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Financial Fraud And Its Consequences

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Identify at least three loopholes in the organization's existing Anti-Money Laundering Policy and propose changes which would close those loopholes for National Bank of Greece.

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Greek Law on Money Laundering

The Greek law of 1995 that prevents money laundering demands that the person who "assists" in the process does so "on purpose." This seems difficult to prove. It might be quite possible for a bank employee or state regulator to be deliberately ignorant about what they (generally) know to be a scheme. Using the phrase "on purpose" seems to assume that we can know the operations of one's mind.

In Article 2, section 2, a similar phrase is used: "...knowing that such property is derived
from criminal activity..." created a huge loophole. Those involved in money laundering, we might presume, will not announce the fact to bank employees. These people go through much trouble to make certain that those who "assist" them have no idea what's going on, or at least, a vague one.

For the National Bank of Greece, in order to be on the board, one must prove a great deal of expertise on financial and banking matters (6.2). Of course, that makes sense. Yet, it is precisely these people will know how to feign ignorance about the source of money, or at the very least, to fully cover their tracks. It's a bit like a murder committed by a forensic pathologist.

It appears, from the Governors Act, that there needs to be two people for every transaction as a for of control. Then, each deposit must be described in detail, that is, its history and point of origin. Bank employees are instructed to see if there is "transactions inconsistent with their experience of a customer and his/her transactional behavior, using the appropriate and adequate documentation" (14.2).

The NBG has specific policies which employees must follow when looking for money laundering schemes. First, they must know their customer. Second, ...

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The solution discusses financial fraud and its consequences.

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Fraud Controls at Andragon

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After analyzing Andragon's financial statements and logging several months on the job, you began to notice that the company's average cash balance is unusually low in respect to its sales and productivity. As such, you began to suspect fraud. After several weeks of investigation, you began to suspect that Karen Smith, the company's bookkeeper, is in cahoots with one of the firm's suppliers, whose owner happens to be Karen's brother-in-law. From what you can tell so far, the supplier is submitting bogus invoices for material that was never received by ANDRAGON. Karen, in turn, has been approving the invoices and cutting checks to the supplier in exchange for a "cut." After reporting your suspicions to John Edward, Andragon's CEO, he has instructed you as follows:

1) Dismiss Karen immediately. Keep the matter quiet, especially in light of the fact that the company is currently looking at the possibility of going public.

2) Work with an outside group to develop an effective anti-fraud control system for the company.

As part of your presentation to Mr. Edwards and the management of Andragon, your group is to prepare an 8-12 slide presentation detailing some specific control systems that need to be implemented at Andragon as soon as possible to help reduce or avoid similar incidents.

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