How to steal billions. Ten of the world's largest banking fraud

The scandal at the French bank Societe Generale, which lost about € 7 billion by the actions of trader Jerome chervil, many media touted as the biggest fraud in history. In our ranking of the largest bank frauds, it is close to the truth.

In tenth place in the world ranking - the largest bank fraud in the history of Vietnam. The scandal broke out in March 1997, when it became aware of the arrest in Ho Chi Minh City businessman named Tang Minh Phung, for failing to pay on the loan of the State Bank of Foreign Trade of Vietnam (Vetkombankom).
Was arrested at the same time his business partner, director of the state company "Epko" Lien Khyu Thein. Companions, or rather associates throughout the 90s were actively engaged in land speculation, using the rapid growth of the real estate market. With the assistance of corrupt bankers Vetkombanka and Industrial and Commercial Bank of Vietnam (Incombank) they received large loans to a network of front companies.
Stagnation in the real estate market turned for fraud fiasco. Show trial Tang Ming Fung and Lien Khyu Tahini, and another 75 defendants in the case in large fraud socialist ownership over traditional socialist countries harsh sentence. Tang Minh Phung, Lien Khyu Thin and four other defendants were sentenced to death, the others - to various terms of imprisonment.
Four of the bombers managed to pardon and replace the sentence to life imprisonment, and Tang Minh Phung Ho Chi Minh City Branch and Deputy Incombank Pham Nhat Hong were shot. The total damage suffered by the two state-owned banks has been assessed in this process is not less than $ 280 million
  In ninth place ranking - a scam in the Bank of China, dating back to 2004, but made public in 2006. Two former branch manager of the State Bank in the city of Kaiping Xu and Xu Chaofan Guodzhun who had taken in 1992-2001 almost half a billion dollars, could hardly expect any other verdict than firing, if they were caught in the homeland.
But namesakes fraud had the sense not only to translate the stolen $ 485 million in the accounts of front companies in Hong Kong and do their washing in Macau casinos, and Las Vegas, but to marry a U.S. citizen. Although both marriages were recognized fictitious trial Xu were both already in the United States. The trial was due to start this year. But in any case, the defendants can not doubt that the verdict would be more humane than the U.S. court verdict possible Chinese.
 In eighth place ranking - John Rusnak, a currency trader at Allfirst Financial, a scandal at the time (in 2002) is the U.S. subsidiary of the second largest bank of Ireland Allied Irish Banks. Like several other traders whose names can also be seen in our ranking, Rusnak initially caused heavy damage to the bank for its operations in currency futures, and then went on fraud, hoping to make good the damage by risky speculation. In 2003, Rusnak was sentenced to seven and a half years in prison.
 Sixth place ranking divide (with $ 1.1 billion), two cases of bank fraud. Thus, in 2006, China has published the results of an audit of the state of the Agricultural Bank of China in 2004. The $ 1.1 billion auditors evaluated only irrevocable damage from 51 fraudulent. To this we may add other financial irregularities - when the deposits ($ 1.8 billion) and loans ($ 3.5 billion). The crime followed a purely Chinese sentences. 64 bank employees were fired and put on trial 21, 1331 was subjected to disciplinary measures.
 As can be seen from the rankings, the Japanese one is quite capable to do something that had created thousands of Chinese - to deliver its fraud damages of $ 1.1 billion True, executive vice president of the American branch of a Japanese bank Daiwa Toshihide Iguchi it took 11 years. Iguchi fraud facilitated by the fact that he not only traded on the stock exchange of public U.S. Treasury bonds, but at the same time in his office responsible for the control of financial transactions.
