THE ROLE OF TECHNOLOGY IN COMBATTING BANK FRAUDS: PERSPECTIVES AND PROSPECTS

Banks are the engines that drive the operations in the financialsector, money markets and growth of an economy. With the rapidly growingbanking industry in India, frauds in banks are also increasing very fast, andfraudsters have started using innovative methods. As part of the study, a questionnaire-basedsurvey was conducted in 2013-14 among 345 bank employees to know theirperception towards bank frauds and evaluate the factors that influence thedegree of their compliance level. This study provides a frank discussion of theattitudes, strategies and technology that specialists will need to combatfrauds in banks. In the modern era, there is “no silver bullet for fraudprotection; the double-edged sword of technology is getting sharper,day-in-day-out.” The use of neural network-based behavior models in real-timehas changed the face of fraud management all over the world. Banks that canleverage advances in technology and analytics to improve fraud prevention willreduce their fraud losses. Recently, forensic accounting has come into limelightdue to rapid increase in financial frauds or white-collar crimes

Challenge of mitigating bank frauds by judicious mix of technology: Experience of a developing country

Banks are the engines that drive the operations in the financial sector, money markets and growth of an economy. With the rapidly growing banking industry in India, frauds in banks are also increasing fast, and fraudsters have started using innovative methods. A questionnaire-based survey was conducted in 2013-14 among 345 bank employees to know their perception towards bank frauds, degree of their compliance level, and integration of technology to detect, control and prevent frauds. This study provides discussion of the attitudes, strategies, and the technology that bank specialists will need to combat frauds. Banks that can leverage advances in technology and analytics to improve fraud prevention will reduce their fraud losses. In 2015, the RBI introduced new mechanisms for banks to check loan frauds by taking pro-active steps by setting up a Central Fraud Registry, introduced the concept of Red Flagged Account, and Indian investigative agencies will soon start sharing their databases with banks

Challenge of guarding online privacy: role of privacy seals, government regulations and technological solutions

The state of privacy in the 21st century is a worldwide concern, given the Internet’s global reach. The privacy violation on the internet is a significant problem and internet users have a right to adequate privacy. New e-business technologies have increased the ability of online merchants to collect, monitor, target, profile, and even sell personal information about consumers to third parties. Governments, business houses and employers collect data and monitor people, but their practices often threaten an individual’s privacy. Because vast amount of data can be collected on the Internet and due to global ramifications, citizens worldwide have expressed concerns over increasing cases of privacy violations. Several privacy groups, all around the world, have joined hands to give a boost to privacy movement. Consumer privacy, therefore, has attracted the widespread attention of regulators across the globe. With the European Directive already in force, “trust seals” and “government regulations” are the two leading forces pushing for more privacy disclosures. Of course, privacy laws vary throughout the globe but, unfortunately, it has turned out to be the subject of legal contention between the European Union and the United States. The EU has adopted very strict laws to protect its citizens’ privacy, in sharp contrast, to ‘lax-attitude’ and ‘self-regulated’ law of the US. For corporations that collect and use personal information, now ignoring privacy legislative and regulatory warning signs can prove to be a costly mistake. An attempt has been made in this paper to summarize the privacy legislation prevalent in Australia, Canada, the US, the EU, India, Japan, Hong Kong, Malaysia and Singapore. It is expected that a growing number of countries will adopt privacy laws to foster e-commerce. Accountability for privacy and personal data protection needs to be a joint effort among governments, privacy commissioners, organizations and individuals themselves

Creative Accounting Scam at Satyam Computer Limited: How the Fraud Story Unfolded?

