other feeds.its founder Calistotanzi was accused of questionable accounting practices in 2003 .He was selling credit link notes of the company and diverting the finds elsewhere. 14 Billion dollors deficit was discovered.

ARTHUR ANDERSEN -click

Certified independent Auditors Involved with Enron Scandal, Arther Anderson was one of the world's five leading accounting firms.Was paid $2Million in 2000 for non audit related matters.They assisted ENRON to set up partnerships and in turn Special Purpose Entities-SPEs for their accounting manipulations.Voluntarily relinquished licence resulting in loss of 5000 jobs in corporate rebranding.

DEUTSCHE BANK SCANDAL click

Spying on directors and snooping on personal lives of its investors. Dois Bank AG is General Global Banking & Financial Services Company.They were caught spying not only on its board of directors but alsdo on the personal life of its investors.It is also the largest foreign dealer in the world. it has presense in Europe,Us ,Asia Pacific and the emerging markets.In 2006 it hasbecome paranoid when it hiredc an external detective agency to snoop on contacts between board members and a Munich based media magnet Leokursh and his associates.

MARTHA STEWARTS click

Insider Trading,Obstruction of justice. Steward is a household name as a business magnet,author and Magazine publisher. she has been very successsful to numerous best selling books.However she got entangled in Incon insider traing in 2002 and was indided on nine counts of securities fraud and obstruction of Justice.However she has bounced back and regained her company in 2012.Martha steward was indided on nine counts of securities fraud and obstruction of justice.

BEARN STEARNS COMPANIES INC. click

Banking security fraud Biggest bailout by the Government. one of the biggest and largest Global Investment US Govt.bailouts of banking securities and brokerage firms. The firm before it went bankrupt was sold out to JP Morgan chase for $2/ per share.

BANCO INTERCONTINENTAL- BANINTER. click

Fraudulent book keeping and political corruption in 2003. The 2nd biggest privately held commercial bank in the Domican Republic. Frauds and political corruption in 2003 resulted in the Domican Republic go to go on a steep decline as fradulent book keeping and political influence by the administration of the former president xxxxMeyya resulted in a 2.2 billion dollor deficit or 12-15% of the country's GDP.

ADELPHIA COMMUNICATIONS CORP click

Internal Corruption & Security Violations Extravagant Life styles by family memebers. Violations of The Racketeer Influenced and Corrupt Organizations Act.Breach of dutties and abuse of Control, Fradulent conveyance and corporate assets convertions. Pensulvynia based company was ranked as the 5th largest cable company in the US before it filed for bankruptacy in 2002 due to internal corruption. The founders were charged with security violations .John and Timothy Rigas were sentenced to 15-20 years in prison -while other officers were also indited.It is a family business.Manipulation of books and stocks prices. The former Adelphia chairman and his son Tim Rigas, Adelphia's former CFO. The Rigases, who were convicted on charges of wire and securities fraud in 2004, began serving their prison terms at a jail in North Carolina in 2007. In November 2011, they were transferred to Allenwood. John Rigas, isn't scheduled to be released from Allenwood until January 2018. Tim Rigas is scheduled to be released in June 2022.

GLOBAL CROSSING LIMITED click

Personal Loans by four CEOs. In terms of of assets the company bankruptacy can be considered to be the 7th largest falling in the American history.The debt was 12.4 Billion dollors was amassed by four CEOs where each was given 23 Million dollors as personal loans which were ultimately firgiven.In 2004 however the company showed improved margin and ultimately bounced back.

HIH Insurance click

False and misleading statements by director Rodler. Breach of good faith as director. Its corporate downfall can be considered the largest in Australian History. It was the 2nd largest Insurance company until it entered into provisional liquidation in 2001.It in curred losses totalling to Australian 5.3 Billion dollors, when its director Rodney Adler was sentenced to 4.6 yrs in jail time for obtaining money by false and misleading statements and privy to discharges of DDs as Director in good faith.Incurred over $5 Billion Australian dollors in losses.

Freddie Mac (2003) click

Company: Federally backed mortgage-financing giant.What happened: $5 billion in earnings were misstated.Main players: President/COO David Glenn, Chairman/CEO Leland Brendsel, ex-CFO Vaughn Clarke, former senior VPs Robert Dean and Nazir Dossani.How they did it: Intentionally misstated and understated earnings on the books.How they got caught: An SEC investigation.Penalties: $125 million in fines and the firing of Glenn, Clarke and Brendsel.

