International Law

Organised Crime Risk

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Interesting story about fraud out of Scotland, which has things backwards.

"Detective Chief Superintendent Alan Moffat, of the Scottish Crime and Drug Enforcement Agency, told the Sunday Herald that the financial services sector in particular was "coming under greater threat" than before, not least because the lack of easily available credit made businesses more likely to turn to organised criminals for funding to tide them over through difficult periods.

He also said that tougher market conditions made "specialist" professionals, such as accountants, lawyers, and estate agents, more vulnerable than ever to witting and unwitting involvement in criminal money-laundering operations, just as the deceptive "professionalism" of Scotland's organised crime operations increased."

There is a similar story being reported in the WSJ about an increase in fraud:

"The number of white-collar crimes could jump significantly this year as economic and financial-market turmoil lead many to deviate from moral and proper activities to keep up a revenue stream or make a quick buck, a new study says.

"It's a different world out there, and fraudsters know it," New York-based risk consultancy Kroll Inc. says in its Global Fraud Report, released Wednesday.

Kroll warns, among other things, about an unscrupulous form of short-selling in which brokers and traders form "loosely organized cartels" to start negative rumors about companies whose shares they are betting against. Such actions could become more prominent, especially in countries with lax regulations, as stock markets continue to reel from the credit crunch and economic crisis."

Fraud thrives in a climate of unbridled hope, where anything seems possible, and all around you people are getting fabulously wealthy.

In such a climate, the pitching of phantom dreams is easier and less likely to be rejected. Superintendent Alan Moffat is mistaking a diagnostic clue with a causal clue: when the phantom dreams go poof, we find fraud where before there was hope and salvation.

It is not possible that Moffat has risen to Superintendent without knowing this. He would not be a stupid man.

But the good Superintendent knows how hard it is to argue for an enforcement budget during the good times, when fraud is running rampant, and instead must wait until the tide goes out and traps the naked swimmers to get support for enforcement. It is a shrewd, and unfortunately necessary move.

Full post as published by Misleading Advertising Law on January 21, 2009 (boomark / email).