f13.net

Are there any accountants/finance people here that have had experience in fraud or forensic accounting?  My independent study professor wants me to find something on banking fraud.  Here is what he said exactly....

"As for the forensic accounting issue - see if you can find some literature related to frauds in the banking industry.  I would like to develop some case studies that might provide insights for credit analysis.  For example, are there tell-tale signs that might allow credit analyst to detect fraudulent information before they make loans based on that fraudulent information?"  

I think he forgets that I have only taken intermediate one and have only begun gaining a background in accounting.  I have no background in forensic accounting except for the book I read. Unfortunately, this book wasn’t about banking fraud.  He mainly wants journals, books, etc.... not a lot of websites(If you know some though don't hesitate to tell me).  Don’t go out of your way to get this information.  However, if you have read something, please let me know.

Thanks

I worked for a Bank for 5 years, many of them doing credit apps, business loans, and so forth.  Most of the fraud I dealt with was shit like Nigerians sending out people to get jobs, photoshoping the paychecks and  simultaniously cahsing them at 14 branches.

It sounds like what you are looking for is something at a much higher level, like the Citibank Private Banking scanadal in Japan.

If you want something going on right now, do a couple of searches on the Bank of Ephraim.  It's currently going down the tubes because something like 75% of its portfolio was with one particular polygamist cult in Southern Utah/Northern Arizona.  Lots of juicy stuff and would make a great case study.

Search on Lexis/Nexis for bank fraud, forensic accounting, that kind of thing.  I always used it a fair amount for Developmental Econ research papers,  to help tie theory to actual cases.

I've been a public accountant for a few years now,  but don't really do much with banks/financial institutions,  and can't say I'm too familiar with bank fraud.  Mostly,  my audit work is non-profits (single audits in particular).

I think you might want to lean towards financial ratio analysis (current, quick, debt-to-equity) for some leading indicators.  Comparing industry to company specific usually yields some results.  Cash flows analysis may help.  Examination of related party activities is a hot topic now as well.

The biggest warning sign of fraud, really, is weak internal control.

Fraud is a hot topic,  but most of the enthusiam masks a basic fact:  Well done fraud is incredibly hard to find ahead of time,  and NO ONE is willing to pay what it would require to search for fraud with even a small amount of success.

Generally when my firm has bumped into anything,  we've had suspicions but never any real proof until the gig was up.

In most client's minds,  the size of the bill doesn't justify the search for the problems.  And I like to eat.

My knowledge base with forensic accounting is limited, but I would suggest looking into cases studies that are done by the FBI if you can find a catalog. They typically hire tons of accountants and have a straight forward fraud division when it comes to investigating banking. I'm not exactly sure where you'd find that kind of information, but I know that since it is a government agency, any cases they brought to trial would be a matter of public record.

Thanks for the help guys.  I have done some research on the FBI website and lexis nexius.  I have found a good bit of information.  Do you think I should start my paper out with some basic info about fraud?  Maybe touch on the toughness of finding it and how internal controls are the cause of 90% of frauds.  The book I read just talked about stuff like that and I think that a good basis of that would be a good idea in this paper, but I have never written a huge paper to this extent.

/kinda lost

I'd say with a big paper like this skip most of the stuff that's seemingly rudimentary. Start off with the specifics and broaden them into a general idea of how to perform adequate credit analysis with good internal control. Citing the cases and where things went wrong is a good start to build up a paper on how they could have been avoided with correct techniques.

Paelos seems to be right on the money. You'll basically want to focus on process, and illustrate with historic examples.

If you get too bogged down in a rudiementary section on what fraud is, why is it bad, and whatnot...IMO, the paper loses focus. In this case, you may want to give the reader some credit for grasping the subject matter.

Bring the noise.
Cheers.............

Dark Vengance is correct. Don't tell your professor what they already know. If they assigned you a paper on fraud them they probably know a great deal about it. Like it has been said before, write about the extrapolations and your interpretations and conclusions of the data and not the fundamentals. Oh and make sure you cite every single thing in today's academic world. I've lost a few classmates to plagarism because they decided that it would be too much work to type up the biblography...

The Parmalat case isn't bank fraud directly, but the company fooled people into thinking they had billions in bank accounts when they had nothing.

As to your professor's question, credit and equity analysts all have to depend on the same audited finanicals so I don't see an advantage there.