kiar notes

1. INTEGRITY &
ANTI CORRUPTION COURSE
KIAR
Kementerian Pendidikan Tinggi
2.0
Building a Generation with Dignity, Integrity and Corruption Free ”
“

2. WHITE-COLLAR CRIMES
7
Module

3. "According to the leading audit firm
PricewaterhouseCoopers (PWC), there is
an INCREASE in the white-collar crime
index in this country in 2018.”
Datuk Seri Akhbar Satar,
President of Transparency International Malaysia
Astro Awani, 26 November 2018
"25,000 investigation papers
involving commercial crimes were
opened nationwide involving losses
amounting to RM6.2 billion for the
period from January to December
2019."
"The police arrested 15,000
individuals involved in the crime"
Datuk Seri Mohd Zakaria Ahmad,
Director of Bukit Aman Commercial
Crime Investigation Department
BH Online, January 30, 2020
Why is it important
for us to know?

4. White-collar Crimes
This term was introduced by the American
sociologist, Edwin Sutherland in 1939.
"A crime committed by a
person of respectability and
high social status in the
course of his occupation"
- Edwin Sutherland, 1939 -
Edwin Hardin Sutherland
13 Ogos 1883 – 11 Okt. 1950

5. White-collar Crimes
General meaning -
non-violent, financially
motivated crime.
Committed by
professionals in the
public and private
sectors.

6. White-collar Crimes?
Generally,
professionals wear
white shirts and ties.
Why called

7. Blue-collar Crimes vs White-collar Crimes
Crimes committed by lower
social groups cause injury
and damage to property.

8. White-collar
Crimes
Embezzlement
Cyber ​
​
crime
Fraud
Accounting fraud
Ponzi scheme
Corruption

9. White-collar Crimes
Case studies

10. - Study by ACFE in 2013 -
USD3.7
trillion
Every year, businesses
lose 5% of their profits
due to fraudulent
activities. Worldwide,
the total loss is USD3.7
trillion.

11. Case 1: Enron Scandal
In 2001, the energy giant Enron went
bankrupt due to fraud in its financial
reporting.
This Enron auditor had his license revoked.
As a result of the Enron scandal, Arthur
Anderson was severely affected and was no
longer the world's largest firm.

12. Case 2: Collapse of Barings Bank
• Barings Bank - the oldest bank in the United
Kingdom.
• Once owned the account of Queen Elizabeth
II.
• Bankruptcy in 1995, after 233 years of
operation.
• Cause - fraud, illegal speculative activities by
his manager, Nick Leeson.
• Leeson caused Barings to lose US$1.4 billion.
• Leeson was jailed for 6½ years.

13. • Bernard Lawrence Madoff (born April 29, 1938)
- Ponzi Scheme criminal legend.
• Also known as a Pyramid Scheme.
• Madoff once held the position of chairman of the
National Association of Securities Dealers
Automated Quotation (NASDAQ).
• 2008 - Madoff is arrested, $65 billion is in his
account.
• Madoff admitted that one of his subsidiaries ran
a massive Ponzi Scheme.
Case 3: Bernie Madoff's Ponzi Scheme

14. • On March 12, 2009, Madoff (71 years old) pleaded guilty to 11 charges.
• Madoff was sentenced to 150 years in prison. He was also ordered to repay $170 billion to his investors.
• While in prison, two of Madoff's children died. One committed suicide and the other due to cancer.

15. • Aman Shah – 24-year-old executive at Hock Hua
Bank, earning RM1,800 per month.
• In 1990, Aman stole 1 cent every day from bank
customers’ accounts.
• Money was deposited into a proxy account at
another bank.
• He lived in luxury. Has 6 supercars, i.e.,
Lamborghini Countach (RM1.3 million), Mercedes
Benz 300SL (RM502,000), Mercedes Benz 300E
(RM192,000), Porsche Carerra 928 S4
(RM638,000) and BMW 329i (RM68,000).
Case 4: The story of the 1 cent thief

16. • Aman Shah displayed his 3 cars at a showroom,
Bukit Bintang (June 1990).
• He once appeared live on the show Sekapur
Sireh (TV3), sharing the advantages of each of
his cars (June 3, 1990).
• The former manager became suspicious after
watching the show and filed a complaint.
• Aman Shah was charged in court for fraudulent
activity amounting to RM4 million.
• He was found guilty and imprisoned for 5 years.

17. • The pioneer of the Ponzi scheme in Malaysia.
Popular around the 80s, in Taiping, Perak.
• Founded by Pak Man Telo, a former journalist.
• This scheme uses new investors' money to pay
dividends to early investors.
• Pak Man Company - Pestama Enterprise
• Accept public investment, promise high returns of
10% every month.
• 50,000 investors, total investment of RM99
million.
Case 5: Pak Man Telo Scheme

18. • Year 1989 - Pak Man was arrested by Bank
Negara.
• He was accused of illegally accepting
deposits from the public.
• His scheme became unstable. Investors
claimed their money.
• There was a commotion at Pak Man's
residence.
• Climax to investors' anger - Pak Man's son
was kidnapped for ransom.
• Pak Man was found guilty by the court and
imprisoned for 2 years.