Then it was like in the case of the Rusnak - loss of inept actions and fraud to cover up violations and compensate for the damage. In 1995, Iguchi confessed to their violations in a letter to the bank's management. The bank tried to hush up the case, which led to him to adverse effects: Daiwa was forbidden to carry out operations in the U.S.. Yes, of course, such fraud can not be compared with thoughts of domestic villains who turned the idea on how to profit from such services as transportation ATM Moscow.
  In fifth position - another rogue trader, Nick Leeson. In the Singapore branch of the British bank Barings, he worked primarily on transactions in futures contracts on stock index Nikkei. The events unfolded on the above-described scenario. Failed speculation, and then fake documentation to cover up violations and new, riskier, more large-scale operations in order to compensate for the damage. Leeson managed to hide losses from 1992 to 1995. The earthquake in the Japanese city of Kobe, the Nikkei has fallen off and led to the loss of Leeson, surpassing the capital of the bank Barings. Singapore trader fled, leaving a note "I` m sorry ", but was arrested and extradited. Singapore court sentenced him to six and a half years in prison, of which he spent four and was free after he was diagnosed with colon cancer.
  The fourth-largest banking fraud in history was recorded in the Dominican Republic. An amount of $ 2.2 billion - and so much lost Banco Intercontinental - not bad by the standards of any country. For the Dominican Republic, it was the equivalent of two thirds of the budget for 2003 - a year when the bank collapsed. Transition failed bank under government control has led to a 30 per cent inflation, currency devaluation, riots.
The investigation showed that, roughly speaking, a bank robbing majority owner of its shares Baets Figueroa and several top managers. At the trial of the perpetrators in the collapse of the bank, not only by allegations of fraud and money laundering and concealment of financial information from regulators (all computers in a specific bank's operating system, through which most of the operations has been hidden from the possible checks). Court decision Baets Figueroa was sentenced to ten years in prison. Sentence his cousin and part-vice-president of the bank Marcos Baetsu Cocco still out, the remaining defendants were acquitted for lack of evidence.
  Third place in the ranking is a scandal in the fourth-largest Austrian bank Bank Fuer Arbeit und Wirtschaft AG, owned by the Austrian Trade Union Federation. The scandal that erupted in 2006 and is still far from over: currently ongoing trial. This case of fraud can be divided into two main stories. First, the bank lost about € 1 billion in foreign exchange transactions, and provided a loan to the former chief executive of U.S. brokerage Refco Inc. immediately prior to the bankruptcy.
In a case involving two former directors of the bank, investment banker Wolfgang Flatley and auditor Robert Reiter. One of the ex-directors, 71-year-old Helmut Elsner, who sought refuge in France, but was granted Austrian justice in original conditions. He was taken home in a special medical plane equipped with medical equipment for cardiac patients, as Elsner tried to challenge the issue in court, referring to the state of health.
  In second place, we finally see Societe Generale and Jerome chervil. The biggest fraud in the banking industry in its history this case can not be considered, however, deserves the title of "bank fraud of the century" as a scam to head our list belongs to the past century.
So, in the first place - the collapse of Bank of Credit and Commerce International in 1991. In the list of charges, sounded to the bank after its collapse, not only banal financial fraud (but on a large scale), but also tax evasion, money laundering, bribery, support of international terrorism, involvement in the arms trade and nuclear technology. The bank's assets at the time of its bankruptcy was estimated at $ 25 billion, but failed to detect about half that amount.

