Rowans-blog

FSA Fines Einhorn £7.2 million. Another regulatory failure!

2012-01-26T08:48:00.000-08:00

The Financial Services Authority (FSA) has decided to fine David Einhorn, owner of the prominent US hedge fund Greenlight Capital Inc (Greenlight), and his fund £7.2 million for engaging in market abuse in relation to an anticipated significant equity fundraising by Punch Taverns Plc (Punch) in June 2009.

On 9 June 2009, Einhorn was a party to a telephone conference in which it was disclosed to him by a corporate broker acting on behalf of Punch Taverns Plc that Punch was at an advanced stage of the process towards a significant equity fundraising. This was inside information and Einhorn should have appreciated this.

A matter of minutes after the telephone conversation had concluded and on the basis of that inside information Einhorn gave instructions to sell all of Greenlight’s holding in Punch. At the time these instructions were given Greenlight held 13.3% of Punch’s issued equity.

Over the next four days Greenlight sold 11,656,000 Punch shares, thereby reducing its holding in Punch from 13.3% to 8.89%.

On 15 June 2009, Punch announced a fundraising of £375 million. Following the announcement the price of Punch shares fell by 29.9%. Greenlight’s trading had thereby avoided losses of approximately £5.8 million for the funds under Greenlight’s management.

The FSA accepted that Einhorn’s trading was not deliberate because he did not believe that it was inside information. However, this was not a reasonable belief. Investment professionals are expected to handle inside information carefully regardless of whether they have been formally wall-crossed. This was a serious case of market abuse by Einhorn and fell below the standards the FSA expects, particularly due to Einhorn’s prominent position as President of Greenlight and given his experience in the market.

Tracey McDermott, acting director of enforcement and financial crime, said:

“Einhorn is an experienced professional with a high profile in the industry. We expect someone in his position to be able to identify inside information when he receives it and to act appropriately. His failure to do so is a serious breach of the expected standards of market conduct."

Yet again the FSA has failed to prosecute a financial insider and seek a custodial sentence. This is now he expected and typical response from this most spineless of regulators, who feel that it is better to seek these pathetic financial penalties, than really go to the trouble of taking these financial spivs to the Old Bailey!

Here was a market professional who learned that shares he owned were about to become impacted by the news that the company was seeking an equity fundraising issue, thus diluting the value of his stockholding.

He immediately gave instructions to sell the entire holding, and in the end, made a saving of £5.8 million for the funds his firm managed.

Whatever you want to call it, this was a gross misuse of privileged information, and Mr Einhorn should have felt the complete weight of the force of the law against insider trading to fall on his head. He should have been prosecuted to within an inch of his well-shod feet, and if convicted, he should have been sentenced to a term of imprisonment. A couple of years at Her Majesty's Pleasure sharing a cell with a steroid-crazed body-builder with an IQ smaller than his hat size would have been a learning curve.

But what happened?

The FSA accepted a plea from him, and accepted that '...his trading was not deliberate because he did not believe that it was inside information...'!

Excuse me, que passa? What did he think it was then, a polite chat with an ever-so-friendly market broker passing the time of day? Who is kidding whom here?

The FSA then fined this uber-rich trader who made millions shorting Lehmann Brothers, the derisory sum of £7.2 million. To a man like Einhorn, this is chump change, he won't even feel the pinch. I'll bet that such a penalty will definitely teach him not to do such a thing again!

What this pathetic exercise ignores is that whether or not the FSA finally decided to prosecute for Insider Dealing, the profits Einhorn made from the deal were the proceeds of crime, whether you call it market abuse or insider dealing, they are still crimes at the time they were committed, and their proceeds can be laundered. As soon as Einhorn realised the proceeds from the sales, he was laundering the money, and any institution handling the deal should have made an immediate SAR if they had suspected the transaction.

Has the FSA investigated to see whether any SAR was reported? Bet not!

This kind of derisory action on the part of the Regulator brings them into disrepute yet again. If they have evidence that individuals have committed crimes, they must and should be prosecuting them, otherwise, what message does this send. Some way must be found to insist that evidence of criminality leads directly to the dock.

London is already the place where the ultra-rich come to lord it in non-dom tax-haven luxury. Where bankers whose publicly-owned businesses have made no profits can pay themselves obscene, million pound bonuses, because no-one has the bottle to get up and say 'No' very loudly and mean it! Where men who through arrogance and incompetence have taken once-great financial names to the brink of extinction, get knighted and given pensions of a size beyond the dreams of avarice! Where 98 of the FTSE top 100 companies can pay no tax to the Revenue. Where we welcome oligarchs who have raped and looted their former State assets, and then come to launder their ill-gotten gains through their ownership of British properties.

What in God's name has happened to us? Where once, we had a name for fair dealing, and integrity, we now have replaced it with greed, sleaze and double-standards. The best thing to do is to put the sign 'Casino' in flashing lights over every immigration desk in every point of entry in Britain. At least then we would be making some pretence at telling the truth of what this country's financial sector offers!

Joseph’s story

2011-12-18T10:43:00.000-08:00

She’s sleeping now.

I managed to clean her up as much as I could,

And the women from the inn took away the birth straw.

They were far too busy after that to be bothered with her anymore.

The rooms were all full and the guests were shouting for their dinners and liquor and calling for service.

It was kind of the woman to give us some old birth cloths to wrap him in,

Said they were old, but clean, even if they had been used before.

She didn’t seem to mind.

The boy has blue eyes.

Seems like a healthy lad, at least as far as I can tell.

That’ll be a blessing anyway, it’s hard enough feeding her and me just now.

Business has really fallen off since the Romans started squeezing the last coins from our pockets to pay for all their foreign wars.

He’ll have to get used to hard work if he wants to keep his place by the fire and share what little food there is.

As I say, he looks sound enough, but what do I, an old man, know of these things, I never had a son before.

I wonder, were his father’s eyes that piercing blue.

I’ve known her since she was very young.

Her father recently asked me to marry her as I was still alone, even after all these years.

He made me a good offer because he already had three other girls and she was, well, she was the least comely,

And he simply couldn’t afford marriage portions for all of them,

That was how he put it.

When I agreed, he gave me a longer lease on the workshop and said he wouldn’t press too hard for rent,

If I wasn’t doing so well that quarter

Nice of him to do that, I thought

The only condition he wanted was to announce our engagement soon

Because she was expecting a child and he did not know who the father was.

Neither did she apparently, except that it came from heaven,

Or so she said, some daft story about an angel,

And her being chosen for a special task.

Don’t suppose it makes a lot of difference anyway.

I'd been having some really odd dreams about this time and I found that I didn’t mind about not being the father,

Although it took a bit of getting used to at first.

The men in the wine shop said I was a fool,

Said I could have held out for a lot more

Called her father a skinflint, said I was doing him a real favour

While the women talked about her in corners,

Making pointed references to certain dates in the calendar

And the arrival of a new cohort of Roman soldiers in the town.

But she simply put her hand in mine

And said she would be a good wife to me

And after that,

I found that it really didn’t matter at all.

She’s a strong little thing.

I’ll say that for her, and when we were told we had to make this winter journey to get registered for the new taxes,

She didn’t make a fuss, but just gathered her few bits and pieces

And went to see to the donkey.

She put what we needed in a bag and handed me the reins

And said we should start soon, as it looked as if the weather would be closing in.

She never once questioned the reason for having to go so far,

It kind of seemed like she was almost expecting it.

I thought we would make it all the way.

Except she couldn’t go on any longer as she was far too tired and her feet were bleeding.

And when her waters broke and the baby started coming, she simply asked me to find her somewhere to lie down,

And she said she would be alright if I didn’t stray too far away.

This inn was just down the road,

But the landlord said he was full up with paying guests

Unless of course I had enough money to pay for his best room

And by the look of our condition, he said he somehow doubted it!

I told him we were broke.

He just stood there with his huge fists on his hips and laughed

And shook his head and told me to get lost and not to waste his time.

His wife understood though, and said he should be ashamed and that we could use the stable

As long as we didn’t mind sharing with the animals.

She came with her mother and old cloths and hot water later

But as I said, they couldn’t stay long

She asked us not to think too hardly of her husband,

Said that he was a good man really.

She didn’t want me then.

Told me to go away and not to come back until it was finished.

I began to argue but she was insistent,

Said that this was something she had to do alone and that she would receive all the help she needed, but she didn’t say from where.

Just told me not to be too far away.

She was right of course, what was I really going to be able to do to help, what experience do I have of these things

She only screamed out once, a man’s name I think,

But I didn’t catch it.

Then, later, the strangers started to arrive.

You would have thought that they would had more consideration.

I mean it’s bad enough trying to manage a new birth,

On your own, in a cowshed, without constant interruptions.

First a crowd of smelly sheepherders, the poorest kind who live out on the hills all year round, not much better than brigands and thieves,

Men with rough hands and even rougher speech, and dressed in fleeces which stank

They all insisted on crowding in to see the child

And wouldn’t take no for an answer.

The landlord tried,

He wouldn’t let them in at first.

Said he ran a classy house and said they had no money to spend

and that they would only frighten his paying guests.

He took some real persuading, but they were very persistent.

Their leader kept going on about angels telling them about the baby and how they had to come and witness his birth.

It’s all nonsense of course, they’d probably all been drinking,

But they did seem genuinely pleased to see the boy

She didn’t say anything, she just smiled.

Just as she was about to go to sleep the professors turned up.

Said they had come a long way and pointed at a star they claimed to have followed, but among all the others blazing away on that freezing cold night, I couldn’t make it out.

They at least brought some presents, but these educated types have no common sense at all.

What is a simple carpenter going to do with myrrh? She can probably use the frankincense to air the clothes, but God knows what I’ll do with the gold.

I’ll have to hide it from the taxman, and hope no-one gets to hear of it.

They talked a lot of blather most of the time, or so I thought,

But isn’t that just like academics all over.

They did tell me not to go home to Galilee just now

Seems it isn’t safe because the King has been asking a lot of questions about some other king being born.