8. PANAMA PAPERS LEAKS

PANAMA PAPERS LEAKS

Important Note: This brief article, compiled, from various sources, is, to give a glimpse into the Episode of “Panama Papers Leaks”. Everything that was anonymously leaked has to be ultimately proved and all such individuals and companies “alleged” to have committed the breach of laws have to be brought to justice with proof of Evidence. However the linked “Law firm” to these Panama Papers, denied all the allegations as well as any relationship with the dubious shell companies and dubious individuals behind such shell companies. The word “alleged” is frequently used as nothing is yet proved and Global Investigations all over the world, are in progress. I may further add that I found LinkedIn as the best social media platform for sharing professional opinions and also gain knowledge from other valuable posts of fellow members ; hence started posting articles of interest in my field of knowledge viz: Forensic accounting, Financial Frauds, Internal auditing , fraud investigation and other related topics. Knowledge is nothing but a continuous learning and sharing exercise. The Republic of Panama is the southernmost country of Central America, bounded on the Northern side by Costa Rica and on the South by Columbia, South America. One side is the Caribbean Sea and Atlantic Ocean and on the other side is the Pacific Ocean. Panama Canal is the most important sea route for shipping lines and connects the Pacific and Atlantic Oceans by about 48 Miles canal. Panama City is the capital of Panama and is the largest city. Panama was a poor province of Columbia until its independence in 1903 and an extremely dependent Country. The United States helped in the formation of the country as also to take advantage of the Panama Canal that was being built at that time, by busineemen as well by the US Government. The Panama Papers episode was allegedly linked to one Panamanian “Law firm”. “The Law firm” (Mossack & Fonesca) was “alleged “to be the largest providers of shell companies. Many scumbags (several big names were mentioned) alleged to have used the law firm to open the shell companies, apparently not all are illegal, but were still used to divert or disguise their funds and business dealings. Since the leakage of information from an anonymous source, several hundred journalists are involved all over the world covering about 80 countries. It is again alleged that many South American Government Ministers, German aristocrats and US bankers were involved. Generally shell companies prima facie, are used to hide ill-gotten wealth from various nefarious activities. The people behind may include drug traffickers, gunrunners, criminals and various business people, and those in high places of Governments. The shell companies are located at various locations all over the world like the Bahamas, Nevada, Panama, British Virgin Islands, Hong Kong, Florida, Delaware, Ras_Al_Khaima (UAE) and spread across the Globe. The Panama Papers were leaked around April 2016 by an anonymous source to German Journalists called “Suddeutsche Zeitung” and shared all the material leaks with ICIJ(The International Consortium Of Investigative Journalists ).The caller identified himself as “John Doe”. The Journalists who unearthed these Panama Papers were Obermayaer and Frederik Obermaier. The ICIJ Gave access to about 100 media organisations across the world. ICIJ was founded in 1997 to co-ordinate cross border investigations into global tobacco, questionable World Bank projects etc. etc. The idea behind ICIJ is for journalists to share their material when it has international relevance. The leak amounted to 11.1 million documents, delivered in installments .The “Leaks” are “alleged” to contain about 200,000 plus offshore companies relating to the “Law Firm”, though the firm denies everything .The source wanted to expose criminal wrong doing by the “Lawfirm’s” dubious clients. Ofcource the “Law firm” completely denied any links with such “clients”. The shell company formation gained importance due to a law passed in 1927-Law32-that Law guaranteed secrecy and exemption from Taxation. The opening of a shell company doesn’t cost much as well and it is easy to close down, at just a click of the fingers. The best thing about a Shell Company is no one will ever find out who are the real persons behind. Offshore or shell companies are generally used to hide as well provide anonymity. The reason could be to hide “something” from their business partners, family and tax people and statutory authorities or may be to divert funds for illegal purposes or drug mafia and other criminal activities or to fund banned organizations etc, fighting unwanted civil wars by supply of guns and ammunitions and other equipment. Some companies divert funds as paid to “consultants” though in real they never worked a day for a particular company to whom they were supposed to have worked. Thus, the legal firm floating such shell companies protects its clients from all angles and keeps their identity as a secret. The shell companies are run by bogus directors and the real owners give power of attorney (POA) to such directors by the “Nominee” directors or their Attorney for operating Bank transactions, bank safes etc. and only the “Law Firm” creating these shell companies, the bankers and the bogus nominee directors know of such an arrangement. It is this legal arrangement that shuts all outsiders, fraud investigators etc from knowing the true identity of”Real” Owners. Also the “Law “Firm” arranges a second protective shield to Real Owners by creating also ”Nominee shareholders”. Thousands of individuals, all over the world, have opened offshore entities (Shell Companies) for diverting the funds and to hide the real owners of the funds. Several of these