Definition of Fraud: The term "Fraud" refers to an intentional and an unethical act by on e or more individuals among the management, those charged with the governance, g overnance, the employees and the third parties to obtain an unjust or illegal advantage causing a material misstatement in the financial statements.
Features of Fraud: 1. . !. . $. &.
It is Dec Decei eitf tful ul It is Inte Intent ntio iona nall It brea breach ches es Trust ust It inv invol olve vess #oss #osses es %onc %oncea ealm lmen entt of of Fac Factt 'ppeara 'ppearance nce of (utwar (utward d )espect )espectabi abilit lity y
Types of Fraud: There are several ways to fraud. 1. . !. . $. &.
%ons %onsum umer er frau fraud. d. Iden Identi tity ty frau fraud. d. Fina Financi ncial al stat statem ement ent fra fraud. ud. %red %redit it card card frau fraud. d. *an+s fraud. und undry ry fraud rauds. s.
The reason behind Fraud: There are several reason for committing fraud. ome of them are given below1. 'bsenc 'bsencee of social social %ondem %ondemnat nation ion . /ala /alafi fide de Inte Intenti ntion on !. 0illful 0illful deviation deviation from #aws and ractices ractices . Degrad Degradati ation on of overal overalll /oral /oral 2a 2alues lues $. /anagement /anagement inefficie inefficiency ncy to 0ith 0ithstand stand ressure ressure &. roced rocedural ural #apses #apses3*o 3*ottl ttlenec enec+s +s 4. (rga (rgani ni5e 5ed d %rim %rime e 6. %orr %orrup uptt /ana /anage gers rs 7. 8mpl 8mploy oyee ee cam cams s 19. Financial Financial /isstatement /isstatement 11. False 'ccounti 'ccounting ng :e.g., bonus schemes; schemes; 1. Financial Financial Frauds Frauds 1!. %omputer %omputer
Effects of Fraud: Due to the present globali5ed hi=tech vibe in the orb of financial sector, fraud becomes a truly worldwide industry. Fraud has devastating economic, security and social conse>uences. For government it can reduce their revenue, reputation, increase cost for law enforcement, and change the currency as well as interest rate. It can also transfer the economical power to the criminals and increase the corruption in the coun try. These effects are described below in brief. 1. Loss of Revenue: Fraud diminishes government ta? revenue and therefore indirectly harms honest ta?payers. It also ma+es government ta? collection more difficult. This loss of revenue generally means higher ta? rates than would normally be the case if the unta?ed proceeds of crime were legitimate. . Reputation Risk: @ations cannot afford to have their reputations and financial institutions tarnished by an association with fraud, especially in todayAs global economy. The negative reputation that results from fraud and forgery, financial fraud, embe55lement will these activities diminishes legitimate global opportunities and sustainable growth while attracting international c riminal organi5ations with undesirable reputations. Furthermore, once a countryAs financial reputation is damaged, reviving it is very difficult and re>uires significant government resources
3. Transferring economical poer: 'mong its negative socioeconomic effects, fraud transfers economic power from the mar+et, government, and citi5ens to criminals. 4.
!ncrease in corruption: The sheer magnitude of the economic power that accrues to criminals from fraud has a corrupting effect on all elements of society. In e?treme cases, it can lead to the virtual ta+e=over of legitimate government.
$. Effecting currency value and interest rates: Fraud can also adversely affect currencies and interest rates as launderers sometimes reinvest funds in other countries which by changing the amount of demand and supply of the currency change the value of the currency. 'nd if there are too much money invested in a country that may cause inflation, and because of that inflation the country government may decrease the interest rate to reduce the inflation. ". !ncrease in #$L: The current situation of @# is very alarming in *angladesh. *ecause of fraud cases such as *ismillah group the @# is increasing too much.
%ase of &ismillah group: *ismillah group, a private ltd. Towel producing company has accused for embe55led around 19.4 billion ta+a from $ ban+s among them one is state owned ban+ and other fours are private commercial ban+. (f the swindled money, Ta+a 779.9! crore was funded, while Ta+a 16.! crore was non=funded erial no.