That rules us out of course

But I think I‘Il take their advice anyway, it doesn’t pay to pick quarrels with kings, priests or politicians.

It’s a lesson to teach the boy when he’s older,

No point in looking for trouble if you don’t have to.

I’ll have my hands full just teaching him the trade

Seems strange now looking at his tiny hands to think how will they ever get used to managing the skills of the carpenter.

But he looks strong, he’ll learn, and when he’s finished his apprenticeship, I’ll take him into the business with me.

That’ll be good, the two of us working together.

And when he has learned enough to be about his father’s business,

We should be able to bring in enough to rent the olive grove behind the workshop,

And maybe buy some goats for his mother.

I’ll teach him all my skills so he won’t hurt himself.

Just making a simple joint to hold two pieces of wood together is a complex operation,

If they are going to last and draw from each other’s strengths.

Using hammers and saws needs time to learn,

The slightest slip when working in wood can cause great pain,

I couldn’t bear to think of the flesh of his hands being torn by nails.

No doubt you’ll say its an occupational hazard for a carpenter

But he seems different somehow, I can’t really explain it.

Maybe I’m getting soft in my old age.

We’ll leave in a few days

When she’s stronger and there’s more colour in her cheeks and she can feed him properly.

I’ll thank the innkeeper of course, but frankly, he’s been acting a bit oddly since the professors left and keeps touching his forehead and calling me sir!

We’ll have to register another time, when it gets a bit easier.

We have to think of a name for him as well. I expect she’s already thought of that, but if she has, she hasn’t let me know.

She’ll probably say the angel told her.

One law for them, and one for the rest of us!

2011-12-13T06:20:00.000-08:00

When a top business executive throws a wobbler because one of his staff has put a pink wafer biscuit on the coffee tray, you know you are dealing with a rare kind of individual. But Sir Fred Goodwin, for it is he, was obsessed with biscuits and also had anger problems, The former Royal Bank of Scotland boss, who was known as "Fred the Shred" because of his obsession with cutting costs, left the taxpayer with a £45 billion bailout bill, and a lot of uneaten pink wafer biscuits.

He was, by all accounts, a terrible boss to work for. It is claimed that Sir Fred could not control his anger if the wrong type of biscuit was put in the boardroom, and even threatened catering staff with disciplinary action in an email titled "Rogue Biscuits" after executives were offered pink wafers.

The reason why Goodwin’s discredited name is back in the public frame again is because the FSA has now published its report into the way they regulated or failed to regulate the way in which RBS engaged in the contested take-over for Dutch bank, ABN Amro.

Let us be clear in the interests of simplicity, RBS made a bid for the Dutch bank, which resulted in their buying a crock, leaving RBS with a £49 billion black hole in her accounts, requiring a £45 billion injection from public funds to keep RBS afloat.

The FSA report makes repeated criticisms of the culture and governance at the bank, and labels the £49bn takeover of ABN Amro in 2007 as little more than "a gamble". So delicate are the sensibilities of some of the Directors of RBS as to the way this bad joke should be described, that they have hired lawyers who have been engaged in a lengthy legal dispute with the regulator over its description of the ABN deal.

In the foreword to the report, Lord Turner, the FSA chairman, says that the due diligence conducted by RBS amounted to "two lever-arch files and a CD-ROM", a claim disputed by the bank's former directors.

During its inquiry, the FSA wrote to former non-executives of the bank, including Sir Tom McKillop, the chairman at the time of RBS's collapse, to gauge whether they had felt intimidated or bullied by Sir Fred's notably autocratic style. The former directors are understood to have responded, perhaps not surprisingly, that they had not. Of course not, who would have thought that such a thing could even have been contemplated, I’m surprised anyone felt the need to question whether these nice Scottish gentlemen might have felt at all intimidated by a commercial thug who threw a hissy fit when a pink biscuit appeared by his coffee cup. What we do know is that The City regulator has reconfirmed its conclusion of last year that no former directors of RBS, including the former chief executive Goodwin, will face punishment over their role in the bank's collapse.

Why should this be, did no-one do anything wrong?

The duties of a director of a public company are straightforward and they include;

Directors must act in the interests of their company;

They have a duty to act within their powers;

They have a duty to promote the success of the company;

They have a duty to exercise independent judgment;

They have a duty to exercise reasonable care, skill and diligence;

They have a duty to avoid conflicts of interest;

Looked at through eyes given the benefit of hindsight, how could Goodwin possibly have thought that the ABN Amro deal was a good one for the Bank? Remember, the FSA report calls the whole thing a ‘gamble’!

The banking culture at the time was caught up in a mania of merger activity. The atmosphere in 2007 was, as one senior former RBS director put it, “eat or be eaten”. This was the era when everything was about rapid growth and global domination. Internally, RBS, it was felt, had to be part of that.

Yet Goodwin was repeatedly warned of the dangers of making a bid for part or all of ABN Amro. The memory of the Charter One deal was still fresh in the minds of RBS board members and many doubted whether a bidding consortium could be formed and did not want to buy the whole bank. Goodwin called UBS banker John Cryan, who had helped broker a previous deal and had been a close adviser of Goodwin’s in the past, for advice. The one-sided conversation was what one colleague later described as the “Fred hairdryer”.

Cryan had been against RBS buying ABN from the start and had warned Sir Fred against doing the deal, telling him he was “extremely concerned” about the impact it would have on the bank, particularly its capital ratios.

In one note, Cryan wrote to Sir Fred warning him about ABN’s exposure to subprime: “There is stuff in here we can’t even value.” Sir Fred replied saying: “Stop being such a bean counter”.

This was a man exercising reasonable care skill and diligence? I don’t think so. This was a man so puffed up by his own ego that he was willing to ignore serious professional advice. The full, gory story of this banking farce can be read at;

uk,finance.yahoo.com/news/RBS-investigationpChapter -2-tele-2357916462.htmail?x=0

What it demonstrates is the way in which one man’s inflated sense of self-importance determined the way in which a bank would quickly founder and collapse to the point that it needed vast sums of public money to stay afloat. Goodwin of course walked away completely free, with an obscene pension to feather-bed has latter years, and no-one inside the RBS Palace of Varieties has been required to explain their dereliction to the duties they owed the company in Court.

To understand the reasons for this inexplicable conclusion, we are forced to revert to the most recent FSA findings. In a report published on 12^th December 2011, the FSA admits its own supervision was "flawed" and "provided insufficient challenge" to RBS, the BBC reports. However, it did not concede these shortcomings amounted to negligence.

How can this possibly be the case? The FSA has had a very chequered track record of dealing with the big cases and it has always employed people who were not really qualified to take on the big players. We were repeatedly told that the FSA was going to be better than its predecessor, the SIB,, which was supposed to be infinitely preferable to its predecessor, the DTI, etc, etc.

It may just be that lawyers reviewing the case may have found themselves constrained by the fact that the then Prime Minister, Gordon Brown, was on the record insisting that the FSA continue to engage with the financial sector, with ‘…a light touch approach to regulation…’

Perhaps they felt that this evidence might not assist a jury in coming to a clear conclusion. Whatever the reason, no-one is going to be held accountable for this farce, and the tax-payer must pick up the bill.

In any other walk of life, any failure to fulfill your role and responsibilities properly, and in such an egregious manner as this, would have resulted in immediate sackings inside both organisations. Any chief officer of police deemed to have acted in this way would have been picking up his P.45 long ago, The same goes for any other kind of public service role, but in the City and the financial sector, we do things differently! No one will be called to account, senior figures inside the FSA will be quietly selected for promotion and the whole rotten system of cosy City financial regulation will just drift on and on.

Many of those of us who have been closest to financial regulation in the past have tried to warn the FSA of its failings, but to no avail. We have tried to show them through offering training or working with their enforcement arm, with the aim of providing a high level of assistance, how to develop investigators with real skills, but we have been rebuffed at every turn.

The good old tradition of well-meaning amateurs exercising senior positions in public life, without any real professional skills, will continue to operate. No detective worth his or her salt would have been confused by Goodwin or his satraps, and it is unlikely that they would have allowed him and his cowed team to shout them down. They would have insisted on getting straight answers to straight questions like;

Why, when he knew that other professionals were counseling caution, did Goodwin ride roughshod over their concerns, without reviewing them by third-party professionals? How did this demonstrate that he was acting within his powers?

Why was so little due diligence undertaken before making such a huge investment? How was this in the interest of the company? How much did Goodwin believe his personal commercial worth in the banking fraternity would be increased in the event that the buyout went through successfully?

It would have been put to him that his anxiety to get the deal done in such a hurry, was largely motivated by his greed and avarice in both wanting to beat Bob Diamond from Barclays, (a personality issue) and wanting to be seen as a major banking icon (a big swinging dick in other words) in the banking world, which would of course have increased his commercial value.

It would have been put to him that his anxiety to achieve this fast fix was in fact a series of major conflicts of interests and not in keeping with the interests of the company and its shareholders, but in making him even more commercially valuable.

He would have been kept at the interview table until such time as he gave simple and reasoned answers. He would not have been allowed to roam off into the realms of commercial bullshit, speculating and pontificating and trying to avoid the real meaning of the questions, and he would have been invited to demonstrate why he should not be litigated against for a gross breach of all these requirements?

We, the investing public have a right to deserve far better from those who regulate our financial sector. We have a right to expect that those who have the stewardship of our great financial institutions, should exercise considerable skill, diligence and above all, caution in their handling of our money. We have a right to expect that the Regulators will employ people who can do their job properly, and above all, we should not expect to have to sit through another sniveling apology from a the head of the SFA, explaining why their handling of their responsibilities was so pathetic.

They should be subjected to the same treatment as any one of us would expect, but the problem with the British financial sector is that there has always been one law for those on the inside and one law for the rest of us. Oh, and they don’t like pink wafer biscuits either!

Lord Snooty Went to Brussels

2011-12-09T04:17:00.000-08:00

What on earth was David Cameron thinking when he went to Brussels to join the talks on the future of the EU?

He managed to enrage most of those present by his intransigence over the issue of European proposals for further financial regulation in Europe, splitting the European Union, after failing to secure “safeguards” for the City of London that he demanded as the price of Britain approving a new treaty for the bloc.