individuals were “alleged” to have taken the assistance of the ”Law Firm” in Panama, which the “Law Firm” however denies. “The Law firm” always works with Lawyers, Brokers, Asset Managers and Banks but not necessarily with end clients. For example it is “alleged” that. Ramak Ltd., Dorling International Limited, Lorie Limited, Drex Technologies S.A are some involved in “Panama Paper leaks”. Of course everything is yet to be proved. These companies are alleged to have a connection to the Syrian dictator. It looks apparent that the “Law Firm” ran several shell companies associated with the brutal Syrian regime, ofcource all this info is the ”Leaks” and the “Law firm” firmly denies. The “Leaks” further “allegedly” implicate the following persons that are associated with the”Law firm” and shell companies floated by the “Firm”. The persons included convict sex offenders, drug dealers etc The following persons and organizations are ”alleged” to work with the “Lawfirrm” for their various “activities”and were mentioned in the “Leaks” and were put on sanctions by the EU, UN, and the USA, during the periods 2008-2014. 1. South African Arms dealer-Bredenkamp, John Arnold. 2. Syrian president’s cousin Makhlouf Ihab 3. Mokhlouf Rami of Syria 4. N’Da Amertchi,Jean-Claud, Banker 5. Ternavsky Anastoly the Belarusian Citizen. 6. Drex Technologies SA 7. Kuo Oil Pte Limited 8. Petropars Limited 9. Timpani Exports Limited, British Virginia Islands Another very interesting part of the Panama “Leaks” is the leak of several thousands of data in all formats amounting to gb259/500/600 and more data, the biggest and largest information of the leaks in the history of journalism, even bigger than Wikileaks, HSBC, Files, and Luxembourg Tax Files. The information pertains to million e-mails and millions of pages of secret documents-all need to be confirmed of their truthfulness and accuracy of the ”alleged” wrong doings. The whole data that came out of the Leaks is so voluminous that the most sophisticated Australian based Forensic IT software, Nuix Investigator, that costs a fortune, has to be used to sort, filter and make some sense of the huge jumbled data and also pull out Pdf files, pictures, scanned documents that may be hidden and not so easily identifiable. One can export and save all the search results for further analysis, if there is no immediate time to do so. There are quite a few high Chinese were also “alleged” to have involved in the “Panama Paper Leaks”. It is “alleged” that One Deng Jiagui (B’law of the Chinese President )own Wealth Ming International Limited and Best Effect Enterprises Limited both based in British Virgin Islands. Also linked is the name of former premier’s daughter Li Peng. She along with her husband alleged to have established Cofic Investment Limited, in the British Virginia Islands through a Geneva Law Firm in 1994. Similarly big Names from Russia also surfaced in 2010, who are real owners behind Shell companies. A special Group consisting of Journalists from the BBC, The Guardian, The Swiss SonntagsZeitung and the Organized Crime and Corruption Reporting project (OCCRP) say the documents involved in the “Law firm’s” concerning the offshore companies expose deals of large amounts of money involving shares in several Russian Companies. Thus, the documents show the myriad ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens. The “Leaks” attributing to “The Law Firm” identified several Groups of criminal’s like-Tax Evaders, Mafia, Sanction Breakers, Arms smugglers, Financial Fraudsters, Drug Lords etc.as well as Presidents, Primers , high net worth individuals and corporates. It is alleged A $2bn trail leads all the way to Vladimir Putin. The Russian president’s best friend – a cellist called Sergei Roldugin – is at the centre of a scheme in which money from Russian state banks is hidden offshore.ofcfource everything is "alleged" and to be proved with Evidence. Conclusion: However Time only will tell the real truth behind the “alleged” “Leaks” and about all persons and corporates involved behind the shell companies the association of “The Law Firm”, the sources and end use of the “various funds” amounting to Billions of Dollars across the World and alleged to have assisted about 300,000 companies across the globe. Also, not all offshore companies are bad but sometimes, to keep their funds safe, individuals also may float offshore companies and exploit loopholes of a particular country’s tax laws. Indian Scenario of Shell Companies and Links to Panama Papers: The papers also included details of entities set up by over 500 Indian nationals. As per a New Report dtd 3rd May 2017, the Income Tax Department has sent about 260 requests seeking information of Tax evasion based on Panama paper leaks. The Enforcement Directorate has initiated investigations into 49 cases of Forex violations under FEMA Act (Foreign Exchange Management Act). According to CBDT, 424 names are under investigation in the case, with maximum (140) names from Mumbai followed by 105 from Delhi and 39 from Kolkata. The government has raised tax demand of Rs 5,419 crore on individuals who had undisclosed offshore accounts with HSBC of which around Rs 337 crore has been recovered. As per another News Report dtd August 13th 2017, A 'black money bonhomie' has come under the scanner involving builders, brokers and Bollywood entities as a multi-agency probe gets underway to pierce the corporate veil of hundreds of suspected shell companies. SEBI also issued notices to 331 listed companies, suspected to be shell companies and with “illicit” funds. Thus SEBI,ED and Serious Fraud Investigations Office and the IT Department have launched massive Investigations into the shell companies and diversion of funds and illicit funds getting into those shell companies.

