Police for white-collar crime

Share Shah

One should be happy to learn that at long last the government is considering setting up a special police force for what is popularly known as white-collar crimes. Presently such crimes even if it involve large sums of money such as the ponzi game, fake banking schemes, fraud are treated as low priority crimes and thus persons involved often escape convictions. Also because little is understood of such crimes, people are harassed more because of media hype than any other reasons.
   It is therefore important for law enforcing agencies to understand what motivates people to commit fraud so they can better assess risk. One element common to most occupational fraud offenders, from the CEO to the rank-and-file employee, is that almost none of them took their jobs for the purpose of committing fraud-they are generally first-time offenders. Facing that fact, one must ask the logical question: Why do good people go badly? An obvious answer is greed. But many so-called greedy people do not normally lie, cheat and steal to get what they want.
   There are two theories about why employees commit fraud. The first is based on a US study. It found that nearly 90 per cent engaged in "workplace deviance," which included behaviour such as workplace slowdowns, sick time abuses and pilferage. On top of that, an astonishing one-third of employees actually had stolen money or goods on the job. The researchers concluded the most common reason employees committed fraud had little to do with opportunity, but more with motivation-the more dissatisfied the employee, the more likely he was to engage in criminal behaviour. One criminologist described the phenomenon as "wages in kind." All of us have a sense of our own worth; if we believe we are not being fairly treated or adequately compensated, statistically we are at much higher risk of trying to balance the scales.
   A second theory about why employees commit fraud is related to financial pressures. In the late 1940s, an eminent criminologist interviewed nearly 200 jailed embezzlers, including convicted executives. He found the great majority committed fraud to meet their financial obligations. The study observed that two other factors had to be present for employees to commit fraud. They must perceive an opportunity to commit and conceal their crimes, and be able to rationalise their offenses as something other than criminal activity.
   According to a story, a loyal accountant bookkeeper for a company was denied a Taka 1000 monthly increase in pay. The accountant was depressed, so he methodically stole for the next 20 years, until he retired. His replacement discovered an amazing fact: The retired bookkeeper had stolen exactly Taka 1000 each month-the exact sum of the salary increase he had expected.
   The lesson in the story is that fraud does not occur in isolation. All crime is a combination of motive and opportunity. The opportunity to commit fraud is typically addressed through internal controls-if the proper checks and balances exist, it is more difficult though still not impossible to defraud an organization.
   To deter opportunity, a firm must divide responsibility. If one person controls both the books and the assets, the ability to commit fraud is limited only by that person's imagination. But if another employee shares a task, it is less likely a perpetrator can succeed. Furthermore, if an employee needs help to defraud an organization, opportunity is greatly reduced. It is one thing to commit a fraud by oneself, quite another to ask someone else to aid and abate in such a scheme. Some argue that the internal controls are simply not enough to deter fraud. They cite two reasons:
   First, controls are supposed to provide only reasonable assurance. Second, there are few controls that cannot be overridden or circumvented by people with sufficient motivation.
   The result of the research on why "good" employees turn to fraud can be distilled into, at least, two important concepts. Employees and executives who feel unfairly treated sometimes believe they can right the 'wrong' by committing occupational fraud and abuse. Workplace conditions are therefore a major risk factor in predicting fraud. Also, employees faced with embarrassing financial difficulties pose a significant problem. The simple moral to the owners is to pay attention to what goes on outside the books. So while one may be looking at the numbers, one must also keep one's eyes and ears open for disgruntled or financially strapped employees. It may mean all the difference in detecting fraud. This perhaps has been the reason why so many firms in the stock exchange are in hot waters.
   It may be interesting to note that the main task of such a focused police force must not only concentrate after the facts but should also take steps to ensure that the public understands the risk involved and thereby deter white-collar crimes. One step would be to build the forensic trail behind such crimes and act as fast as possible.

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Omar Mohamed

Recently, a news item has been published in different dailies on the decline in housing business due to anti-corrupt investigation by Anti Corruption Commission (ACC) and National Board of Revenue (NBR). The leaders of REHAB expressed their grave concern regarding the consequence of such drive on housing business. It seems that they are not happy with the current anti-corruption drive of the joint forces and other government agencies including ACC.
   I was surprised to see that the media are also depicting the news in such a manner that favours the illegal business of REHAB members. This is reflected in their indifferent attitude to do any investigative report on the issue. Many people know that the rich and mighty REHAB members are grabbing lands in surrounding areas of Dhaka city. I do not see anything wrong in the investigation to know income sources of the buyers and sellers of luxury apartments and housing plots.
   