Lord Snooty almost certainly misread the signals coming from the EU, probably believing that Germany would not force his issues to a point where he had no choice but to play his veto. Germany possibly also thought he wouldn’t press the point so far, but would be willing to roll over on certain issues. In the end, his decision to force a breakaway treaty within the EU came after a standoff with France and Germany, who rejected Lord Snooty’s demands for legally binding commitments to shield the City of London from new and wider regulations.

“I had to pursue very doggedly what was in British national interest. It is not easy when you are in a room where people are pressing you to sign up to things because they say it is in all our interests,” Mr Cameron said.

Well, let us examine that statement!

The City of London, and the very small number of extraordinarily powerful (and obscenely wealthy) men who run the Square Mile, have, through their friends and lobbyists in the Tory Party in Parliament, let Cameron know in hugely certain terms what his future would be, if he were to accede to EU requests for further financial regulation. The City does not like financial regulation, because it gets in the way of business. The City has taken this view for hundreds of years. At the turn of the eighteenth century, Alexander Baring, 2nd son of Francis Baring of the prestigious banking family said;

‘...I consider every regulation to be a restriction and, as such, contrary to that freedom which I have held to be the first principle of the well-being of commerce…’

Nothing has changed in the minds of British bankers since that statement was uttered, and no-one proposing wider regulation of the financial sector is going to be given a wide audience in London.

We have banking regulations, of course, it’s just that they are not enforced very well, or really at all, to any great extent. You only have to look at the level of downright fraud committed by our High Street banks to realize the truth of that assertion.

The financial mess we are currently laboring with was caused directly by these very banks. They played around with financial products which they did not understand sufficiently, they gambled on other people’s debts in the sub-prime scandals, they encouraged their people to sell worthless and dangerous products to gullible investors, and they made fortunes gambling in proprietary trading. Then, when they were broke, they went bleating to the Government for a bail-out, and we were forced to pick up the tab for their incompetence, their arrogance, ignorance and greed (thanks Steve Knightley), all the while, being told that it was our duty and in our best interest to do so!

Can someone help me understand how our best interests are served by continuing to bail out these conmen, crooks and thieves, without any kind of gut-wrenching regulation being imposed on the bastards in return.

The British financial sector, which is all we have left now that most other meaningful jobs have been destroyed, exists to serve the interests of a very small group of elites. They serve the politically exposed criminals and foreign dictators who use the London market to launder the looted contents of their bank accounts out of the reach of their true beneficial owners; they serve the interests of tax evaders, both from home and abroad, they facilitate the onward safe-passage of bribes and corruption on an international scale; they gamble recklessly with the contents of their Treasuries, and then pay themselves bloated bonuses.

We now know that 98% of the FTSE 100 companies (which includes all the major banks) pay little or no tax in the UK, so what benefit do we really get from them? If you need financial services, it is now a given that you will be gouged, cheated, ripped off and sold wholly inappropriate products. If you want a pension, it is an accepted fact that you will have much pulled out if it by the way of inflated and almost invisible charges.

These are the products whose promoters, ever so quietly, through their friends on the Tory back benches, sent the message to Lord Snooty. ‘…If you don’t want to end up like John Major, fighting a constant back-bench army of ‘Euro-bastards’, make sure you know where your (and our) best interests lie…’

Lord Snooty has won himself a reprieve. He will have pacified his Euro-demented back-benchers and given himself some breathing space. He has done his job by his mates in the City, who will be happy that they may not have to face greater EU regulation.

However, Cameron’s bid to secure a new protocol on the City’s exclusion from new rules won little or no support from other EU members, and was barely discussed in detail during the ten-hour summit. Mr Sarkozy merely dismissed the demands as “unacceptable”.

Snooty came home with nothing, except having succeeded to marginalize Britain even more in the eyes of the wider EU members. He may think that the EU can do nothing in the wider scheme of things, Haig, the Foreign Minister was wittering on about ‘protection by treaties’ on Radio 4 this morning.

For myself, I expect that if the new club members form a group, of which Britain is not a member, then they will almost certainly not let us come to their parties! Britain’s ultimatum has infuriated many European leaders who saw Britain as the biggest obstacle to a rigorous treaty to improve eurozone governance and resolve the sovereign debt crisis. Some in the negotiation said the decision to stand firm would have repercussions. “This is going to cost the UK dearly. They have antagonised everyone,” one senior EU official said.

Still, as long as the City gets what it wants, they won’t give a fuck!

Row Over Clarkson’s Suicide Comment

2011-12-04T00:59:00.000-08:00

Top Gear presenter Jeremy Clarkson has faced a storm of protest from mental health charities after he branded people who throw themselves under trains as "selfish".

The 51-year-old, who was forced to apologise earlier this week after saying all striking workers should be shot, was embroiled in further controversy after he reiterated his view that those who commit suicide on railway lines cause "immense" disruption for commuters. In this article, Clarkson mirrored the writing of Dean Swift, and has received the same response.

‘…A Modest Proposal for Preventing the Children of Poor People in Ireland From Being a Burden on Their Parents or Country, and for Making Them Beneficial to the Publick…, commonly referred to as A Modest Proposal, is a Juvenalian satirical essay written and published anonymously by Jonathan Swift in 1729. Swift suggests that impoverished Irish might ease their economic troubles by selling their children as food for rich gentlemen and ladies. This satirical hyperbole mocks heartless attitudes towards the poor, as well as Irish policy in general.

Swift goes to great lengths to support his argument, including a list of possible preparation styles for the children, and calculations showing the financial benefits of his suggestion. This essay is widely held to be one of the greatest examples of sustained irony in the history of the English language. Much of its shock value derives from the fact that the first portion of the essay describes the plight of starving beggars in Ireland, so that the reader is unprepared for the surprise of Swift's solution when he states, "A young healthy child well nursed, is, at a year old, a most delicious nourishing and wholesome food, whether stewed, roasted, baked or boiled; and I make no doubt that it will equally serve in a fricassee or a ragout.

Readers unacquainted with its reputation as a satirical work often do not immediately realize that Swift was not seriously proposing cannibalism and infanticide, nor would readers unfamiliar with the satires of Horace and Juvenal recognize that Swift's essay follows the rules and structure of Latin satires.

Swift was widely criticized for publishing this piece once it became known he was the author, and he faced widespread public anger. The same can be said for Mr Jeremy Clarkson who has been on the receiving end of politically-correct opprobrium for his comments on public suicides.

Charities said his comments were "tasteless" and accused him of trivialising the subject of suicide.

Clarkson said: "I have the deepest sympathy for anyone whose life is so mangled and messed up that they believe death's icy embrace will be better. However, every year around 200 people decide that the best way to go is by hurling themselves in front of a speeding train. In some ways they are right. This method has a 90% success rate and it's extremely quick.

"However, it is a very selfish way to go because the disruption it causes is immense. And think what it's like for the poor train driver who sees you lying on the line and can do absolutely nothing to avoid a collision."

Later, the presenter referred to those who choose to jump in front of trains as "Johnny Suicide" and argues that following a death, trains should carry on their journeys as soon as possible.

He added: "The train cannot be removed nor the line re-opened until all of the victim's body has been recovered. And sometimes the head can be half a mile away from the feet. Change the driver, pick up the big bits of what's left of the victim, get the train moving as quickly as possible and let foxy woxy and the birds nibble away at the smaller, gooey parts that are far away or hard to find."

Marjorie Wallace, chief executive of mental health charity Sane, said: "We are absolutely appalled that Jeremy Clarkson should accuse people who throw themselves on railway lines of being 'selfish'. He has obviously never experienced the agony of mind which drives people to such desperate acts.

"When gripped by such mental anguish people do not act rationally. The selfish person is the one who rates being late by minutes or hours as more important than a person losing their lives forever."

Catherine Johnstone, Samaritans' chief executive, said: "The insensitivity of Jeremy Clarkson's comments in his Sun column today about people who die by suicide on the railways truly beggars belief. While purporting to express sympathy for people who die this way, his remarks about their bodies constitute gross intrusion into the grief and shock of bereaved families and friends."

Jeremy Clarkson is the Dean Swift of our times. He is a great satirist, and he makes his points with a pen as sharp as any wielded by the former Dean of St Paul’s Cathedral. In this article, he is making a serious point about the sense of hopelessness and uselessness that our modern times can engender in some people, and the steps they will go to, to extricate themselves. His writing is in bad-taste, because that’s what satire is and is meant to be. He is just being Clarkson, for fuck’s sake, and is not meant to be taken literally. Read him, and move on.

The real satire in these comments is the paucity of education in English literature these pundits have received, in that they have obviously never read Jonathan Swift, one of Britain’s great writers, and therefore are unable to recognize satire when it is served up to them!

'...Father, forgive them.....'

2011-11-22T02:39:00.000-08:00

A blog examining the organised criminal nature of the High Street Banking Industry.

When criminologists measure criminal threats to society, one of the criteria evaluated is the volume of loss (or financial damage) such criminality generates. So, we can get statistics about the value of goods stolen from shops, or the value of quantities of drugs seized, because obviously, if a particular activity is causing severe financial loss to the country, then it ought to be taken more seriously, and hopefully, escalated in the threat-value recognition.

When a specific group of individuals or practitioners repeatedly appears in the statistics of criminal activity, as being responsible for the egregious activities identified, the Government and the Home Office encourage the agencies of control to target these people and focus investigative and prosecutorial attention on them.

We tend to call this kind of activity, 'Organised Crime' and it is defined by the UN, among other agencies thus... "... large scale and comples criminal activity carried on by groups of persons, however loosely or tightly organized, for the enrichment of those participating and at the expense of the community and its members. It is frequently accomplished through ruthless disregard of any law...'

Paul Nesbitt (head of Interpol's Organized Crime Group) defined it in 1993 as, "Any group having a corporate structure whose primary objective is to obtain money through illegal activities, often surviving on fear and corruption."