9. How to defend Against Social Media Frauds

Defence against Social media Frauds

For the High networth Individuals,

Politcians,CEOs and Other well known Personalities it is a bit more difficultt against Social Media impersonators.

However some basic prcautions

would help in the prevention from this type of frauds.

They are:

1.Make full use of the "Settings" offerred by the social media and follow the instructions regarding captcha Puzzels etc.

2.Login iniformation is most important that should not be shared or trusted with Anyone.

3.Close family and friends might still accoidentally make you vulnarable if you allow them to use your accpounts online.

4.Never share your personal information like social security number,driving license numebr etc .

5. Have unique pass words for diffrent accounts you use and never reuse the same pass word for diffrent accounts.

6.You need not put your real birthday on face book.

7.Accept friends requests on social media ONLY from persons with whom you are familier with.

10. ONLINE DATING FRAUDS

All about Online Dating Frauds

Online dating frauds are another area of concern amongst numerous frauds. Around 7.0million UK adults used online dating sites in 2016. National Fraud Intelligence Bureau has found that in 2016, singles were conned to the extent of about 40 Million Pounds, by fraudsters. Dating fraud is becoming more successful and sophisticated and more and more victims are defrauded. The victims often do not go to police as they are ashamed or embarrassed of what happened to them. The fraudsters create fake online profiles and trick people in parting monies with false and misleading promises. They first befriend the Victim even for months before suddenly asking for money on some medical or other emergency, which the victim, unfortunately parts. Many Victims parted with huge money transfers, leading to bankruptcy. At times it may be a circle of friends that the victim is exchanging messages making him/her more vulnerable. Thus the main objective of these scammers is to defraud monies from Victims, keeping their identity behind a dating site or social network but never meeting person to person.

The following “profile” features are observed of a Male dating fraudster: 1. Male aged about late forties, say, 45+ yrs. Old

2. Status-widower

3. No political interests

4. High Income 5. Good height, say,

5 feet 10 inches or more

6. A good professional degree.

7. Finally the photo of the fraudster from a distance and at an angle.

8. Normally dating scammers are abroad and not reachable.

The following profile features are observed of a Female dating fraudster:

1. Female aged in her late 20s

2. Status: Single-never married.

3. Body: Average

4. Education: Student

5. Height: 5 feet 6 inches.

6. Dress in snaps: Selfies of her wearing skimpy vest tops showing lots of cleavage.

7. Politics –No Interest.

8. Normally dating scammers are abroad and not reachable.

Hence the following precautions (Red Flags) may be taken before responding to “Wanted” advertisements on dating sites:

1. Search Google, for the name and profile or turn to “Dating scam “profiles” on Google.

2. If the name or profile is not found, immediately, stop contacting and take appropriate action with the concerned crime regulating authorities.

3. Also when messaging if one is dealing with a group of fraudsters, they forget their previous chatting, hence be watchful for consistency.

4. Scammers usually target older woman in the age group of 50+ who are very vulnerable who are also rich. Hence such persons should be more careful in responding to online dating websites.

5. Do a profile check of their professions and photos on Google. Check to see if the photo appears on Google with another name and profile.

6. Be very alarmed if in a rapid way they escalate in 5 to6 weeks of friendship online, they start messaging, that they love you.

7. Don’t trust anyone until actually you have met him/her.

8. The fraudsters first select a target victim, create emotional connection and finally blasts last minute resistance-(Seduction hand book-The Game By Neil Strauss), hence be careful communicating with unknown persons online without verifying their credentials.

9. The scammers may ask the victims to chat and message outside the dating sites like face book, Skype that makes them more close to the Victim for getting more personal information to con the gullible person at the other end.

10. Generally the scammers avoid direct questions like “what do you do for a living”? “How tall are you”? “Who are your other family members”? Etc. This is another red flag that should sound an Alert to the possible victim.

11. The scammers also avoid meeting face to face on some excuse or other.

12. Make sure that internet dating doesn’t cost you emotionally, mentally or monetarily. Some are desperate to find love that they completely ignore the warnings and red flags and fall Victims to scammers.

13. Scammers first mislead the intended victims by informing the intended victim that he or she makes say $150,000/ pa. and trick the victim to disclose how much they are making and other financials, so that when the fraudster suddenly asks for money to meet an emergency the victim parts with money that it can be paid back to him.

14. If you get suspicious and asks if this is any scam, the fraudster pretends he is very angry for suspecting and makes the Victim feel guilty and so parts with the money.

15. The messages and letters written by the scammer is full of love poetry out of a novel that the victim believes in him.

11.INTELLECTUAL PROPERTY RIGHTS-FRAUDS

IP Rights-Meaning,Types,Red Alerts

Intellectual Property Rights-Protection from Frauds

First one should understand what one means by Intellectual Property Rights. The proprietor or owner may use and none can lawfully use such property without his authorization.