*an+ name
'mount of ta+a
91 9 9! 9 9$
Banata ban+ rime ban+ Bamuna ban+ hahjalal Islami *an+
!.7 billion !.9& billion 1.& billion 1.7 billion &7.4 million
Pr e mi e rBa n k
'mong the persons who were ambiguous about this money laundering case, Durjoy and 'li, non=paid directors of *ismillah Croup, allegedly helped its high officials in conducting the scam and fleeing the country. *ismillah Croup /anaging Director ha5a olaiman 'nwar %howdhury was the mastermind behind the misappropriation and was assisted by some high=ups of the five ban+s 'ccording to '@TI=%())ETI(@ %(//II(@. Thirteen of the accused are proprietors and top officials of *ismillah Croup and its sister concerns haharish %omposite Factory #td, 'lpha %omposite Towel #td, haharish T #td, uiry committee reviewed documents of all the five ban+s and >ui55ed around 49 of their officials. ' commission official said when the swindling too+ place, many of the ban+ officials, who are now in the five ban+s, were wor+ing with the rime *an+. ome sources also mentioned that some govt. official is implicated with this fraud case. %howdhury along with many top officials of the group have fled abroad with a great portion of the swindled amount.
Rules broken by &ismillah group: 1. They have intentionally influenced the ban+s. . The controversial group along with its sister concerns, most of which are fa+e, swindled the money with the help of ban+ officials between Bune 99& and (ctober last year mostly through #T) Gloan against trust receiptH using names of fa+e foreign buyers and forged documents, the en>uiry found. *orrowers usually do not need to put their property as collateral to get loans from ban+s through #T) as such loans are given on trust provided that some documents are maintained. *y doing this fraud they have breached the trust. The above reason made the transaction of *ismillah group as a case of fraud
$unishment for the accused persons involving &ismillah group fraud: 1. The 'nti=%orruption %ommission filed 1 cases against $! top officials of five ban+s and the controversial terry towel ma+er *ismillah Croup for misappropriation of T+ 1,14.& crore under anti=money laundering act. . 'ccording to '%%, if convicted under the anti=money laundering act, the accused may get up to 19 years in prison and their moveable and immovable properties might also be confiscated
'imilar case study in !ndia: !. There are a lot of fraud cases in India li+e Coa mining, %oal cam and a lot. *ut the case which is so close to *ismillah group fraud case is Co a mining case. . The multi=crore Coa illegal mining scam led to the downfall of the %ongress government in the state. The agency has registered a fraud case in the )s !$,999=crore scam which was earlier investigated by the / * hah %ommission for alleged large scale irregularities. %lose to 69 companies involved in mining in the state have been named in the 8nforcement %ase Information )eport :8%I); filed by the agency. The hah %ommission has pegged the scam to the tune of )s !$,999 crore in the state. The commission had submitted its report in this case in 91, two years after it was constituted. This forgery case has been registered against government officials, mining companies and entities identified and mentioned in the report of %entral 8mpowered %ommittee :%8%; appointed by the upreme %ourt and the Bustice hah %ommission report including the report of the ublic 'ccounts %ommittee of Coa.J
$unishment for fraud in !ndia: 1. 0hoever commits the offence of fraud shall be punishable with rigorous imprisonment for a term which shall not be less than three years. . The imprisonment may e?tend to seven years. !. The person who committed fraud shall also be liable to fine which may e?tend to five la+h rupees.