We are living in what I think is now generally agreed to be the worst period of financial constraint since the Great Depression, and every man, woman and child in this country is having to make do with less and less. The Government is telling us at every opportunity that we must get used to making do with fewer social supports, while at the same time, saying that it is trying to help the economy by engaging in Quantitative Easing (printing more money to you and me) in order to get growth started again.

Ordinary savers have found that their savings' rates have dwindled to virtually nothing, and many people are looking to find advice on how to get the best from their limited reserves of money.

So, why is it that at the very time when people need good financial advice most, the British High Street retail Banks appear to be completely immune to this need, and carry on their business as if their clients are merely there to be fleeced?

For many years, it has been one of the great mantras of the financial services industry that the institutions are looking to acquire 'as big a share of the customer's wallet' as possible. This phrase was widely bandied about in the banking industry by executives who used to come to seminars put on by a leading computer manufacturer, and they looked to the IT industry to help them develop software that would do just that, 'get a bigger share of their customers' wallets', and a great deal of time and energy was spent encouraging the development of technologies which would help banks 'up-sell and cross-sell'.

We have had to go through a financial services revolution in this country to get financial institutions to grudgingly subscribe to a theory of 'best advice' for their clients. The regulator has had to issue meaningful warnings about 'treating clients fairly', (an issue you might have been forgiven for thinking was a 'given'). So why is it, after all this time, that so many of the banks and their financial friends are still behaving like a bunch of highway robbers, cheating and stealing their clients blind. Some recent cases are instructive.

Two Barclays bank employees were sentenced to five years imprisonment following their roles in £1.3 million worth of fraud on old age pensioners. Karl Edwards, 44 and Andrew Waters, 26 appeared at Birmingham Crown Court on November 18th 2011, following the fraudulent activities, they received five years each. The court heard that the bankers targeted three victims who were all over the age of 80. Karl Edwards was thought to be a "premier relations manager" whilst employed at Barclays.

In July this year, Another ex-Barclays employee was jailed after he stole more than £600,000 from dead, elderly and ill customers, to fund his online gambling addiction. James Leonard Finnigan, 42, from Twickenham, Middlesex received a four-year jail term at the Old Bailey, having previously pleaded guilty to the fraud. A police spokesman commented: “James Finnigan appeared to target customers who were elderly in the hope of avoiding detection, in some cases going as far as taking money from accounts when customers had recently died.”

How about a greedy bank manager who was given a hefty bonus payment - at the same time as he was robbing customers of tens of thousands of pounds. Liam Allmand was so highly thought of by Barclays Bank for looking after their higher-earning clients that he was rewarded with a £20,000 bonus on top of his salary. But unbeknown to the bank, for two-and-a-half years customer relationship manager Allmand, 27, had been rifling the accounts of his portfolio of 300 wealthy customers.

Former customer relationship manager Liam Allmand was jailed for four-and-a-half years in February 2011, after stealing more than £45,000 from wealthy Barclays Bank customers. He said he was so "clever" even the bank's sophisticated security system took two-and-a-half years to spot his thieving.

These cases were straightforward criminal activities, and although it is tempting to ask why Barclays' so-called sophisticated internal financial crime prevention systems did not identify these activities earlier, the most likely truthful answer will be 'what sophisticated internal systems'?

But what about more inchoate dishonesty, what about the way you treat your clients? If you are behaving in an honest and proper manner with your clients, why would they complain about you? What is it about the High Street retail banking industry that means when you join, you leave your morals, your honesty and your integrity in a pile on the doorstep?

Perhaps it has something to do with the culture of the institution which is being joined!

The consumer magazine 'Which' has just published a report on bank selling practices, which makes for compelling reading.

High street banks are offering poor investment advice and recommending inappropriate financial products to consumers, according to an undercover investigation. Which? sent nine researchers - all aged above 60 and posing as retired savers inexperienced at investing - to get financial advice at bank and building society branches across the UK. The study found that 32 out of 37 advisers made misleading statements about available investment products and appeared not to have a good understanding of the financial risks involved.

Many of the bank employees recommended complicated financial products, and which incur hefty fees to pull money out in the short term, which are considered inappropriate for the average investor near retirement age. Even though financial institutions earn commission on the products they recommend, nearly half of the advisers said there was no cost for their advice.

One of the undercover researchers was told by an employee at Yorkshire Bank, a subsidiary of Clydesdale Bank, to invest £50,000 in a bond without disclosing that this would net the bank £4,400 in commission. Earlier in the year, two of Britain's biggest banks, Barclays and RBS, were reprimanded for mis-selling financial products. Barclays Bank is the most complained-about financial services company in the UK, according to figures released in late November 2011. The bank's customers lodged 8,283 complaints with the Financial Ombudsman Service (FOS) from 1 January to 30 June, of which 5,226 were about banking and credit services and 2,085 about insurance cases.

More than two-thirds (71%) were upheld in the complainant's favour – 67% of the banking and credit complaints and 93% of the insurance complaints, most of which related to payment-protection insurance policies. The data covers a total of 69,841 complaints handled by the FOS in the first half of the year. Of the 100,000 businesses under its remit, 142 accounted for 87% of all complaints.

Banks topped the table, with five groups each receiving more than 3,000 complaints and together accounting for 38,286 cases. Lloyds TSB was the subject of 6,947 complaints, Bank of Scotland 5,804, Abbey 2,493, NatWest 2,379, MBNA 2,298, HSBC 2,177, Royal Bank of Scotland 1,812, Alliance and Leicester 1,786 and Nationwide Building Society 1,149. The FOS was deluged with complaints about unauthorised overdraft charges in 2007 and 2008, when it came to investments and pensions, 63% of complaints were about sales and advice, but a spokesman said the latest complaints focused on other aspects of banking services and charges, most notably PPI mis-selling.

Indeed, PPI issues made up 51% of all complaints to the FOS, of which 75% of those complaints were about selling practices and advice. Remember, when reading what follows, please recall that the PPI scandal was determined to be a wholesale engagement in what is euphemistically called 'mis-selling', which is a misleading way of saying ' wholesale, institutionalised fraud.'

The Financial Ombudsman Service publishes an annual review of the cases it undertakes. In last year’s annual review they reported a 58% increase in the volume of complaints referred to them about payment protection insurance (PPI). The FOS said they hoped that the FSA’s proposals in relation to the handling of PPI complaints would be finalised as soon as possible – and that the improved complaints-handling processes subsequently put in place by businesses would result in a significant reduction in the volume of PPI complaints referred to the ombudsman service over the following year (2011).

Unfortunately, the year did not turn out that way. In August 2010 the Financial Services Authority (FSA) introduced new complaints-handling guidance (its policy statement 10/12) about the assessment and redress of PPI complaints. Some businesses started to implement this guidance but a number of high-street banks decided to challenge it.

We may want to ask ourselves why is was so necessary to challenge a policy statement which was intended to make the PPI resolution simpler, but we must also remember, that banks would rather throw money at any issue which might prevent them from having to spend money on a compliance issue, or to repay customers, no matter what the cost. This is all part of their dysfunctional egregious culture.

This meant that these banks started to issue standard letters to customers from autumn 2010, saying they were unable to decide PPI complaints while legal action was ongoing. How many legitimate claimants may have died during this period is not known. This legal action took the form of a judicial review brought by the British Bankers Association (BBA) – on behalf of a number of high-street banks – challenging the FSA and the ombudsman service.

This massive (and expensive) exercise in gratuitous time-wasting resulted in a judgment which was handed down by the High Court at the end of April 2011 – endorsing the FSO approach, and that of the FSA, to handling PPI complaints. Just as the annual review was going to print, the BBA announced that it did not intend to appeal this judgment.

While awaiting the outcome, most banks that were challenging the case stopped responding substantively to many thousands of complaints. Regrettably this led to delays and uncertainties for the consumers in these cases, and following a report on 14 September 2011, the spectre of the biggest financial mis-selling scandal in the industry’s history doesn’t look like going away any time soon.

Millions of customers have now realised that for years banks have made a killing from selling expensive Payment Protection Insurance to people taking out loans – whether or not it was appropriate. It became so profitable for banks to sell PPI that many customers ended up paying for it without even realising they had it.

Others were sold insurance they didn’t need or couldn’t use, but which still ended up costing them thousands of pounds. Now the banks have been forced to put aside billions of pounds to cover the cost of compensation to thousands of customers after abandoning the legal challenge in the High Court.

The latest figures from the Financial Services Authority show that in many cases the industry is still failing in its attempts to resolve people’s complaints. 'Which?' executive director Richard Lloyd says banks still aren’t treating customers fairly. ‘If the next round of complaints data doesn’t show a dramatic improvement then the FSA must take tough enforcement action against banks whose complaints handling isn’t up to scratch.

‘To ensure that consumers get the redress they deserve the FSA must make sure that all major banking groups are required to review the PPI complaints they previously rejected unfairly. These figures point to the blasé attitude banks seem to have towards their customers. In a properly functioning market banks wouldn’t be able to get away with treating customers like this.’

Of the big four retail banks, Lloyds TSB has the worst complaint record, with 84 per cent over the last six months being settled against them. Royal Bank of Scotland and Barclays occupy the middle ground, with scores of 55 per cent and 52 per cent respectively.

Natalie Ceeney, chief executive of the FSA, puts the statistics into context when she says: ‘These latest figures show a significant increase in the number of new PPI complaints referred to the ombudsman during the first half of 2011. This period coincided with the time when most of the high street banks and some other financial businesses had put PPI complaints on hold, because of their legal challenge against the ombudsman service and FSA.’

So, what are we faced with?

We are examining a market sector that has grown too bloated and complacent for its own good. This arises largely out of the fact that there are far too few retail banks to give the customer any real choice, coupled with an attitude within the institutions, that the ordinary rules of commercial probity and legal compliance do not apply to them. This is exacerbated by the fact that most banks now have difficulty in separating their wholesale from their retail arm. Retail client accounts should be separated and ring-fenced miles away from the casino banking end of the institution.

These institutions possess significant criminogenic characteristics. This does not mean they are all criminals, but that they possess the capability to slip into criminal activity whenever it suits them.