European banks have lost a third of assets in the U.S.

The global economic crisis has seriously shaken the position of European banks in the United States. Over the past five years, European financial institutions have reduced their assets in the United States by a third to less than a trillion dollars, the analysis of data the Fed held The Financial Times. In their place come the banks of Canada and China.

In the time since the beginning of the crisis, the assets of European banks in the U.S. market fell by 540 billion and now account for 973 billion dollars, reported FT. Contributed to this write-off of assets and their sale, closure of entire businesses. Have also contributed U.S. regulators, demand from European financial institutions to increase capital. Involvement of dollars for them was more problematic, so many, rather than to increase capital, just cut the amount of assets.

"This is a volume decline compared to the level of five years ago. It's more like a return to the way European banks look 10 or even 20 years ago when they had a more modest balances "- quoted by FT partner of the law firm Allen & Overy Doug Landy, head in her regulatory practice in the field of financial services.

"European banks have been hit just two. First, it was necessary to improve capital ratios. Second, in the past year and a half, the U.S. money market funds stopped buying commercial paper of European banks because of the debt crisis. This not only raise the price of raising funds in the U.S., but also the existence of assets in the United States has become a financial burden, "- said RBC daily Mediobanca analyst Christopher Wheeler.

Most assets in the U.S. fell to the Irish banks - with $ 130 billion in September 2008 to just $ 3.8 billion in March. Presence in the U.S. market of German and French banks, though decreased - from 427 billion to 267 billion dollars and 420 billion to 373 billion dollars, respectively - still remains significant. However, the French financial group BNP Paribas, Credit Agricole and Societe Generale promises to further cut its U.S. business.

In the past, European banks many times have changed their attitude to the U.S. market, the growing presence there, turning the operation, but this time it will be extremely hard to regain lost ground, says Christopher Wheeler. Freed European banks actively take place local players. Wells Fargo, which became the most active U.S. bank in buying the assets of European competitors, has recently acquired a portfolio to $ 6 billion from the German WestLB. Last year, he also shared with JP Morgan bought part of loan volume of $ 9.5 billion, offered for sale by Anglo Irish Bank. Capital One acquired U.S. subsidiary of online banking from the Dutch ING Group.

Active are not just American financial giants. The invasion began in the USA Canadian players. TD Bank in 2009, increased its assets in the U.S. with 170 billion to 251 billion dollars a U.S. assets of Canadian banks in general are now 654 billion dollars, more than double the same period of French banks. Assets of Chinese banks in the U.S. for the last five years have grown more than tenfold - from 4.4 billion to 63.8 billion dollars

Distressed mortgages in the United States can do municipalities

California Mortgage Resolution Partners encouraged local authorities to buy back bonds tied to bad loans, refinance loans under federal programs, and re-sell bonds to new investors

Initiative consultancy Mortgage Resolution Partners (MRP) are interested two cities of San Bernadino near Los Angeles, reports Los Angeles Times. San Bernadino has been hit by the mortgage crisis - prices fell by 50% or more. "Negotiations with the private sector to restructure loans do not have time for the spread of the epidemic - the member of the municipality of San Bernadino Ed Burke - even with historically low interest rates, many hard to refinance loans because of stricter requirements for borrowers and the difficult situation in the housing market."

MRP suggests that local authorities took advantage of the possibility of alienation from rights holders of mortgage bonds to loans given by the constitution. To help residents of the District, the government must buy credits which exceed the market value of the mortgaged home. Then the loans must be refinanced on federal programs and re-sold to new investors.

MRP initiative applies to non-standard mortgages without government guarantees, the risks of which are entirely private investors. This category includes instruments linked to 532,000 loans, said a senior managing director of Amherst Securities Group Laurie Goodman. Of these, 3,165 credits belongs to the Elk Grove and Sacramento.

We now have 5.4 million borrowers mortgage amount exceeds the value of the house (estimated MRP). Guarantee of Fannie Mae and Freddie Mac have approximately 90% of the mortgage loans in the U.S.. According to Amherst, on the balance of Fannie Mae and Freddie Mac $ 113 billion of non-standard loans. The total market for securitized U.S. mortgages - more than $ 8 trillion.

San Bernadino until decisions are not made, but the initiative has attracted the interest of several cities and districts in the United States, including Chicago, Elk Grove, Berkeley and Suffolk County in New York. True, Chicago Mayor Rahm Emanuel said that the problems in the housing market are too global to try to resolve their efforts of local authorities.

MRP together with local authorities willing to buy loans at 75-85% of the market value of housing. For example, a house worth $ 100,000 would be paid $ 75,000, while the amount of credit for tens of thousands of dollars more. The homeowner will have to apply for refinancing under the federal program loan for $ 97,750. The remaining $ 22,750 - a profit of investors, commissions MRP, legal expenses and reserves of the municipality. MRP promised investors 20-30% of revenue. But if the initiative MRP will be accepted on a national scale, the loss of the bondholders could reach 30% (estimate Moody's).

Association securities industry and financial markets (SIFMA) suggests taking loans originated in the districts, which has a right to dispose of municipal loans from mortgage trusts, with the market for securitized mortgage bonds. The solution must be "a positive impact on the cost of housing, and not exacerbate the fall in prices and reduce the willingness of investors to invest in housing district and its residents," said the representative of SIFMA Tim Cameron.

