Letter of the Day | The blame game
I have read with interest some of the articles appearing in the Gleaner online featuring the financial losses resulting from frauds (white-collar crimes) committed on financial institutions. What really caught my attention, however, were the statements made by the justice minister, Mr Delroy Chuck ( Sunday Gleaner of May 26, 2019). The co-chair of the Anti-Fraud Committee of the Jamaica Bankers Association posited that the failure of the justice system to provide stiffer penalties for fraudsters has resulted in the preponderance of fraud. Mr Chuck, in response to these comments, argued that the blame should be laid squarely at the weaknesses in the banks’ financial systems. Having worked in the banking system as an auditor and fraud examiner for over 12 years, I think that both positions have merit.
There is an argument that the more security features or internal controls built into a system, the greater the cost to develop the system. It is also argued that there may be increased customer dissatisfaction where there is a rigorous verification process. Also, it may be further argued that the performance or efficiency of the system may be impeded or compromised due to enhanced security features activated in the system. The fact is that management has to decide which risk is greater – the cost of fraud or the cost of security – internal controls designed to detect and/or prevent fraud.
The justice minister quite rightly stated that banks need to strengthen their financial systems in order to reduce the incidence of fraud. However, it must be pointed out that the current legislation and penalties are inadequate and, therefore, will not act as a deterrent to white-collar crimes. The Government has significantly strengthened the Anti-Money Laundering legislation and its regulations. More recently, the Road Traffic Act has been significantly overhauled with stiff penalties included, aimed at reducing the carnage on our roads.
If we are going to reduce the incidence of white-collar crime or mitigate the risk of fraud, I would suggest to the honourable minister to have the current legislation updated and the relevant regulations put in place. A strong message should be sent to fraudsters. They need to know that fraud does not pay. In my view, there is no justice in a system where a person commits a crime, spends three to six months at Her Majesty’s pleasure and when released enjoys the ‘fruits of his or her labour’.
The financial institutions have to get their act together and invest the resources necessary to strengthen and adequately monitor their financial systems. Sooner rather than later, they are going to come to the realisation (if they have not yet done so) that the cost of fraud is going to have a negative impact on their bottom line.
It is time for the Government and the financial sector to stop pointing fingers and playing the blame game. They need to come together and put the necessary legislation, regulations and systems in place to rid the society of the scourge of white-collar crime.