So-called 'mis-selling' is a classic example. Customers were routinely deceived into buying PPI insurance, without a full knowledge of the facts, at a significant cost which caused them loss and damage. Such activity is a crime, it is Fraud, and it should have been dealt with as such. The people who sold the products should have been arrested as should their managers, their directors and their Board members, anyone who had an interest and a position in the selling chain should have had their collars felt. The craven attitude of so many British politicians and regulators towards their relationship with the banks, has prevented this example of blatant criminality from being dealt with as such, yet the damage and losses it causes to the country and its citizens are of grotesque proportions, running into many, many billions of pounds

If a group of any other organised criminals had caused in excess of £9 billion damage to UK plc over just one individual financial product, in any other circumstances, then you can rest assured that huge attempts would be made by dedicated teams of law enforcement, to hunt them down, try them and send them to prison.

Because these crimes are being committed by the banks, no-one raises the issue, and yet, if you apply the definitions I included at the beginning, banks bring themselves firmly within the definition of organised crime.

We have to begin to start seeing some major banks as little more than criminogenic enterprises, who deliberately flout or pay little more than lip service to regulations which get in their way of making profit. They have lost any sense of financial proportion, even those whose existence has been preserved by the tax-payer, and at a time when the vast majority of the country is being forced to undergo financial constraints that are causing significant hardship, they still believe that they are entitled to pay themselves bonuses of obscene proportions even when they continue to report losses.

Pure greed influences and informs all their decision-making processes, and we should see and call them 'Organised Criminals' for that is what they truly are.

Father, forgive them, for they know all too well what they do.

Re-tooling up the Police

2011-11-17T04:22:00.000-08:00

In April 1981, the Metropolitan Police Special Patrol Group were ordered into Brixton with instructions to carry out a dynamic 'stop and search' campaign among the youth of the community. A large number of arrests were made for various street offences by well-drilled officers, and the immediate effect among the Brixton residents was to cause enormous resentment. Police in surrounding districts watched in mounting disbelief as the SPG roared through Brixton like a hot knife through butter, and discussed among themselves who could possibly have ordered this campaign, which was guaranteed to cause social unrest of unrecognisable proportions.

Following the urban riots which inevitably resulted, Margaret Thatcher visited The Metropolitan Police Commissioner at the Yard, and discussed the additional training and the list of new riot equipment they needed, including a '...greater variety of riot shields, more vehicles, longer truncheons ...' (Margaret Thatcher 'The Downing Street Years, p.145.), equipment, they would very quickly receive. The riots, and the immense public fear they engendered, provided the political impetus for the Conservative Government to spend a significant sum of money changing the face of Police public order containment tactics. They knew they would not be opposed in providing the Police with the new, aggressive riot equipment, which up to that point had consisted of a rather cumbersome plastic shield, an acutely uncomfortable hardened helmet, and a cricket box!

It is of some interest to recall that in 1974, while the Tory Party were in Opposition, in the aftermath of the Heath government being brought down by the 1974 coal strike, the Ridley Plan (also known as the Ridley Report), reported on the state of the nationalised industries in the UK. The report was produced and drawn up by the right-wing Conservative MP Nicholas Ridley. In the report he proposed how the next Conservative government could fight, and defeat, a major strike in a nationalised industry. Among his many recommendations were the need to train and equip a large, mobile squad of police, ready to employ aggressive riot tactics in order to uphold the law against violent picketing.

These tactics, including the provision of more dynamic riot equipment (subsequently described as the 'tooling up of the police' by Sir John Alderson, Chief Constable of Devon and Cornwall police), would later be successfully employed during the miners strike of 1984-1985, when the National Union of Mineworkers was defeated by the Conservative Government of Margaret Thatcher.

After the Miners' strike had been crushed, William Whitelaw was quoted as saying; '...Without Brixton, I doubt if we could have defeated Arthur Scargill...'

The riots of Brixton, and later Toxteth on Merseyside, fortuitously provided the requisite degree of public anxiety which would enable the government of the day to engage in a wholesale re-arming of the police, without attracting too much criticism from the Liberal Left who would see it as an anti-libertarian gesture. Police agencies which aspire to 'police by consent' are very sensitive to suggestions that their tactics could be making too great an inroad into possible areas of civil liberties, and how we arm our police in this country has always been a very contentious topic. If we are going to see our police being equipped with new and more aggressive weapons of constraint and coercion, we need to be provided with very good reasons for that change, and rioting, burning and looting can prove to be very persuasive.

In August this year, a black 'gangsta', Mark Duggan, was shot dead by police in Tottenham. He was found to have a converted pistol which the Independent Police Complaints Commission subsequently confirmed was a BBM ‘Bruni’ pistol containing live rounds and it was being carried by Duggan hidden in a spare sock, not one he was wearing.

He was shot dead by a police marksman in Tottenham, North London. He had been stopped by undercover officers as he travelled in a minicab and confronted because they believed he was on his way to ‘use the weapon’ he was carrying. Rumours that he had been ‘executed’ fuelled the riots in the North London community, which spawned copycat violence and looting across the country.

So, it was with no great surprise to hear immediate calls for the police to be issued with rubber bullets and water cannons, for use on the British mainland. The immediate calls for these items to be deployed followed hard on the heels of the inner city riots, when gangs of marauding youths ran amok in commercial centres, smashing windows and looting and burning shops. In the post-disturbances discussion, innumerable commentators have sought to find reasons for the riots and how they could have been better controlled, and among the many calls for action was to issue rubber bullets to the Police.

Ironically, the issuance of rubber bullets to confront the inner city rioters would have been a largely pointless exercise. Baton rounds are designed to disperse dangerous crowds, in static situations, where it is perceived that the threat of potential violence and danger to law enforcement is reaching an unacceptable limit. Then baton rounds are effectively used to break up large numbers of protesters gathered together to confront police. They are not prescribed for use against mobile, small running groups of people such as were seen during the looting sprees. Rubber bullets are a crowd dispersal agent, not a missile to be fired at running groups of youths, because they are ineffective against the mobile rioters, and dangerous to potentially innocent persons who might be inadvertently caught up in the fleeing melee.

So why were there so many dark predictions of the use of rubber bullets during the student fees demonstration on 9th November in London? Why were we subjected to the lugubrious face of Commander Pountain as he pontificated on the theoretical use of rubber bullets to protect his heavily armed and armoured officers. I say theoretical because nobody in the wildest extremes of their imaginations really believes that police are going to fire rubber bullets against students. It isn't going to happen.

This what the police spokesman really said about potential violence at the demonstration.

'... 'However, it would be negligent if we did not plan a response to the small minority who may be intent on disruption and may not intend to be peaceful...'

Regarding the potential use of baton rounds, a police spokesman said: '...There are a range of tactics available if there is criminality and violence associated with the event. One of these is the authority to deploy baton rounds in extreme circumstances. These are carried by a small number of trained officers and are not held and used by those officers policing the route on Wednesday...'

So, there you are, no-one policing the demo would carry rubber bullets. So why raise the issue at all?

Now, in the aftermath of the Tottenham and Manchester riots, the time is ripe for a new paradigm in public order management. It is simply all part of a campaign to 'soften up' the British people to get them used to the potential likelihood of the use of these weapons in the near future, so when they are used, no-one can say they were not warned! And when will that be...?

Well, it won't be very long. The impact of the economic austerity measures has not yet really begun to bite, and will not be truly felt until the first part of 2012. Then, when people begin to feel the true impact of the cuts to their living standards; when they see the inevitable upward spiral of fuel costs; the increases in the cost of food; the erosion of their savings, caused in a big part by the outright criminality of the banks and the savings' institutions as they reduce hard-earned savings by hidden costs and charges; the refusal of the big banks to cut their obscene payments to themselves while engaging in wholesale mis-selling practices, and the host of other issues they will have to face, including the increase in the costs of their children's educations, then we will see the emergence of the anger of the hitherto silent class, the group which up to now has sat silent and carried the financial burden through their taxes, while the government has laid billions of pounds of tax-payer's money on the banks, only to see it disappear again in more balance-sheet reconfiguring and bonus awards.

Then the ordinary people of this country will start to find ways of expressing their anger at the failure of the politicians to manage things equitably and fairly, and when they finally realise the growing disparity between those who are reaping millions in banking bonuses or other dividend windfalls and their increasingly straightened circumstances, then even they will move onto the streets. Oh it will all start peaceably enough, with orderly demonstrations, along the lines of the 'Not In My Name' marches prior to Tony Blair's taking us to war in Iraq, but it will not be long before these marches are hi-jacked by the agit-prop groups, the anarchists, the SWP and all the other groups of the political extremes, who long for physical confrontation with the agencies of control. They will gladly catch a free ride on the coat-tails of the respectable Middle Class, until it comes time to take over.

Remember the Poll Tax riots, which in effect proved to be the Rubicon which Margaret Thatcher could not cross, well these manifestations will be a great deal worse and they will involve very extreme violence. The rioters a few weeks ago learned a lot of lessons about successfully confronting the police, and those lessons learned will be re-enacted, as mobile squads of rioters group and re-group, not staying long enough to be 'kettled', moving from flash-point to flash-point, directed by messages promoted on social media messaging systems (are the police really going to shut down the whole mobile phone network, with all the commensurate costs involved to legitimate users?)

The riots will be coordinated and will involve the escalation of extreme violence on both sides, and as the violence increases, so will the calls for the use of the baton rounds, and the police will be hard-pressed to keep them in check. The Right-wing Press, eager to see these weapons used on the mainland for the first time will shout for their use, and they will be brought into the action. Their inexperienced use will lead to serious injuries, indeed, even possible fatalities, as in Northern Ireland, and this will, in turn, aggravate the whole situation. It will be inevitable as the less experienced and the legitimate protestors begin to witness the kind of violence which has marred so many police actions hitherto, they themselves will start to protest at the kind of behaviour being manifested by uniformed officers, as well as the new groups of plain-clothes snatch squads being increasingly used to take down individuals. In protesting at this kind of conduct, they are more likely to find themselves being 'kettled', manhandled, screamed at, violently pushed backwards, hit on the body and legs with long truncheons and even arrested and subjected to the use of 'reasonable police force', which will tend to have a radicalising effect on even the most moderate protestor!