Abstract Keen to project a perpetually rosy picture of the Satyam to the investors, employees and analysts, Mr. Raju (CEO and Chairman) manipulated the account books so that it appeared to be a far bigger enterprise than it actually was. The Satyam fraud has shattered the dreams of different categories of investors, shocked the government and regulators alike, and led to questioning of the accounting practices of statutory auditors and CG norms in India. An attempt has been made to provide an explanation for various "intriguing" questions about Satyam scam, such as: What was the need to commit a fraud on such a large scale? How Raju managed to cook-up books? What was Raju's real modus-operandi to manipulate the accounts for eight years? Why was Raju forced to blow his own whistle? Why was not there a stricter punitive action against the auditors of Satyam PwC?, etc." Now, after thorough investigations done by the CBI and SEBI, they have unveiled the methodology by which Satyam fraud was engineered. Finally, we recommend that "CA practices should be considered as a serious crime, and as such, accounting bodies, law courts and other regulatory authorities in India need to adopt very strict punitive measures to stop such unethical CA practices"

Fraudulent reporting practices: the inside story of India's Enron

Fraudulent reporting practices can have significant consequences for organizations and all stakeholders, as well as, for public confidence in the capital and security markets.In fact, comprehensive, accurate and reliable financial reporting is the bedrock upon which our markets are based.Keen to project a rosy picture of the Satyam to investors, employees and analysts, Mr. Raju (CEO and Chairman) fudged the account books so that it appeared to be a far bigger enterprise, with high profits and fast growth rate, than it actually was.The Satyam fraud, India’s Enron, has shattered the dreams of different categories of investors, shocked the government and regulators alike, and led to questioning of the accounting practices of statutory auditors and corporate governance norms in India. This is an exploratory and qualitative study based on secondary sources of information. An attempt has been made to provide an explanation for various intriguing questions about Satyam scam. After thorough investigations by the CBI and SEBI, they have unveiled the methodology by which Satyam fraud was engineered. Finally, we recommend “Fraudulent reporting practices should be considered as a serious crime, and accounting bodies, courts and other regulatory authorities in India need to adopt very strict punitive measures to stop such unethical practices.

A Study of Economic Value Added Disclosures in the Annual Reports: Is EVA a Superior Measure of Corporate Performance?

This paper explains the concept of Economic Value Added (EVA) that is gaining popularity in India. We also examine whether EVA is a superior performance measure, both for corporate disclosure and for internal governance. Of late, companies in India have started focusing on shareholders wealth creation by adopting value-based models for measuring shareholder value that helps to align managerial decision-making with the firm preferences. In recent years, the EVA framework is gradually replacing the ‘traditional’ measures of financial performance on account of its robustness and its immunity from ‘creative’ accounting. Even though some leading Indian companies have already joined the band wagon of their American counterparts in adapting the EVA-based corporate performance systems, many other are hesitating as there is no strong evidence that the EVA system works in India. Till now, EVA disclosures are “not mandatory for the Indian companies.” Also, we examine the value-creation strategies of selected Indian companies by analyzing whether EVA better represents the market-value of these companies in comparison to conventional performance measures. The study indicates that “there is no strong evidence to support Stern Stewart’s claim that EVA is superior to the traditional performance measures in its association with MVA.” As part of this study, we have also extensively surveyed the EVA disclosures in the Annual Reports made by the same sample group of 500 corporations from India

Voluntary Corporate Governance Disclosures in the Annual Reports

Abstract Co rporate governance (CG) disclosure is a fundamental theme of the modern corporate regulatory system, which enco mpasses providing "governance" information by a corporation to the public in a var iety of ways. The purpose of this research is to examine the CG d isclosure practices of Indian corporations at a time prior to when mandatory requirements for disclosure were introduced. Hence, this study explores the voluntary CG practices of 50 corporations, over and above the mandatory requirements of Clause 49 of the Listing Agreement. In order to study the CG disclosure practices, we have prepared a CG Disclosure Index. We have primarily used secondary sources of informat ion, both fro m the Report on CG and the Annual Reports for the financial year 2003-04 and 2004-05. As a part of this study, a total of 40 items have been selected fro m the CG section of the annual report for the period of study. In order to provide a co mparison across the industries, a sample o f 50 corporations have been taken fro m four industries, viz., software, text iles, sugar and paper. Appropriate statistical tools and techniques have been applied for the analysis of the results. It has been observed that corporations are following less than 50 percent of the items of CG Disclosure Index. Moreover, there is no significant difference among the disclosure scores across the four industries