Intellectual Property Rights are very complex subject and covers a wide and complex area of diverse subjects. Intellectual property rights and Cyber laws go hand in hand in this age of internet and online usage.

Various countries have formulated Patent laws, Copyright laws, Trade mark laws to deal with the implications of the implementation and protection of the owners and developers against IP Frauds. Thus, the anti-piracy laws of various countries impose fines and also imprisonment for violation of the IP rights.

The IP Rights may relate to the following areas:

1. Movable properties

2.Immovable properties and

3.Intellectual property

Movable properties may be a vehicle like car or a personal item like a lap top, which no one except the owner can use and for any other to use there must be authorization from the owner.

Immovable property is like land and buildings and the owners have to comply with the statutory regulations regarding construction etc.

Finally, Intellectual Property rights which are the creation of human brains/minds and is like an asset which can be bought, sold or mortgaged.

Intellectual properties may include Inventions, designs, trademarks, and literary, artistic or scientific works etc.

Intellectual property consists of Patents, Trademarks, Industrial designs, music works, dramatic works, paintings and drawings, photography, Domain names, digital copyright, Trade secrets, software copy rights, Licensing, Cyber law etc.

The World Intellectual Property Organization –WIPO-is an international Organization for the protection and use of human minds and spirit.

To prevent misuse by unauthorized persons the IP rights holder should follow:

1. Timely filing of patent, trademark, copy rights both domestic as well as foreign.

2. Printing the patent, trade mark rights.

3. Safe keeping of related documents, software, drawings, designs.

4. There should be an IP Policy to protect IP Rights.

5. There should be an independent audit of all intellectual property.

6. The staff should be educated about the importance and protection of IP rights.

7.Proper logs should be maintained in logs about the usage.

8. There should be continuing education about IP rights their safe keeping and importance.

Frauds in IP Rights:

As per a report by European Commission, EU customs authorities seized 5 million counterfeit products, mainly the fake products originating from China.in the year 2015.

The pirated and counterfeit goods globally are about 2.5 % of imports and exports worldwide as per a report from the Organization for Economic cooperation & Development and the European Union. These frauds have become more organized and globalized crime and cross border crime.

IP Rights frauds and Online frauds are on the rise among several Indian companies. Counterfeit drugs and medicines, hauls, globally account for millions in dollars.

Worldwide covering about 81 countries in a week-long crack down on illegal counterfeit medicines which are harmful also accounted for about $3.0 million dollars.

One of the most important Intellectual Property Rights Frauds and scams are known as “Inventor Promotion Scams”.

Some fraudsters claim to promote or development of an invention which may never occur and the “Victim is tricked into parting with monies for “services” that never happen, for which payments are made.

The possible precautions-Red Alerts for such type of fraud are:

1.Be alert for Money Back Guarantee schemes of Promotions and development.

2. Gather full contact and other information of such organizations who claim to promote.

3.Make sure to obtain receipts for the money paid and get properly signed and documented contracts and agreements for such arrangement of promotion and development of IP Rights with employees as well outside consultants, as needed.

4.Immediately contact a legal consultant if there is any suspicion or deviation from agreed terms and conditions.

5.Devise preventive security strategies and exit policies to counter IP frauds.

6.Back ground check is a must of the persons entrusted with the Intellectual property work. The checks should broadly cover their habits, criminal records, through verification of their academic credentials with the respective academic institutions.

7.Installing CCTV s at all critical work places.

8.Taking all necessary legal precautions for prosecution if there is an infringement.

9.A IP Rights audit is another proactive step to stop infringements much in advance.

IP violations on the internet net are another huge area of frauds committed. Many international companies with operations in People’s Republic of China and Other developing countries are always at a risk of their IP rights getting infringed by fraudsters.

In India, it is about 1% of counterfeit goods and stands in rank three.

The most famous case of infringement of IP Rights is with respect to Kodak and Polaroid cameras, where the former was accused of infringing the patent rights of Polaroid. After a long battle of over a decade, Polaroid wins $925 Million.

Thus, to conclude, owners and Organizations of copyrights, trademarks, licensees should take professional help. The owners of the IP rights should be aware of their rights in the event of any infringement by a third party. The owners and developers should keep their invention or development a secret till the completion of the same.

12.FORENSIC AUDITOR Vs.STATUTORY & INTERNAL AUDITOR

Forensic Vs.Statutory-Internal-Auditors.

Forensic Accountant & Audit vs Internal Auditor-Statutory Auditor

Internal Auditor:

An Internal auditor is one who is appointed by the Management to assist in bringing to light accounting errors, reconcile accounts, verification of stocks on timely basis to exercise controls on the organisation’s assets and for effective implementation of

company’s policies and procedures as per the respective SOP manuals. Internal auditing is part of overall Internal Controls of the Organisation. The frequency of an internal auditor’s reporting may be monthly reporting, or quarterly reporting as per the engagement terms. Internal audit is for improving the effectiveness of business operations, risk management and thus provide an independent assurance to the Management. An internal auditor is an independent qualified Chartered Accountant’s Firm.