It is only when the middle classes find themselves on the receiving end of police action that they begin to understand what others have experienced in the past, and usually, they don't like it, and they make their feelings felt at the ballot box. That is why the use of this 'Situationist' style methodology can be so effective and could so easily lead to the radicalising of a whole new group of hitherto unaligned groups of people, which will result in turn, in a fracturing of civil society unimagined in our time.

When politicians resort to tooling up the police, they do so for a very good purpose, and they intend the weapons to be used. We are fast approaching that time.

Banking culture saps energy and enthusiasm!

2011-11-08T09:12:00.000-08:00

A fascinating story in today's Daily Telegraph. Told by a former insider at Lloyds Banking Group, he unloads a broadside at his former employers.

'...If some mad professor wanted to conduct a cruel experiment in the psychology of stress, he couldn't do better than to replicate the corporate culture of Lloyds Banking Group...'

He then proceeds to describe what can only be defined as a completely dysfunctional environment, where very senior people are expected to put in punishing hours of work '...to micro-manage the smallest details of everyday business...'

Probably no bad thing if some mega M&A deal is about to be signed off, but to receive an text at 1.00am demanding details of a seating plan or a briefing on a customer recently met, demands an urgent review of the mental balance of the sender!

He talks about an '...endless cycle of reorganisation...' a seemingly permanently repeated activity since the merger with HBOS in 2009, during which, each member of staff has to re-apply for their jobs, and which demands many months of management time. During this time, all effective decision-making had to be put on hold, leading to a state of inaction '...close to paralysis...'

Managers' decision-making authority was eroded to the point that in order to get approval for two additional junior staff required to help undertake a vital compliance task (probably something like a major KYC remedial exercise), it required a study by external consultants, costing far more than the modest salaries of the staff needed, and adding months of delay!

Deferring decision-making became the order of the day, and instead of exercising authority, managers chose to get 'sign off' from as many other people as possible. This, we are told, led to an atmosphere of distrust and suspicion, which the write finally ended by resigning!

As an ordinary man in the street, I used to find myself caught in a quandary when I was forced to determine what sort of service the public are entitled to look for from the major High Street banks. We have been constantly told that the banks have to be free to pay salaries and bonuses which make their ordinary client's eyes water, because the banking process is so complex and they need to be able to hire the best brains, to remain competitive.

I no longer believe this bullshit, indeed, I haven't believed it for many years. When I was in the Fraud Squad, I often had to go to banks to elicit information, get evidence we needed to convict some scam artist, and I never once ceased to be amazed at their apparent lack of common sense, their constant obstruction of every move we needed to make, until they were in possession of a piece of meaningless paper called a 'Bankers Books Evidence Act Order'. Even then they would only eke out the information like it was their own blood.

Later, I watched while financial practices which would shame some three-card trickster became the sine qua non of day to day business practice, while young people, frightened for their jobs, aggressively pushed the sale of new credit cards, new accounts, personal pensions, personal protection insurance policies, whatever was flavour of the month being promoted by their greedy sales managers. No wonder they were allowed to get away with it, there was no-one left with any vestige of business morality left to put the brakes on, and all the time, the level of operational dysfunctionality was getting worse and worse.

If you are one of those who is so fed up with the level of non-service you get from your bank, the lack of management empowerment, the inability to take even the most simple decision, then read this article on page B4 of the Daily Telegraph. I doubt whether Lloyds is alone in this condition, banks are so used to benchmarking themselves and their business methods by what their competitors are doing, that my guess is they are all in the same condition of paralysed inertia, as the author of the article puts it;

'...Middle managers' inability or reluctance to make decisions puts a further burden on senior executives, who are already prone to meddle too much in detail...'

God help us if they had to do something complicated.........

David Cameron's Acid Test of enforcement

2011-10-11T05:21:00.000-07:00

A new report gives the lie to the Prime Minister's bromide that '...we're all in this together...'

Nearly all of Britain's biggest companies legally avoid tax in the UK, including the state-backed Royal Bank of Scotland and Lloyds Banking Group, according to new research.

The charity, 'Action Aid' found that 98 out of the 100 companies on the FTSE 100 base their operations in territories where there is low or no tax.

The heaviest users were based in the financial sector despite the industry's role in the economic crisis.

Britain's four biggest banks - HSBC, Barclays, Lloyds and RBS - have 1,649 tax haven companies between them.

Action Aid's tax justice expert Chris Jordan said: "Tax havens have a damaging impact on the UK exchequer, the stability of the international financial system, and vitally on the ability of developing countries to raise tax revenues which would lift them out of poverty and make them less dependent on aid.

"When multinationals use tax havens to avoid paying their fair share, ordinary people in both poor and rich countries are left to pick up the bill. Spending on doctors, nurses and other essential services gets cut for those who need it most.

"Tax havens might provide the lure of financial secrecy and low tax rates for big companies, but at a time when all countries are desperate for revenues, the UK government can't afford to turn a blind eye."

If this news wasn't nauseous enough, consider the bonus payments that bankers are now demanding.

In a recent survey by recruitment website eFinancialCareers, nine out of ten City bankers said they expect a bonus this year. Of these, nearly half anticipate more than last year; while one in ten expects their year-end payment to rise by 70% or more.

TUC general secretary Brendan Barber was reported as saying: "Banks have played a key part in bringing the economy back to the brink of recession so it's astounding that bankers expect any bonuses, let alone bigger pay-outs..."

"If the government refuses to challenge these multi-billion pound rewards for failure, the least taxpayers deserve is a bonus tax to help pay for the mess they are creating."

Despite several major banks warning that the eurozone debt crisis will hit profits this year, think tank, The Centre for Economics and Social Research, predicts that City firms will hand out bonuses totalling £7.2billion, up from £6.7billion last year.

Mr Barber said: "It makes you wonder what level of financial Armageddon is needed for bankers to not get a bonus."

What we all have to understand is that these grotesquely-paid parasites, who caused the international debt crisis in the first place, are getting their bonuses from money on which little or no British tax has been paid. So, where is their employers' justification for paying such high salaries and bonuses now?

We are always being told that without these payments, these incredibly intelligent people would go elsewhere. Well, now we can see there is no reason to keep them here, because their employing institutions aren't even paying any realistic tax anyway, so these threats are as hollow as are the morals of those who parrot this rubbish. Let the bastards fuck off to another jurisdiction, but make their hitherto automatic right to re-enter this country dependent upon a one-time windfall payment, cleared through H.M.Treasury, before presenting themselves again at Immigration!

David Cameron cannot sit back and contemplate this scenario without feeling very uncomfortable indeed. He has already had cause to observe what damage can be caused by a criminal under-class who had no reason to riot. If these disparities in social wealth become any more egregious, ordinary, decent working people who pay their taxes, seek to educate their children honestly, and who do not live in debt, but who find their jobs shrinking, their costs of living spiralling and their savings dwindling, will start to reconsider their position, and when that happens, their wrath will be terrible to behold.

We are now governed and ruled by faceless men and women in suits who sit in banks and boardrooms and bureaucrats' offices, and have no interest in us or our interests or our way of life. Banking decisions which govern us are made largely by people who have no interest in Britain, yet our Governments, of both colours, meekly acquiesce, and sign up to the bullshit they are fed.

David Cameron needs to go away and read G.K.Chesterton if he wants any assistance on what might lie in wait!

From the poem '...We are the people of England...'

They have given us into the hand of new unhappy lords,
Lords without anger or honour, who dare not carry their swords.
They fight by shuffling papers; they have bright dead alien eyes;
They look at our labour and laughter as a tired man looks at flies.
And the load of their loveless pity is worse than the ancient wrongs,
Their doors are shut in the evening; and they know no songs.

We hear men speaking for us of new laws strong and sweet,
Yet is there no man speaketh as we speak in the street.
It may be we shall rise the last as Frenchmen rose the first,
Our wrath come after Russia’s wrath and our wrath be the worst.
It may be we are meant to mark with our riot and our rest
God’s scorn for all men governing. It may be beer is best.
But we are the people of England; and we have not spoken yet.
Smile at us, pay us, pass us. But do not quite forget.

The World-Check Global Compliance Leadership Forum 6 - 7 October 2011

2011-10-10T07:22:00.000-07:00

To Brocket Hall, Hertfordshire as an invited guest and speaker, to attend the annual Global Compliance Leadership Forum organised and produced by World-Check.

I have known the company since they started over a decade ago when they launched the world's first database for KYC compliance. Today they are rightly considered to be the leading global authority on resolving risk through targeted intelligence.

Now an integral component of the new Thomson Reuters Accelus Screening product, World-Check has been joined by the Northland Solutions Transwatch transaction monitoring software, to create a suite of end-to-end solutions that provide a comprehensive view of regulatory and legal risk, helping organizations manage Governance, Risk and Compliance globally, encouraging growth and innovation instead of bogging them down.

In the distinguished company of Rear Admiral Chris Parry, a specialist in Geo-Strategic Forecasting and Risk Assessment; Professor Alain Bauer, Professor of Criminology; Neville Tiffin, Global Head of Compliance of Rio Tinto; B.C.Tan, Head of Organised Crime Research for World-Check and Keith Packer, a former Commercial General Manager of British Airways, we spent two delightful and instructive days evaluating and analysing high-level issues of compliance with international regulatory demands.

My paper, which examined the issues surrounding narcotics and terrorist money laundering in Pakistan and Afghanistan, sought to evaluate the implications of the lack of meaningful aml systems and controls which still pertain in Pakistan, and how her failure to comply fully with FATF requirements has made her a real risk to international banks who could easily be induced to provide services to Pakistani high net worth individuals, or exchange-quoted companies.

When discussing money laundering typologies in Pakistan, it is an enormous mistake to start by thinking in conventional, money laundering terms.

In Pakistan, cash is routinely used, every day, as the traditional means of value transfer, and a very large number of even sophisticated, educated people will routinely withdraw the entire contents of their monthly pay cheque from the bank, once the cheque has cleared into their account, and hold it in cash.