SIMFA and ASF have received a legal opinion stating that the exclusion of mortgage bonds is unconstitutional, because the benefits of this will be only MRP and private investors. Federal Housing Finance Agency U.S. (FHFA) also support the initiative MRP is not promising.

"We have seen this movie - says Stephen Glyukshtern response regulators, who heads the MRP, - several Wall Street firms and their lobbyists in Washington will fight like hell to destroy the solution that can help ordinary Americans." Investors buying refinanced loans, MRP promises up to 30% of income, and bankers - billions of dollars in fees. MRP itself is going to take $ 4,500 commission on each loan.

U.S. restructure loans in December

As a result of a sharp fall in real estate prices, millions of Americans turned to the banks more money than you can gain from the sale of their homes taken out a mortgage. Experts estimate that one in five Americans, have initiated mortgages, in this situation, and now the size of its debt exceeds the market value of a home, the purchase of which the loan was granted. We are talking about more than seven million people in the U.S..

According to the "Russian news service", the number of victims could rise to a quarter of all mortgage customers in the event that U.S. real estate prices will fall another 5%. At the same time authoritative agency Standard & Poor's warned that next year we can expect a fall in prices and a 10%.

Now the mortgage crisis continues to complicate the situation in the U.S., and the global financial market. In the tie that Freddie Mac and Fannie May have put forward the idea to limit loan payments to 38% of income Americans, the stability of the market must once again falter. This is due to the fact that Fannie Mae so last quarter loss of $ 29 billion, and the reduction of income from taxpayers on loans, put them in an even more difficult situation. As a consequence, they will again have to ask for support from the national budget, which would be difficult for the U.S. financial system. International stock markets have already reacted to the news index falling U.S..

However, the government did not stop there. Who will take some changes in the legislation that will affect taxpayers mortgages. The changes relate to the fact that the government plans to restructure part of the debt creditors Fredie Mac and Fannie May. It is expected that the legislation will be reviewed in mid-December and will be held at the same time the debt restructuring, people will pay on the loan is less, but the payments are spread over a longer period. However, I must admit that the new law will affect only those taxpayers who have already managed to cover 90 percent of credit. And there are, statistically, less than one-tenth of all borrowers. But at least they will not have to worry about the fate of their homes.

In this series of bank failures, mortgage-related, in the U.S. continues. Recently, on the official website of the Federal Deposit Insurance Corporation (FDIC) of the United States of America has information about the destruction of two U.S. banks - Security Pacific Bank (Los Angeles) and Franklin Bank (Houston). Note that after the failure of all deposit accounts of Security Pacific Bank were transferred to Pacific Western Bank, and Prosperity Bank received the invoice Franklin Bank.

Thus, from the start of the global financial crisis, which grew out of the mortgage crisis in the U.S. market, nineteen credit institutions of the country into bankruptcy. It is interesting that in 2007, only three banks were such a fate. However, as seen in the news, the government is still trying to maintain a policy of maximum loyalty to the borrowers.