La to prevent fraud in &angladesh: *angladesh enal %ode, Foreign 8?change )egulations 'ct= 174 :F8)'; Income Ta? (rdinance= 176 /oney #aundering revention 'ct= 99 :/#'; and 'nti= %orruption %ommission :'%%; 'ct= 99, the *an+ %ompanies 'ct= 1771 and The %ompanies 'ct = 177 are the suitable #aws to prevent such crimes. 0hile there is always scope for improvement in the #egal Framewor+, the blame cannot be impute s>uarely on those 'cts and )egulation. *angladesh has changed its anti money laundering system to prevent money laundering and fraud. In February 91, the national parliament approved a new bill as to the prevention of the crime of money laundering and fraud. The /oney #aundering revention *ill=91J did not only replace the previous /oney #aundering 'ct 997J but also is one of the major steps to throw of financial terrorism. Though it didnAt wor+ too well as there were two major money laundering cases happened one is the
(ffence of fraud and punishment in &angladesh: 1. For the purposes of this 'ct, fraud shall be deemed to be an offence. . 'ny person who commits or abets or conspires to commit the offence of money laundering or fraud, shall be punished with imprisonment for a term of at least :four; years but not e?ceeding 1:twelve; years and, in addition to that, a fine e>uivalent to the twice of the value of the property involved in the offence or ta+a 19:ten; lac+s, whichever is greater. !. In addition to any fine or punishment, the court may pass an order to forfeit the property of the convicted person in favor of the tate which directly or indirectly involved in or related with fraud or any predicate offence. . 'ny entity which commits an offence under this section shall be punished with a fine of not less than twice of the value of the property or ta+a 9:twenty; lac+s, wh ichever is greater and in addition to this the registration of the said entity shall be liable to be cancelled. $. It shall not be a prere>uisite to charge or punish for fraud to be convicted or sentenced for any predicate offence. &. (ffences under this 'ct shall be cogni5able, non=compoundable, and non=bailable.
The court may, on the basis of a written application by the 'nti %orruption %ommission or any person or organi5ation authori5ed by it, issue an order to free5e or attach the property, within or outside the country, involved in money laundering or any other offence.
Rules for &anking companies) financial institutions and intermediaries to prevent fraud in !ndia: 1. 8very ban+ing company, financial institution, and intermediaries shall a; /aintain a record of all transactions, the nature and value of which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions ta+e place within a month. b; Furnish information of transactions referred to in clause a; to the director within such time as may be prescribed. c; 2erify and maintain the records of the identity of all its clients, in such manner as may be prescribed. . The records referred to in sub=section 1. hall be maintained for a period of ten years from the date of cessation of the transactions between the clients and the ban+ing company or financial institution or intermediaries, as the case may be.
Responsibilities of &angladesh &ank against fraud: The 'ct gives *angladesh *an+ broad responsibility for prevention of fraud and wide ranging powers to ta+e ade>uate measures to prevent fraud facilitate its detection, monitor its incidence, and enforce rules and to act as the prosecuting agency for breaches of the 'ct. The responsibilities and powers of *angladesh *an+ are, in summary 1. *angladesh *an+ should be +ept free from all olitical pressures. . #egal and (perational Independences of *angladesh *an+ should be ensured !. 8stablish an 8thical tandards %ommittee :8%; in every *an+s. . To investigate into all fraud offences. upervise and monitor the activities of ban+s, financial institutions and other institutions engaged in financial activities. $. %all for reports relating to fraud from ban+s, other institutions engaged in financial activities analy5e such reports and ta+e appropriate actions. &. rovide training to employees of ban+s, other institutions engaged in financial activities on prevention of fraud. 4. To authori5e any person to enter into any premises for conducting investigations into fraud offences.
6. ersons authori5ed by *angladesh *an+ to investigate offences can e?ercise e>ual powers of an (fficer in %harge of olice tation under the %ode of %riminal rocedure. 7. To do all other acts in attaining the objectives of the 'ct.
19. The %ourts will not accept any offence under the 'ct for trial unless a complaint is lodged by *angladesh *an+ or any person authori5ed by *angladesh *an+ in this behalf.
References: *. /oney #aundering revention 'ct, 91 +. T<8 %(@8KE8@%8 (F /(@8L #'E@D8)I@C '@D FI@'@%I'# %)I/8 by Bohn /cDowell and Cary @ovis. 3. revention of money laundering act=99, India
,. http-33archive.thedailystar.net3beta3news3acc=sues=$!=bismillah=group=officials=ban+ers3
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