Fifteen years ago, I had a presentation entitled All Bankers Are Criminals.
It’s a great title, and was basically all about corruption in the City and how to stop it.
Corruption takes place every day. Just as criminals and cybercriminals are trying to steal the money, so are employees and partners. These are the things banks need to consider the most.
In fact, many hacks on banks occur due to employee deceit or ignorance or social engineering. Best case in point is the Bank of Bangladesh bank robbery where criminals could have siphoned off $1 billion. The Federal Reserve stopped the transfers after the first $101 million. How did they spot it?
The losses could have been much higher had the name Jupiter not formed part of the address of a Philippines bank where the hackers sought to send hundreds of millions of dollars more. By chance, Jupiter was also the name of an oil tanker and a shipping company under United States’ sanctions against Iran. That sanctions listing triggered concerns at the New York Fed and spurred it to scrutinise the fake payment orders more closely, a Reuters examination of the incident has found.
Having said that, the workers in Bangladesh also spotted the issue:
The bank's SWIFT system is configured to automatically print out a record each time a money transfer request goes through. The printer works 24 hours so that when workers arrive each morning, they check the tray for transfers that got confirmed overnight. But on the morning of Friday February 5, the director of the bank found the printer tray empty. When bank workers tried to print the reports manually, they couldn't. The software on the terminal that connects to the SWIFT network indicated that a critical system file was missing or had been altered.
But how did the fraudsters do this?
Some people say they just walked into the bank, which had poor security checks. The fact that one bank employee was involved emerged.
Internal fraud is often the worst issue.
This led me to think about other bank headlines, and realising that even God’s banker has issues.
Early in the morning of 18 June 1982, in a scene redolent of a real-life Da Vinci Code, the body of Roberto Calvi, chairman of one of Italy’s most influential financial establishments, the Banco Ambrosiano, was found hanging from scaffolding under London’s Blackfriars Bridge by a passing postman. Calvi’s pockets were full of stones and, bizarrely, a brick had been pushed into the zip of his trousers … the man who provided banking facilities for the Vatican, earning him the media nickname of ‘God’s Banker’, had, apparently taken his own life.
Was he banking for the church or the mafia? I cannot say, but it’s interesting that the Vatican’s bank has run into trouble several times.
A Vatican court convicted a former senior official at the Vatican bank and his lawyer of embezzlement and money laundering, sending a strong signal that the church was determined to get its financial house in order. The defendants — Angelo Caloia, the president of the Vatican bank for two decades, and his onetime lawyer Gabriele Liuzzo — had been accused of embezzling millions of euros through shady real estate deals between 2002 and 2007.
Why do I raise this today?
I guess because so many examples of crypto scams are out there such as Axie infinity being hacked, Luna imploding, investors managing risk like degenerates themselves, Celsius acting on a "Ponzi scheme" and not forgetting the Three Arrows scandal:
Three Arrows Capital, once perhaps the most highly regarded investment fund in a burgeoning global financial sector, collapsed in excruciating and embarrassing fashion. The firm’s implosion, a result of both recklessness and likely criminal misconduct, set off a contagion that not only forced a historic sell-off in bitcoin and its ilk but also wiped out a wide swath of the cryptocurrency industry.
But you find these issues wherever you look in financial markets. For example, how many of were aware of the Federal Reserve managers being criminals?
The trouble began in September 2021, when journalists unearthed financial disclosures showing that Fed officials actively traded individual stocks and financial assets in 2020 while the central bank was undertaking vast market interventions to keep the U.S. and global economy afloat.
The main criminal in this case was Robert Kaplan, the former head of the Federal Reserve of Dallas, who made a million dollar bet on market movements the day before the Fed released market data.
This is, in effect, insider trading. Was Kaplan sent to jail? Nope. Just quietly retired. Bankers may be criminals but they don’t go to jail. Prime Ministers do and criminals go to jail, but bankers just sail into the sunset. Just look at the 1MDB scandal in Malaysia:
Malaysia’s former Prime Minister Najib Razak was jailed on Aug. 23, 2021. He sought and failed to delay a final appeal decision to his country’s highest court. He stole hundreds of millions of dollars and now faces up to 12 years behind bars for his key roles in one of the largest-ever international cases of corruption and money laundering. However, the top bankers who provided the cash that he and his cronies stole are not facing jail, let alone prosecution.
Source: Ink Stick Media
Suffice to say, the moral code of banking is a fine line and not an easy one to track and trace, or regulate and manage. That’s the reason why bankers don’t retire … they just lose interest.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...