It is not unusual to observe significant amounts of cash being used to pay for very large bills. When one checks into a hotel, even one of a very high standard, the clerk routinely asks whether the bill will be settled in cash or by the use of a credit card.

Pakistanis keep large sums of cash in their homes, and no-one thinks anything remotely untoward of such significant possession.

Therefore, when conventional money laundering methodologies are reviewed, but in Pakistani terms, the traditionally accepted truisms do not so easily apply.

For this reason, a major number of Western-style anti money laundering methodologies simply have no resonance in Pakistan because the criminals routinely keep the cash, and no-one is in the least bit concerned or suspicious if such sums are used to maintain their lifestyle.

This is not to say that money laundering techniques are not used in Pakistan, indeed, the more important requirement for illegally-acquired money in Pakistan is to have an acceptable way to explain its existence in cash form, as opposed to seeking to use conventional ways of laundering it. This does mean, however, that in many cases, the laundering methods adopt a form of 'reverse money laundering' where the activities of the person conducting the laundering activity are aimed at providing a putative legitimate provenance for the money, to give the cash a legitimate 'legend'.

We are dealing with a State which is very resistant to implementing meaningful aml systems and deliberately engineers a legally-instituted system of cross-border financial transfers, designed to allow the free-flow of all kinds of international currencies into and out of Pakistan, but without any meaningful questions being asked as to the source, provenance or ultimate destination of that money, a system which flouts international law and makes a mockery of any internal anti-money laundering proposals or initiatives, and which deliberately facilitates the financing of international drug trafficking and terrorist financing.

Addressing an audience largely composed of senior risk and compliance professionals is no sinecure, and a sharp debate ensued, identifying and recognising the problems associated with States like Pakistan and Afghanistan, and asking how they can safeguard their institutions from the risks of doing business with major Pakistani criminal elements or Afghan terrorist paymasters.

When discussing the difficulties associated with the narcotics connection which Pakistani money poses, it became easier to appreciate the dichotomy which financial sector practitioners have to face. Nevertheless, the debate did point up some potential solutions, which I have no doubt the World-Check and Thomson Reuters professionals present would have noted and will be working on.

This is the real value behind these fora, the chance to meet and discuss real-life problems with those who have most to lose from getting them wrong. This is where Thomson Reuters is really defining a new agenda of risk management, and opening up a whole new series of prevention mechanisms and tools. Working at this depth of intellectual challenge and with this degree of granularity defines a whole new scenario of sophisticated supports for the regulated sector.

As these kind of new products come on stream, they will quickly spotlight those 'so-called ' solutions which seem to promise much but deliver very little, and in time, they will be excluded from the market, as the new Thomson Reuters solution suites become recognised as providing significant added value.

Thank you World-Check for the invitation, thank you to the new friends and contacts I made, it was one of those events that was worth every minute!

New City Trader Scandal

2011-09-16T03:00:00.000-07:00

Well, why are we so surprised? It was only a question of time before another city gambler stepped forward to claim the title of greater fool! I use the word ‘gambler’ deliberately, because that is what these people are. I mean the people who throng the city desks engaging in financial trading, whether client-focused or proprietary. Theirs is a gambling mentality, and their liabilities are magnified exponentially by the very instruments they adopt.

Derivatives instruments are fundamentally risk-limiters, used to manage and mitigate risks. When you reverse their polarity, and put them in the hands of people who are remunerated by the amount of money they can make for their institutions, speculating on the world’s markets and using instruments to leverage their exposure to potential gain, and you have a recipe for disaster.

But we have known this for a long time. Nick Leeson, 1995, Yasuo Hamanaka 1996, John Rusnak, 2002, Jerome Kerviel, 2008, all of them lessons in how and where the regulators and the Compliance departments got it so fatally wrong.

Regulatory agencies have demanded greater and tougher surveillance systems and controls to manage these risks. Daily reporting of exposed positions to the regulators is mandated, but nothing seems able to identify these traders effectively, until the problems burst open, with the concomitant losses matched only by the red faces at all levels of control.

Yet, these problems do not need to take management by surprise.

Northland Solutions Ltd, now owned by Thompson Reuters have long been able to offer a transaction monitoring tool which runs a daily surveillance function of every trader in any trading department. The tool will monitor their build-up of open positions, at what time, in which market and at what price; it will monitor when specific positions are closed, and at what price; it will closely track position limits being reached, where margin limits are being potentially crossed, and it will provide a fully holistic picture of the trading activity being undertaken by every trader in the team.

Where positions are growing dangerously large, or where they might indicate that some other, possibly illegal activity is being planned, (insider dealing, market manipulation, etc) the system will send a warning to the compliance team to alert them of the risks being adopted by the trader, and give them an opportunity to act accordingly!

There is absolutely no excuse for any institution not to implement such systems and put them in place immediately. No CEO should be able to say in future that he or she was not aware of the risks of unmonitored trading.

This time, some very senior heads at UBS need to roll. It will not be enough simply to lay all the blame on the trader, there are others who need to share this responsibility.

My private expectation is that this trader has been making some exceptional profits in the past, and that he has been allowed to carry on all the time he was making money. This time it seems he may have read it wrong, or more likely, something in the market has intervened to alter the shape of his playing field. Whatever the explanation, he should never have been allowed to get into this position in the first place.

International Investigation into Insider Trading emerges from LIBOR Case

2011-08-29T04:25:00.000-07:00

The investigation into the alleged manipulation of the LIBOR rates during the financial crisis of 2007/8, have unearthed additional evidence of what appears to be a series of insider dealing rings at some of the largest global investment banks.

A report in the Daily Telegraph of 29th August examines the background to these investigations, and refers to enquiries being undertaken in the US and in the EU, and has elicited a statement from one source close to the investigation that states; '...What seems far more certain is that some individuals will be facing prosecutions for more traditional market abuse...'

The report goes on to state that banks on both sides of the Atlantic are allegedly involved in the investigation including Barclays, Lloyds and Royal Bank of Scotland, all of whom have revealed that they are part of the investigation.

If prosecutions do emerge from the insider dealing allegations, it is believed that they will commence in New York.

Such an investigation and prosecutions would be a very good thing, if for no other reason than they have a far better prospect of success in the US, and the consequent sentences imposed upon conviction will be more severe.

It has taken the US to lead the way to demonstrate to the rest of the international banking community that they must not assume that they are immune from prosecution, if they commit serious criminal offences.

For too long, selected areas of the banking sector have behaved with a cavalier disregard to the requirements of international criminal law, and for too long, respective Governments, including the UK, have allowed banks to continue to commit crimes as if they were uniquely immune from the laws which govern ordinary criminal behaviour.

Only by criminalizing these people and locking them up for a significant period of time, will the message get through that they are not the protected species so many of them consider themselves to be.

The Daily Telegraph report states quite openly that for the LIBOR prosecution to succeed, the authorities will have to prove that there was collusion at the highest level among banks. If this is the case, and there was a criminal conspiracy of such a kind, then these actions have to be construed within the organised crime continuum, because that is where they truly belong.

Only when Governments begin to realise that such crime, albeit committed in the banking suites, is as much 'organised crime' as any other example of the genre, will they begin to find other, more effective ways of dealing with these activities.

Why Zero Tolerance Policing policies are not needed in the UK.

2011-08-16T06:23:00.000-07:00

There has been much loose chatter about the adoption of so-called 'Zero Tolerance' policing methods, to begin to make inroads into social crime environments. Jack Straw used to wax lyrical about their use and many other politicians have begun to extol the virtues of US-style policing models, as a means of tackling the inner-city gang crime culture.

As is so often the case, politicians fail to understand the reason for the adoption of these tactics in America, and they reach out for the sound-bite, as opposed to the reality.

So-called 'zero tolerance' policing grew out of 'the broken-windows theory' of urban degeneration, which posited that where early signs of decay or social damage, or the commission of minor offences was observed, by taking immediate and robust action, more serious criminal activity could be quashed in the bud, leading to a fall in crime numbers.

So popular did this theory become that it was widely adopted in a number of major US cities. It had one hugely successful, and originally unforeseen consequence, which enabled US police to make major inroads into levels of serious crime among gangs, hitherto considered impossible.

It is this aspect that politicians are lauding when they talk about 'zero tolerance', but ironically, we do not need this application in the UK.

In the US, the powers of the police to stop and search suspects for carrying drugs, illicit firearms, other weapons, or stolen goods are hugely constrained by US Federal law. In so many cases, the relevant offending items are discovered as a result of a search, which can quickly be deemed 'illegal' because the officer cannot demonstrate that he had 'probable cause' for the making of a search of the defendant or his house or his car at the time. If the search is deemed to be illegal, then any articles discovered as a result of the search, are deemed to be inadmissible in evidence, and many gang members had walked free from court despite being found in possession of serious weapons or firearms.

Such a loophole had caused great soul-searching to the US police because it meant that it was becoming well-nigh impossible to tackle street gangs when seen in the community.

This was where 'zero tolerance' came to the rescue.

Recognising that street gangs demanded high levels of 'respect or 'street cred', a concept not hitherto unknown in Tottenham or Brixton, the cops quickly realised that issuing summonses for minor offences such as jay walking, public urination, drinking alcohol in a public place or any of a list of minor 'citable' offences, would so offend the gangster's sense of dignity, that the summons would be completely ignored.

All the police then had to do was attend the summons court on the due date, and upon the defendant's non-appearance to answer the summons, obtain a warrant for his arrest. Such a warrant gave a right to enter the defendant's apartment, by force if necessary, to effect the arrest, and while lawfully in the premises, who could possibly know what other incriminating items in the form of drugs, guns, knives or stolen goods might be found in the course of the search, none of which could be challenged in court as being illegal, and the defendant would be charged accordingly.

The effectiveness of this method soon became a favourite ploy of police, indeed, special warrant squads were formed, to hit the homes and squats of the criminals, few of whom seemed to learn the lesson of the issuance of a summons, and continued to refuse to acknowledge its receipt, preferring to risk a raid sooner than appear to lose face by answering a summons!