The world economy in the event of a disaster will not last more than a week

Expert Group argues that the global economy can withstand large-scale destabilization due to natural disasters or acts of war only for a week as governments and businesses are not sufficiently prepared to cope with the effects of an emergency. Events such as the volcanic ash cloud in 2010, which prevented air travel in Europe, the earthquake and tsunami in Japan and flooding in Thailand in the same year, showed that key sectors and businesses could be adversely affected if disruption in the production or supply continue over a week. "One week is the maximum term, which will make the economy, working on the principle of" just in time said in a report of the London Institute of International Affairs Chatham House. The current fragile state of the global economy causes it especially vulnerable to unexpected shocks. According to the expert group, and 30% of the gross domestic product of developed countries may suffer directly as a result of crisis situations, particularly in the manufacturing and tourism sectors. It is estimated that the SARS outbreak in Asia in 2003 was worth commercial companies about 60 billion, or about 2% of GDP East Asia, the report said. According to the World Bank, after the tsunami in Japan and the nuclear crisis in March 2010, the volume of global industrial production declined in the following month by 1. 1%. A cloud of volcanic ash in 2010 cost the European Union 5-10 billion euros and put some airlines and travel companies to the brink of bankruptcy. "I would like to think that we can learn from our experience and in the future become more resistant, but it will not happen unless governments and commercial companies have not prepared better and do not arrange alternative delivery channels, which will be available in the event of disasters" said Alyson Warhurst (Alyson Warhurst), head of the British consultancy Maplecroft. "BE PREPARED" Costs can rise rapidly if the crossings or in the main production centers of outages will last several days, which could jeopardize the food and water supply as well as energy and communication networks. In the case of a prolonged power failure, some businesses will be forced to cut investment or jobs, or even to consider closing, leading to a permanent decline in the pace of development. In general, governments and commercial companies well prepared for and able to manage a powerful, unpredictable disasters, as their plans of action in an emergency is rarely taken into account worst-case scenario. "Insurance funds and business planning for emergencies often involves a return to pre-crisis status quo. However, this approach may not be entirely adequate in the world of complex economic and social risks, which can not return to the normal course of operations after the crisis said Bernice Lee (Bernice Lee), lead author of the report. "In an interdependent world, many industries, especially the expensive production may need to review their business model" just in time she added. Climate change and a lack of fresh water are additional risk factors that impose further limitations on infrastructure and resources. In recent years, experts have warned the government that the government does not properly prepared to meet the challenges associated with the effects of national crisis. The UK government in 2007, has been criticized for its lack of preparedness for flooding, which cost the economy 3. 2 billion pounds. The Expert Group recommended various ways to improve measures for governments and private companies to overcome the consequences of extreme situations. They emphasized the importance of social network resources as useful purpose in the exchange of information in case of crisis. During the civil unrest in London in 2010, social networks such as Twitter proved invaluable means by which many people were able to track the movements of the rebels in the capital of the UK and to take the necessary precautions.

U.S. companies do not undertake to predict its financial results for 2012

Uncertainty about the future of U.S. companies of the business has reached its maximum level since the last financial crisis.
Only 20% of the 500 largest U.S. companies to make any predictions about the financial performance this year. And most of those who try to predict the future, do not expect anything good.

Of the 410 companies included in the base for the calculation of the index S & P500, which is reported for the last year, only 86 made the forecast for 2012 expected earnings per share. This is the lowest figure since the third quarter of 2009, when the U.S. was still reeling from the financial crisis, according to the research firm Capital IQ, owned agency Standard & Poor's. Typically, about a third of the largest U.S. companies report their expectations for future returns on a quarterly basis. In this case, at the peak of the crisis in 2008, the proportion of businesses trying to somehow guide the investors in his business prospects, fell to 15%.

"We note the marked reluctance of companies to be specific in their forecasts. When they talked about their prospects for 2012, they tended to make general comments that apply to any company in any sector "- The Financial Times quoted an analyst Capital IQ Christine Short. Uncertain growth companies in the future began late last year amid worsening European debt crisis and uncertain economic prospects in developing countries.

However, even those companies that try to forecast its future cash flows, not very optimistic. Of the 86 companies, which issued its forecast for this year, 54 are waiting for the deterioration of business and only 26 are counting on growth rates. Another six corporations believe that the dynamics of their business will be the same as in 2011. Many of these companies also provided incomplete projections, as they can not predict, such as the impact on their business, currency volatility and fluctuations in commodity prices. Thus, the company Colgate first time in 13 years refused to make a forecast for earnings in certain regions.

Analysts believe the reluctance of companies to make any predictions now a response to macroeconomic uncertainty. "The macroeconomic environment is not estimable. CEO does not know what will turn the situation in Europe, the CEO did not know China will face a hard or soft "landing" of the economy, the CEO does not know what will eventually be the situation in the U.S. economy. CEOs feel exactly the same as everyone else ", - told RBC daily strategist at Miller Tabak & Co. Peter ABC. In addition, U.S. companies have recently focused on the emerging markets, a situation which is less amenable to prediction, he said.