Internal auditors differ from statutory auditors, the latter are appointed by the company in the Annual General Meeting and the audit is conducted once in a year and the reporting is to the shareholders. Bankers, Creditors, Shareholders and all other third parties reply on a statutory auditor’s report for lending monies for various purposes. The Internal auditor helps the Managements in taking timely real-time actions as well assist in stock taking and accounting for assets of the company on regular basis. However, it may be noted that it is not the duty of an Internal Auditor to investigate into frauds or conduct forensic audits.

Internal audit Process involves the following steps:

1. Internal audit Assignment Terms-Monthly or quarterly Reporting and areas to be covered specifically.

2. Audit program -Periodical check covering all segments of the business process.

3. Maintaining Audit Working Papers-Permanent & Other working notes and Documentation

4. Discussions with management and other concerned departments on the issues raised during audit

5. Obtaining replies from the management to audit queries and

6. Final Internal audit report, with the observations, recommendations for improvement and any specific matter requiring immediate attention of the management.

Statutory Auditor:

A statutory auditor of a company is appointed in an annual general meeting and reports to
the shareholders of the company. The financial statements audited by an external statutory auditor are for reporting to shareholders. Bankers, creditors and any third party interested in investment or mergers, takeovers, reply on statutory auditor’s report, though some may go for a separate due diligence before taking major investment decisions.

Thus, a statutory auditor is only a watch dog unlike a forensic accountant who is like a blood hound.

A statutory audit is conducted once in a year, based on test checking of the transactions and reporting on the True & Fairness and Going concern concept.

Forensic Accountant-Auditor: Objectives and methodology of Forensic Audit:

Forensic Accounting/Audit has gained importance due to increase in financial frauds, white collar crimes and cyber crimes.

It is a specialized field of accounting for investigating frauds and for analysis financial information for using in any litigation or legal proceedings. Forensic accounting techniques involves auditing and investigative skills and skills of fraud investigation.

Forensic accountants perform the following functions:

1.Work place frauds

2. Insolvency, bankruptcy and reorganizations

3.Computer forensics

4.Business valuations for takeover, mergers .

A fraud is a misrepresentation of facts which the person making knows it be false or misleading and the person relying on such “representation” relies on it and believes it to be true and in the process, incurs monetary losses or parts with something that belongs to him and thus becomes a “victim” of fraud by the perpetrator.

Normally the word forensic is associated with methods or techniques used scientifically in the investigation of a crime. Forensic accounting is the use of professional accounting skills in matters which involves civil or criminal litigation.

Thus, forensic accounting deals with

litigation support involving accounting.

Forensics means suitable for use in the courts of law. Forensic accounting involves retrieval of accounting data that may be concealed with an intent on fraud or to hide any specify information from the eye of the public, thus it is a critical examination of the accounting and differs from internal or statutory auditing.

In the present age of cyber crime, forensic accounting or audit has gained utmost importance to critically and deeply investigate into the various aspects of accounting of an organisation. It is further to be noted that all fraud examination involves forensic accounting but not all forensic accounting is fraud examination. In a fraud examination, usually a fraud has taken place but in forensic accounting engagement, it does not necessarily mean any fraud has taken place. For example, if there is a business valuation the organisation may hire an accountant for forensic audit.

A forensic accounting or audit is compulsorily undertaken by an accountant where as a fraud examiner need not necessarily by an accountant and even non-accountants also perform fraud examination.

In Forensic accounting’s scope, it involves litigation and evidence proof before a court of law and all fraud reporting, examinations are done with “eye towards litigation”.

The techniques used in Forensic accountinog include:

1.Conventional auditing and accounting tools.

2. Benford’s Law Test or “Z” Test-To measure significance of variations between two populations.

3. Theory of relative size factor-Ratio of the largest number to the second largest number.

4. CAAT-Computer assisted auditing tools.

The need for forensic accounting/Audit has come due to failure of statutory and Internal audits, with their limitations in the scope and objective vis-à-vis Forensic Accounting.

A Forensic accountant hounds for conclusive evidence and deliberately tries to find Misstatements in the accounts unlike an auditor who tries to find deliberate misstatements.

Thus, a Forensic accounting involves:

1. Application of specialized knowledge.

2. Act as expert witness in a court of law.

3. Litigation consultancy.

4.Fraud detection.

5.Computer forensics.

6. Requires the use of knowledge from many disciplines.

7. Forensic accountant is a blood hound.

Thus, it may be concluded that Forensic audit is not new and history can be traced to 1890, Sir Arthur Conan Doyle’s fictional character, the famous detective Sherlock Holmes.

A forensic accounting is an investigative accounting unlike Internal auditing or statutory audits, which are more to comply with statutory regulations.