   Black money
   During my research in 2001 on the issues I have seen that buying housing plots and apartments is the secure means to invest black money and wealth accumulated by corrupt means. REHAB president is saying that most of the buyers of housing apartments and plots are NRB (Non-resident Bangladeshis). Is it true? If true then what's wrong with the government's initiative to investigate the source of income.
   It seems that every business group wants to do business in Bangladesh without complying with the legal procedures of the country. Earlier we saw the sharp reaction of business community about joint force's drive against hoarding and rotten products. Many big importers and officials of big business houses were arrested. Should we allow such practice anymore?
   Another point in that news item surprised me. Other business groups, whose business is related to the success of housing business such as cement industry, re-rolling mills and paint industry, have also expressed their dissatisfaction over this anti-corruption drive. What do they want? Is it not that they like to make money by any means even beating the primitive accumulation process during early days of industrialisation?
   What lesson can we learn from such concerns of the business groups in Bangladesh? It is true that the entrepreneurial class in Bangladesh did not emerge through a natural process as it happened in other parts of the world. Research shows that this class emerged by misappropriating state property and by manipulating the state mechanisms in their favour. Therefore, these business groups will always try to make the government intervene in their favour. The state is somewhat weak towards these business groups. This is the result of our integration into neoliberal globalisation where state's role in market issues will not be tolerated by the market forces.
   This can be proved by recent appeal to the importers of the daily essentials to cooperate with the government to reduce the price hike. Sympathetic experts are talking about the market economy where the state has minimum control over private sector business. But they are not talking about the peculiar nature of the business class in Bangladesh. The principle of market economy assumes that there will be smooth competition and compliance to the legal system of the country. The peculiar characteristics and functioning of our business class do not match with such assumption of the market economy.
   This news item should not be conceived of as a normal issue. This signals us a core issue of capital accumulation process in Bangladesh and also provides clue to the researchers who are interested to uncover the relationship between state and market.
   The author is a graduate student at the University of Toronto.

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Bangladesh needs stability
for sustained growth: ICCB

Bangladesh experienced a very difficult time both economically and politically during the year 2006 as it had to face serious challenges - both man-made and otherwise, International Chamber of Commerce-Bangladesh (ICCB) news bulletin says.
    Political dilemma, erratic power supply, increasing prices of essentials, inflation, deteriorating law and order and lack of governance pushed the country into a political brinkmanship leading to the declaration of state of emergency, it said.
   Despite other shortcomings, Bangladesh economy has been achieving a 5 .5 per cent growth year after year, with the GDP reaching to 6.7 per cent in the FY 2005-06. It is evident that the economy was on a right track mainly due to resilience of the private sector. As a result, living standard has improved with a steady growth in employment. Bangladesh is in the process of integrating itself with the world economy and will continue to do so irrespective of changes at the domestic front, ICCB bulletin observed.
   The Asian Development Bank (ADB), in its annual development outlook, has revised its earlier forecast of 7 per cent growth to 6.5 percent for Bangladesh, while the central bank estimated that it may reach up to 7 per cent during FY2007. However, in our view both the projections are well below than the ADB's projected growth rate of over 8 per cent for other South Asian countries. Thus, Bangladesh would be trailing behind this projection of regional growth, which only underlines the need on its part to accelerate the growth momentum.
   There are no reasons now for Bangladesh not to post higher GDP growth in the backdrop of the peaceful conditions that has been created after the January changeover. Even under the chaotic and awfully disruptive political conditions that gripped the country earlier, the economy continued its impressive growth. Why then the trend shouldn't continue in a favourable atmosphere?
   However, the experts rightly sounded caution about a declining trend following the declaration of emergency and linked it with the government's tough actions that perhaps created a panic that has slowed business operations and new investment.
   The Business leaders have conveyed their support to the positive steps taken by the caretaker government when they met the Chief Adviser and Adviser for Finance and Commerce recently. They, however, opined that drive against corruption should continue without creating unnecessary panic among the businesses. Praising the recent decision of reconstituting the Anti-Corruption Commission (ACC), separation of judiciary, the anti-hoarding policy, improvement in power generation and Chittagong port operation, the leaders have suggested for reforms of the National Board of Revenue, strengthening the country's trade negotiations capacity and capital market development.
   Business leaders have voiced their concern over empowering the ACC to arrest suspects and freeze their assets without any court order under a nonbailable section. The leaders also expressed their apprehension that the proposed new provision of law can be used as a tool for harassment and therefore, suggested that if within the 'Emergency period' such a provision cannot be dispensed with, then its implementation should at least be made contingent upon 'approval of all the Commissioners of the ACC.
   Tax evasion has taken a serious proportion. ICCB has endorsed the business leaders' suggestion that a time bound 'exit route' may be considered for those who evaded taxes. However, unscrupulous politicians and their cronies who had indulged in large-scale corruption should not be spared, the bulletin added.
   It has also endorsed business leaders appreciation of the timely initiatives by the government for bringing in political stability, streamlining the administration, bringing the corrupt politicians and their cronies into task.

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