That was the main reason behind the apparent success of 'zero tolerance' in the US, because it resulted in a very large number of hitherto perceived 'untouchables' finding themselves banged up with maximum prejudice.

We, in the UK, do not have the same problems associated with the legality of producing items seized in a 'stop and search' exercise, so the need for such actions are not called for in this country. We could and should make more use of the summonsing power under the Motor Vehicle Construction and Use Regulations to harass criminals, particularly those who like the 'cred' the possession of certain types of vehicles gives them, and we should do everything in our power to get them disqualified from driving, but we must accept that these are only disruption exercises, valid though they may be.

Let our politicians start listening to experienced police officers first about what does and does not work against criminals, and stop reaching for populist sound-bites, and we might start to get somewhere.

The first thing they must do is to begin to restore and mend the morale of police which was so damaged by the misplaced findings of the McPherson Report. They must restore the recognition that policing involves the use of 'force', it is not a social-work agency or service. Police must be allowed to become far more robust in their dealings with gangsters, and those whose actions are akin to a new model of urban terrorism, so as to begin the take the fight back to the enemy and reclaim the streets.

Let the police become more resolute in their ambition to lock up those who would use violence, intimidation, riot and affray to get their own way, and let them get the support they need from the Courts.

In the 1950's there was dangerous gang violence on the streets of West London, directed by gangs of white gangsters, and aimed at black immigrants, who were intimidated and hurt by these unwanted and largely unprovoked attacks. The courts responded by handing out very lengthy prison sentences to those who were apprehended, and it did not take long for the message to be heard. The violence was quashed in the bud. It can be done again, without needing to import other methods which simply would not work effectively here.

Rowan Bosworth-Davies is a member of the Standing Group on Organised Crime.

Trying to make sense of mob violence

2011-08-10T03:11:00.000-07:00

Listening to the media in these last few days, I have been swamped by the plethora of opinions seeking to explain the recent rioting in London and elsewhere.

It is pointless refusing to try and understand why these events are occurring because they will inevitably re-occur, and we shall not have leaned any lessons from the experience.

Much of the explanation, I believe, lies in the cultural mind-set of the groups of people who are committing much of this violence. It is a mind-set moulded by failing social background, role-model absence, educational rejection, all leading to a recognition that access to the traditional status of success in the eyes of the community from which they come, is denied to them. If they cannot achieve ownership of the trappings which designate success by lawful means, they will do so by criminal means.

Emile Durkheim defined this kind of conduct as 'Anomie'.

According to Durkheim, anomie is a breakdown of social norms and it is a condition where norms no longer control the activities of members in society. Individuals cannot find their place in society because they either have no clear rules to help guide them, or they have rejected those standards. Rapidly changing social conditions as well as a need to adjust to widening disparities in wealth, work and aspirations, leads to dissatisfaction, conflict, and deviance.

For Robert Merton in 1938, the term anomie, meant a discontinuity between cultural goals and the legitimate means available for reaching them. Applied to Western cultures, the emphasis on the goal of monetary success but without the corresponding emphasis on the legitimate avenues to march toward this goal, stimulates a huge sense of normlessness. In other words, many people in a society may aspire to be viewed as 'success' models, flaunting the badges of such success, but the ways in which people go about obtaining those success symbols are not the same, because not everyone has the same opportunities and advantages as the next person. This leads almost inevitably, to deviance.

Such deviance is not contained to the underclass however. Other members of other social groupings will also commit crimes to achieve success (Insider Dealing, Market Manipulation, Money Laundering, etc) but in this article we are looking at the riot and looting impulse, which is largely, but not exclusively an underclass phenomenon.

A significant amount of the violence and looting appears to have been generated by a type of individual, who when interviewed by media representatives, gives dis-jointed explanations for his conduct. What does come across most clearly is that they appear to have no concern for the likely consequences, if they were to be arrested. It is almost as if they view the likelihood of a custodial sentence as an inevitability in their life, indeed, many of them may already have experienced such a phenomenon. So the first observation is that they do not appear to have any fear of even the most severe social interventions. These are young people with nothing to lose, so through looting, they have everything to gain! It is another form of terrorism, where ordinary people are put in fear, where extreme violence is routinely used, but the ambition is greed.

Another observation is that they all aspire to the very trappings of success which are denied to them by their rejection of the education process, thus exacerbating their inability to get jobs. They target shops selling expensive training shoes, gold and jewellery, electrical goods, mobile phones and computers, all the detritus of the 'celebrity' status which they so earnestly crave.

They loot shops because they can, and when there are enough of them, acting in concert, there is very little to stop them. These actions are fluid, they differ from ordinary political riots where the aim is to confront authority, these are more like hit and run tactics, always moving, thus making them much, much harder to Police and control.

Government must begin to address the very real problem of social inequality. Just providing more hard-pressed tax-payers money in the form of welfare benefits is not the answer. The welfare states which for the last 60 years have provided our social environment with cradle-to-grave protections in terms of health, education and social welfare are now facing insolvency. Putting it at its simplest, they are running out of money, while at the same time, they are having to face up to the likelihood of a future in which fewer individuals will be either willing, or indeed available to provide the necessary degree of funding to continue to maintain those benefits at even contemporary standards.

Politicians must begin to recognise that in many areas of our country there are communities with no possible likelihood of work, no real care for the future, and whose many unplanned children are born into social dysfunctionality which no amount of intervention will prevent. These feral communities have no fear of authority, they are inured from their earliest days to consider all forms of social control as something to be rejected and they will continue to provide the means for further riots and looting in the future, as they begin to realise what they can achieve by these actions.

When we begin to recognise that a new form of terrorist warfare is being developed, then we can begin to define ways of dealing with these individuals!

Responding to FSA Demands for Remedial Activities.

2011-08-07T06:38:00.000-07:00

A recent report in June 2011 by FSA, identified serious weaknesses in the management of important compliance requirements, across a wide range of banks and financial institutions.

Specifically, with regard to client identification issues, PEP handling, correspondent banking and wire transfer activity, the Report found significant short-comings in a large number of banks reviewed.

The FSA stated; '... We will, where appropriate, use our enforcement powers to reinforce key messages in this report to encourage banks and other firms to strengthen AML systems and controls and deter them from making decisions which do not take adequate account of money laundering risk...'

That Report should have been an alarm bell in the night for those banks whose failures to provide adequate preventative provisions, bring themselves within this category.

But how has it got to this state of affairs in the first place?

Well, the first people to be blamed are the FSA themselves. They have consistently failed to enforce the AML Regulations with any degree of rigour. They have continued to issue discussion documents when they should have been giving these banks a serious going over for failure to adhere to the Regulations.

This meant that the banks only implemented compliance controls in a fairly piecemeal fashion, and with no great degree of willingness to spend any realistic sums of money on implementing truly effective controls.

Yes, the regulators did issue fines and costs from time to time, but it is pointless fining a bank. They can always pay the fine, and then pass on the cost right back to their customers. If all a Regulator does nothing more than impose a fine which the institute has no difficulty in paying, then they only have themselves to blame for allowing this dreadful state of affairs to flourish. They have always failed to understand the culture of the banks they supervise.

Let us start by recognising the most basic of all truths which attach to the banking sector's willingness to engage voluntarily with financial regulatory requirements - particularly as they pertain to anti-money laundering - they just don't give a damn about it. Consider these quotes from the FSA report;

'... Some banks appeared unwilling to turn away, or exit, very profitable business relationships when there appeared to be an unacceptable risk of handling the proceeds of crime. Around a third of banks, including the private banking arms of some major banking groups, appeared willing to accept very high levels of money-laundering risk...'

'... Our main conclusion is that around three quarters of banks in our sample, including the majority of major banks, are not always managing high-risk customers and PEP relationships effectively and must do more to ensure they are not used for money laundering. Despite changes in the legal and regulatory framework a number of the weaknesses identified during this review are the same as, or similar to, those identified in the FSA report of March 2001 covering how banks in the UK handled accounts linked to the former Nigerian military leader, General Sani Abacha. We are concerned there has been insufficient improvement in banks’ AML systems and controls during this period...'

By far the most egregious however was; '... At a few banks, the general AML culture was a concern, with senior management and/or compliance challenging us about the whole point of the AML regime or the need to identify PEPs...'

What these three statements identify so clearly is that the British banking fraternity have together stuck two fingers up to the law and the regulations which seek to prevent criminal money from being moved through our institutions. It's not an accident, it's not inadvertent, it is deliberate, concerted and done with the most simple motive, greed!

So, what happens when the FSA has been in and conducted an Arrow review? When the glaring lack of any meaningful controls has been identified and highlighted; when the absence of any realistic transaction monitoring IT systems is discovered; when the KYC processes ignore more than they recognise, then there should only be one way forward.

Such an absence of controls is primary evidence of a wholesale policy of deliberate evasion of the law, with the aim of generating even more financial gain, in other words, an exhibition of organised criminality.

That conduct should be treated in the same way as other major organised criminals. The Chief Executive should be invited in to a meeting at the FSA and promised that unless his systems and controls are brought into an acceptable condition within a short space of time, with the proper trained staff to operate them, then he and his main Board will be prosecuted for the failure to implement the necessary degree of controls, and a custodial sentence sought.

This may sound draconian, but I believe that it is the only way to engage the hearts and minds of these executives who are willing to deliberately ignore the law in the name of profit. They have had years to get their act together and they have wilfully ignored the requirements.

So, let them spend some time in Wandsworth. It won't take long for the message to get round the other institutions, which would trigger off a Gadarene-like rush to start to undertake the remedial exercises properly. Such a criminal conviction would disbar these men from any further role in the City or the banking sector, and it would predicate a period of wholesale reform in the boardrooms of every banks in the country.

So, let us hope that those with the power to enforce the Money Laundering Regulations start to view some of the most egregious financial institutions who fail to demonstrate that they are taking the implementation of proper remediation, as the organised criminals they undoubtedly are, and deal with them accordingly. It would be amazing what a few weeks banged up would achieve!