A Forensic accountant can take a seemingly needle in-a-hay stack Pile of financial information and distil it into the important elements that need to be presented clearly and concisely as court room testimony.

The preparation of financial statements has some but not all characteristics of forensic accounting.

TOP TEN - THE GREAT INDIAN FINANCIAL SCAMS & FRAUDS

1.HARSHAD MEHTA-STOCK MARKET SCAM:

Status of the person: Share Broker, Mumbai, known as “The Big Bull”

Period: Late eighties to early 1990s.

Nature of the Scam: Stock Market manipulations and misuse of Banks funds at his disposal wrongly given to him. Sky rocket share prices and cheating on Bank funds.

The scam Came to light in 1992, upon investigation into stock market fluctuations. Mr. Harshad Mehta Died of heart attack in 2001 when in custody at the age of 47 years. Case still going on with his brother, Mr. Ashwin Mehta, a lawyer, fighting the case. Amount involved in Scam: INR: 4,662. crores Criminal charges: 27 criminal charges Banks Involved: State Bank of India, State Bank of Saurashtra, SBI Capital.

Liabilities and Assets as on Sept 2015-Of Harshad Mehta: Liabilities: (16,045 Cr) Banks: INR:4662 Crores; Statutory dues: 11,175 Crores; Other Dues: 208 Crores Assets: (1,724) Short term FDs 640 crores; Shares: 1,028 crores; Immovable properties 44crores, Other Miscellaneous assets:11 crores. Bank Claims: INR: 4,597Crores.Decree amount: 1,688 and Distributed: 1,074 Crores. Mr. Harshad Mehta simply manipulated the money from one bank to another bank in the purchase of bonds, which the banks were statutorily required to invest , a certain minimum amount, as on Friday every week;

He did this for an attractive brokerage promising both the buying bank and selling bank with funds in his hands always but not necessarily buying in full or not buying at all.(Strictly banks were not supposed to pay directly to the broker but trusted him and paid directly cheques in his name in violation of the rules).With such huge amount of money in his hands the stock market was manipulated by taking the share prices to peak highs by buying stocks of all kinds including penny stocks.

However, once the markets are in boom the shares were heavily disposed and thus the gullible public lost crores of rupees while Mr. Harshad Mehta made crores in the process. But when there was enquiry and investigation on the erratic share market movements and the scam was found out and Mr. Harshad Mehta and his family were pinned were arrested, the share market collapsed, and the banks as well as the public lost heavily during that period.

The bank people involved in the scam panicked and some even committed suicide.

Having a big sale, on-site celebrity, or other event? Be sure to announce it so everybody knows and gets excited about it.

2.Ketan Parekh: Stock market scam.

The Stock Market-Scam

Status: Stock Broker Period-scam-1998-2001 Investors lost monies to the tune of INR4,000 Crores.

He was arrested on 30th March 2001, after His Scam was busted due to a bear cartel, that brought the markets down and he could not mobilise funds and was banned from stock trading for 15 years till 2017.

He was also imprisoned for one year for his economic crimes.

The second most big scam after Harshad Mehta scam. He was known as the “Bombay Bull” & “Pied piper of the Dalal Street,”. Mr. Ketan Parekh, was a trainee in Harshad Mehta’s companies.

Though he was a protégé of Harshad Mehta, he was very soft-spoken and learned the tricks of trade of stock market and he himself became a big follower by one and all of investment of stocks. At one time, he singlehandedly drove the market with a 200% appreciation of some of the stocks.

He became Broker turned operator of the stock market. He used to create a scenario where by investors believed that the appreciation of stocks is due to their fundamental strength but not due to the manipulation of stock market by Mr. Ketan Parekh.

He used to pick 10 stocks, known as K-10 Stocks, and repeatedly operated those stocks in the market and take them to a very high level of prices and then dump the stocks by making a big kill in the process and all those who followed his K-10 stocks ended up burning their fingers not understanding that the stocks have no fundamentals but only manipulated by him. Most of these K-10 stocks were from the ICE sector, viz: Information, communication and Entertainment.

He used to manipulate the promoters and take monies from them by promising to take the shares to high levels in the stock market, before dumping the stocks at their peaks levels. He formed this strategy with a group of ten brokers to make his plan work in the manipulation.

In those years, it was dot com boom.

He used to buy shares when they are low and after taking up prices to very high and used to borrow from banks and even companies against the boosted shares as collateral and thus manipulated the markets through his K-10 stocks.

The scheme was busted once the stocks came under Income Tax Department scanner and were observed and his game was out.

A strong bear cartel also was responsible for his down fall where he could not raise any more monies.

He used to mobilise huge funds with the help of banks by pledging shares as collateral and borrowing more than the allowed limits which is unlawful; he was also involved in insider trading by colluding with promotors and promising to take the shares to high prices and in the process, collect huge sums of money which were in turn used in the stock market manipulation.