Fraudulent reporting practices by Satyam

Fraudulent financial reporting practices can have significant consequences for organizations and all stakeholders, as well as, for public confidence in the capital and security markets. In fact, comprehensive, accurate and reliable financial reporting is the bedrock upon which our markets are based. Keen to project a rosy picture of the Satyam to investors, employees and analysts, Mr. Raju (CEO and Chairman) fudged the account books so that it appeared to be a far bigger enterprise, with high profits and fast growth rate, than it actually was.The Satyam fraud has shattered the dreams of different categories of investors, shocked the government and regulators alike, and led to questioning of the accounting practices of statutory auditors and corporate governance norms in India. This is an exploratory study based on secondary sources of information.An attempt has been made to provide an explanation for various intriguing questions about Satyam scam. After thorough investigations by the CBI and SEBI, they have unveiled the methodology by which Satyam fraud was engineered.Finally, we recommend “Fraudulent reporting practices should be considered as a serious crime, and accounting bodies, courts and other regulatory authorities in India need to adopt very strict punitive measures to stop such unethical practices”

Intellectual capital disclosure: Scenario of a developing economic

In the era of information and knowledge, effective use of Intellectual Capital (IC) is the most important factor that determines the success of a business leading to sustainable competitiveness. Value creation has been a concern for many years and companies have always been trying to find out the best ways for its improvement.Thus, IC disclosure (ICD) is becoming a major part of companies‘ value in today‘s knowledge-based economy. Currently, ICD is not compulsory and is done by the companies purely on ―voluntary‖ basis. IC disclosure has become a critical necessity in this new framework.IC measurement, reporting and disclosures in the developing economy are still at a very nascent stage, especially in India.This is an exploratory study of ICD and measurement by the 8 Indian companies over 5-year period, using content analysis and market value added (MVA) as research methodologies.IC is valued at market value (MV) minus book value (BV).The annual reports of the selected companies were collected from their respective web sites.As part of present study, various statistical techniques have been used to analyze the data.The findings show that on an average, the sample companies reported a positive value of IC; significant correlation has been noticed between tangible assets (TA) and net operating profits (NOP).However, no significant difference was found between percentage of IC to MV, and per cent of TA to MV.The study finds wide-disparity, low-level, and purely voluntary nature of the ICD made by the selected companies. Unfortunately, the omission of IC information may adversely influence the quality of decisions made by shareholders, or lead to material misstatements.We recommend to the international accounting bodies, to take the lead by establishing a harmonized ICD standard, and provide guidance to the big listed companies for proper measurement and disclosure of IC, both for internal and external user

Prophylactic and Therapeutic Potential of Asp f1 Epitopes in Naïve and Sensitized BALB/c Mice

Background: The present study examines a hypothesis that short allergen-derived peptides may shift an Aspergillus fumigatus (Afu-) specific TH2 response towards a protective TH1. Five overlapping peptides (P1-P5) derived from Asp f1, a major allergen/antigen of Afu, were evaluated for prophylactic or therapeutic efficacy in BALB/c mice. Methods: To evaluate the prophylactic efficacy, peptides were intranasally administered to naïve mice and challenged with Afu-allergens/antigens. For evaluation of therapeutic efficacy, the mice were sensitized with Afu-allergens/antigens followed by intranasal administration of peptides. The groups were compared for the levels of Afu-specific antibodies in sera and splenic cytokines evaluated by ELISA. Eosinophil peroxidase activity was examined in the lung cell suspensions and lung inflammation was assessed by histopathogy. Results; Peptides P1-, P2- and P3 decreased Afu-specific IgE (84.5~98.9%) and IgG antibodies (45.7~71.6%) in comparison with Afu-sensitized mice prophylactically. P1- and P2-treated ABPA mice showed decline in Afu-specific IgE (76.4~88%) and IgG antibodies (15~54%). Increased IgG2a/IgG1 and IFN-γ/IL-4 ratios were observed. P1-P3 prophylactically and P1 therapeutically decreased IL-5 levels and eosinophil peroxidase activity. P1 decreased inflammatory cells' infiltration in lung tissue comparable to non-challenged control. Conclusion: Asp f1-derived peptide P1, prophylactically and therapeutically administered to Balb/c mice, is effective in regulating allergic response to allergens/antigens of Afu, and may be explored for immunotherapy of allergic aspergillosis in humans