Anatomy of Fraud

The tale of Robin Hood has captured the imagination of many – from movie directors to story tellers to do-gooders to fraudsters. In embezzlements in several banks, I encountered the phenomena of clerks who embezzled for a long time by taking funds from rich and undeserved clients (in the fraudster’s mind) and transferring the funds to more needy clients.

In many cases, the fraudster does not bother to gain from his deeds. This phenomenon is not unique to one culture – it can be detected in all countries and is perpetrated by men and women equally.

In my career as an insurance lawyer, I have handled a few Robin Hood crimes, each with their own twist.

Human beings are complicated creatures who have understood from day one that in order to create some sort of order in the world, they must live by rules. The most well- known set of rules is the Ten Commandments.

Four of the ten deal with the relationship between God and Man.

Six deal with what is essentially forbidden in daily life.

Three of the six deal with fraudulent behaviour: thou shalt not steal, thou shalt not bear false witness against thy neighbor, thou shalt not covet thy neighbor’s house … nor anything else that is thy neighbors.

The first chapter of the Old Testament in the Bible, which deals with human beings (Adam and Eve) also deals with fraud (stealing an apple). Ever since Biblical times, fraud has developed into a complicated and interesting act which has adapted itself very quickly to all the opportunities offered by modern life.

Every few months, we read new stories in financial newspapers about a rough trader who was able to cause enormous losses.

The temptation of making a huge pile of money, using O.P.M. (other people’s money) in a transaction which on the face of it, looks legitimate, is too big and ultimately, cannot be avoided.

Some of the cases did not just end in a big loss, but also had additional consequences. Such was the case of Nick Leeson, who was able within a short period of time (about 2 years) to bring about the collapse of Barings Bank, which was a reputable bank for 220 years before Mr. Leeson decided to act.

In recent years, it was found that a meager clerk of Bank Société Générale managed to lose $7.2 billion in financial trading. His crime was obviously not shocking enough as in October 2010, the Court in Paris sentenced him to only 5 years in jail.

My Personal Note

A few years ago I worked on a case which involved a bank sustaining a loss of over $70 million as a result of transactions by a bank manager who used his clients’ money to gamble on the exchange rate of the US dollar against the Japanese Yen or the Deutsche Mark.

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