Madhavpura Mercantile Commercial Bank-MMCB-assisted in funding Mr. Ketan Parekh in his illegal market operations.

3 .Satyam Scam: Diversion of funds & Cooking Books.

The Diversion of funds & Cooking of Books

Satyam Case Of Diversion of funds & Cooking of Books

Largest Fraud in the Indian Corporate Sector Mr.B.Ramalinga Raju was the founder of Satyam Computer Services in 1987.

Accounts Books were "Cooked". At the beginning, it employed about 50,000 employees and covered over 65 Countries. MAYTHAS Acquisition was to conceal the fraud. In 2008 the company was awarded the "Global Peacock Award" by the World Council .

The attempt that failed to Cover Fictitious Assets with Real ones for Corporate Governance. through the (Aborted) Deal of Maytas. Problems started in 2008 when he planned to buy Maytas properties for $1.3 billion Books were being cooked since 2004 till the Fraud is out in 2008. and a 51% stake in Maytas Infra for$300 Million.

The deal was aborted on account of opposition by the Investors. Thus started the downfall of Satyam and subsequent Revelation by the chairman Mr.Ramalinga Raju by writing a letter to SEBI chairman and stock exchanges, revealing the fraud committed.

The fraud of manipulation of books of accounts to show a better position than the real and thus the purported acquisition of share in Mytas and Mytas infra,to cover such ‘gap' and ‘Big Hole’ in finances by fudging of books along with the help of PWC Auditors.

The persons responsible for the massive Fraud are: 1. Mr. Ramalinga Raju-Founder Chairman

2. Mr.B.Rama Raju-Brother of Founder

3.Mr.V.Srinivas-CFO

4.S.Gopalakrishnan-PwC Auditor

5.Mr.Srinivas Talluri, PWC Auditor.

1.Inflated Cash & Bank balances (Rs. 5,040Cr)

2. Accrued Interest that was non-existent

3. Under stating liabilities(1,200,Crores) and over stated Debtors (Rs.500 Crores)

4. Wrong reporting of Revenues by about Rs.600- Crores. 5.The Employee numbers inflated by 13,000.

(More detailed in the World's 25 Great Fraud's article)

4. Roop Bhansali Scam: “Ponzi” scheme:

Ponzi Scheme-Mr.Roop Bhansali Scam

Mr.Roop Bhansali, the 41 year old, obscure Chartered accountant from Jaipur, qualified in 1980 , was involved in cheating the investors by offering high interest rates to investors and glamorous gifts like cars to agents for mobilising the deposits. Over three lakh investors, creditors including State Bank of India and Bank of Tokyo were taken for a ride.

It all started I 1991, when he converted his CRB Consultancy private limited to CRB capital Markets Limited, a Non-Banking Financial Company (NBFC).During 1992-1996, he was running CRB Capital Markets, CRB Mutual fund and CRB custodial services. Once the monies are mobilised, he used to transfer the monies to imaginary companies.

He, very intelligently exposed the ineffective regulations of the day and risk-taking investors with unduly high rate of interest expectations on their deposits.

As reported by State Bank of India; Central Bureau of investigation and Market intelligence he duped to the extent of about Rs.400 crores-Public deposits and Debentures, Over Rs.200 crores Inter corporate deposits, about Rs.90 crores to Banks, investors in CRB Capital markets Rs.252 crores. Thus, he cheated about Rs:1,000/ crores of all segments of public. There were charges that he issued fraudulent dividend warrants to State Bank of India that spurred investigations by RBI.

There were rumours that he was moving from Calcutta, Kathmandu, Peru and even Canada, the elusive Mr. Bhansali, however was very much in India. In 3 years between 1993-1996, the net worth of his CRB capital increased 37 times! It increased from Rs.12 crores to Rs.436 Crores.

In the process, he developed close connections with all the “Right” people in “High” places adding ease to his floating NBFC when quite a few other prominent companies were refused registration.

The bust began when the cheques issued to depositors started bouncing and panic struck the depositors like lighting and things happened fast, with the depositors demanding the withdrawals of their deposits from CRB and then “The cat was out of the bag” and the scam exposed.

The reason for such a mess was a crooked brain with influential “friends” and a pathetic regulators and regulations.

Media played a big role in 1996 and exposed Mr.Bhansali’s scandal. It was surprising that SBI and RBI gave an in principal licence to form a bank to an unregistered company.

It was only in 1996 when markets fell and Mr. Bhansali found it difficult to raise monies to pay back monies that his scam was unearthed.

He was brought back from Hongkong along with his family and only Mr. Bhansali was arrested by the CBI and the case in courts.

The Great Indian Scams...cONTINUATION

EXCLUSIVE Web site on Financial Frauds ,cyber crimes.