Speed, surprise and strategy

Money is transferable by one brief telephone call/e-mail or fax. It is therefore vital that not only is any investigation/analysis conducted in utmost secrecy but action is taken before the launderer has an inkling that he is being investigated.

Accordingly, at the very earliest opportunity, an analysis should be carried out to assess whether there has been any fraud and if so, the extent.

Once the problem has been assessed, decisions need to be taken as to whether it is commercially sensible to pursue the launderer and if so, to what extent. No victim, however large or small, should fail to assess the significance of publicity, given the fact that it has been the victim of fraud which is often caused by inadequate security measures or lack of judgment.

On the other hand, Directors are now facing increasing responsibilities to safeguard and preserve companies assets.

The Turnbull Report describes the ability of a company to respond appropriately to significant business risks to ensure its effective and efficient operation as an element of a sound internal control system. This includes safeguarding assets from inappropriate use or from loss and fraud and ensuring that liabilities are identified and managed.

The internal control system should be capable of responding quickly to evolving risks to the business arising from factors within the company and should include procedures for reporting immediately to appropriate levels of management any significant control failings or weaknesses.

The recommendations of the Turnbull Report do not have the force of statute. A company that does not implement those recommendations will not necessarily be liable to its shareholders for losses that may result from a failure to deal with risks. The Turnbull Report states that responsibility for implementing the guidelines lies with the board of directors and although they can delegate the task, they can’t delegate the responsibility.

However, the directors of the company owe it duties of trust and to act in its best interests. If a director fails to take reasonable steps to fulfil those duties, then he may be liable to the company for any resulting losses. The director of a company may also assume this kind of liability by virtue of his service contract with the company.

The Turnbull guidelines may therefore in the future provide guidelines for what constitute reasonable steps for a director of a company to take. If the board fails to follow the guidelines, it may be said that the directors have acted negligently. They may therefore be personally liable to reimburse the company for any resulting loss.

Under current law, if a director fails to prevent or report a fraud he has breached his duty to exercise care and skill. This duty is owed to the company. The director owes the company the same standard of care which a reasonable person would exercise on his own behalf. The test is objective.

The standard of skill required from a director is that which could be reasonably expected from a director with his degree of knowledge and experience. This is a subjective test. In this sense the director may well be negligent in failing to take steps to prevent fraudulent activities.

This is a clear example of how a director may be held liable to the company for failure to take reasonable steps to prevent loss to the company. There is no reason why the same argument could not be applied to the director who fails to implement internal control procedures to prevent misappropriation of company proprietary information by a computer hacker through failure to implement security measures.


Reference:
http://www.antimoneylaundering.ukf.net/papers/solicitor.htm

In a tactic as old as banking itself, criminals have always used banks as a sure-fire way to launder money gained through illegal means. But with the advent of internet banking, "following the money" to locate and prosecute money launderers and criminals has become more difficult than ever.
 
Money laundering, which involves disguising the origins of illegally obtained cash and then transforming it into apparently legitimate investments, is bolstered by the near anonymity that can sometimes be achieved through internet communication.



"A potential risk exists at any stage of the contact between a new customer and financial institution," says a report issued Thursday by the Financial Action Task Force (FATF).  But, the group says, in the case of internet banking, the difficulties "are increased if the procedures for opening [accounts] are permitted to take place without face-to-face contact..."


International access
 
FATF, set up by the G7 group of major industrialised nations, also noted that worldwide access further complicates detection of fraud.
It is not always clear whether an account is accessed from a country other to where the money is held, and account managers may simple be too busy to monitor all the activity of individual account holders.
 
Gambling with illegal cash
 
It isn't just online banks that are vulnerable. Internet-based gambling operations can also act as a haven for illegal cash-washing operations.
The FATF said there is evidence that criminals are using online casinos to commit crimes and launder the proceeds.
Aside from the problems inherent in internet banking, online casinos further complicate tracking of questionable transactions because gambling records are software based and at the gambling site - often located offshore.
That makes evidence gathering more difficult because the records are harder to find and may not exist at all.
 
Combatting cyber crime
 
In issuing its report, the FATF said countries could take several measures to counter money laundering. They include:

• Requiring internet service providers to maintain accurate and thorough subscriber information
• Require the establishment of log files, showing access and telephone number identity
• Ensure that information is made available internationally

The report on the potential of internet fraud coincided with one on the progress that the G7 has made to counter countries harbouring money-laundering schemes, among them Israel, Panama and the Bahamas.
In June, members of the G7 group of industrialised nations published a list of countries that made money laundering easy, and threatened tough action and sanctions if their governments failed to join international efforts to crack down on the criminals.






Source:
http://news.bbc.co.uk/2/hi/business/1149984.stm