Fraud Intelligence

Lessons from Madoff as fallout hits banks HSBC faces a US$6.6 billion claim in a US lawsuit brought by Irving Picard, the court-appointed bankruptcy trustee seeking to recover funds lost by investors in Bernard Madoff’s US$65 billion..

Timon Molloy, Editor

Assessing the financial benefits of counter fraud work has always been a contentious and difficult issue, writes Jim Gee of PKF. On the one hand there has been a sad history of flawed claims of unachieved savings. On the other, more frequently, in many organisations the real financial benefits flowing from counter fraud work are routinely not counted; they should though and can be.

Fraud risk management is practised across the globe but the underlying principles are implemented in varying degrees. While some firms have comprehensive and coordinated anti-fraud strategies, others focus instead on individual measures. The resulting gaps can leave firms, and fraud risk teams themselves, vulnerable to shock and loss, says David Luijerink of KPMG.

Earlier this year, Kroll released its annual Global Fraud Report, which highlights four key findings: theft of information and electronic data has surpassed all other frauds for the first time; fraud is largely an inside job; fear of fraud is dissuading companies from going global; and companies are unprepared for increasing regulatory efforts against corruption. Tommy Helsby circumnavigates the risk map.

Most frauds are discovered after a tip-off – the whistle is blown. If employers want to hear it first, they would be advised to think hard about outsourcing to a reputable third party reporting service, says Stephen Norton of Safecall.

The cat and mouse contest between corporate security and technically astute fraudsters never ends. Nick Odgen, CEO and founder, Voice Commerce Group has long fought the criminals in the financial services sector and has an answer to the threat as it migrates to mobile banking.

In JSC BTA Bank v Mukhtar Ablyazov & others EWHC 2219 (QB), the High Court considered whether failure to comply with a freezing order entitled it to strike out the defence and find for the claimant even while the respondents sought to challenge jurisdiction. Charlotte Ovans of Field Fisher Waterhouse examines the ruling.

The latest government Strategic Defence and Security Review for the first time identified cyber attacks as a major threat to the UK. As individual European states develop their defence strategies the European Union too is finally looking at an integrated response. Keith Nuthall reports.

The recent judgment of Mr Justice Lewison in the case of Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (in administration) [1] is one of many judgments arising out of the collapse of the Versailles group of companies a decade ago. Although an appeal is scheduled to be heard in December 2010, this first instance judgment is important for those working in the field of business crime, writes Yindi Gesinde of Baker & McKenzie, because it has far-reaching consequences for a victim’s ability to trace into property that has been misappropriated or obtained as a result of a breach of fiduciary duty.