19. THE LATEST CRIMES
White collar crime & trafficking

21. ∙ Masterminded by Taiwanese and Chinese
syndicates - using international lines from
Hong Kong and local.
∙ The 4 most popular modus operandi:
a. win a lucky draw.
b. lie about a kidnapping and demand ransom.
c. impersonate a police officer, court official or
other government agency.
d. posing as an official of the National Bank or
a commercial bank.
MACAU Scam

22. Lucky draw
∙ The victim received a phone call - informing the
victim that he had won a lucky draw worth
millions of dollars from a Hong Kong and Macau
company.
∙ The syndicate provided a phone number to
contact if the victim wanted to claim the prize.
∙ Once the victim agreed, the victim was required
to pay tax and insurance by depositing money
into a specific account to claim the prize.
∙ After the transaction was completed, the caller
failed to be contacted, and the promised prize
money was not delivered.
MACAU Scam (1)

23. 'Spoofing' police officers / government
agencies
• The victim received a phone call from an
individual claiming to be a court and police
officer.
• The victim was allegedly involved in illegal
activities (such as ah long, secret societies and
drug trafficking)
• The victim was asked to transfer money from
his account to a specific account, supposedly to
avoid the victim's account being frozen by the
authorities.
POLIS
(scam)
MACAU Scam (2)

24. 'Spoofing' official of central bank or
commercial bank (credit card)
• The victim received a call from someone
claiming to be a bank officer.
• The victim allegedly failed to make a credit card
payment.
• The victim was instructed to contact someone,
supposedly an official of Central Bank of
Malaysia (BNM), to avoid having his name
blacklisted or his bank account frozen.
• The victim was asked to transfer money to a
specific account through e-banking or through a
cash deposit machine (CDM).
MACAU Scam (3)

25. Kidnapping and demanding ransom
∙ The victim received a phone call from someone
who claimed that their child or relative had been
kidnapped.
∙ The victim was tricked into transferring the
ransom money to a third party account number
provided by the caller (syndicate).
∙ Other tricks / tactics - alleged hit and run and
failure to pay bank / financial institution loan
debt.
MACAU Scam (4)

26. ∙ Victims met over the internet and then
fell in love.
∙ The suspect claimed to want to go to
Malaysia because he wanted to marry
the victim.
∙ Upon arriving in Malaysia (supposedly),
the suspect/syndicate member contacted
the victim and claimed that the
authorities had detained the suspect for
several offences.
∙ The victim was required to pay a sum of
money to allow the suspect to be
released.
Love scam

27. • The victim met the suspect through social media.
• The suspect convinced the victim that he had fallen in
love with the victim.
• The suspect intended to send a 'package' to the
victim as a sign of love.
• The victim was contacted by someone claiming to be
a customs officer or delivery service company -
informing them that the package sent to the victim
had arrived.
• The victim was ordered to pay tax or insurance
because the package was found to contain
undeclared money/valuables.
• The victim was only aware of being cheated when the
promised item was not delivered, even though
payment had been made.
Parcel scam

28. ∙ Caused by the customer's negligence for
disclosing the password to a third party.
∙ The victim received an SMS purporting to have
won a cash prize.
∙ To claim the prize, the victim is instructed to open
an internet banking account and then follow the
instructions given.
∙ The instructions include disclosing the password
and making the syndicate's mobile phone a
medium to receive bank verification code SMS.
E-banking scam

29. ∙ Syndicates trick victims into revealing bank
account or credit card information.
∙ The syndicate sends fake e-mails pretending to
be sent by a legitimate party (banking institution).
∙ The email asks the victim to disclose personal
information.
∙ some cases redirect victims to fake websites
that resemble legitimate websites.
Phishing

30. Fraudulent applications
∙ The syndicate made credit card applications
by forging identity cards, salary slips and
employer confirmation letters.
∙ The syndicate turned an empty, uninhabited
house into a postal delivery address.
Credit card fraud (1)

31. Account takeover / Identity theft
∙ The involvement of 'insiders' in financial institutions.
∙ They give all account holder information to the
syndicate.
∙ The syndicate will contact the 'Card Centre'
introducing themselves as the owner of the card
and make a report about the loss of the card.
∙ Syndicate will make a change of address
application.
∙ Once approved, the bank will replace the card that
was reported lost without the original cardholder's
knowledge.
∙ A new card will be posted to the syndicate address.
Credit card fraud (2)

32. Non-received issue fraud
∙ Credit card delivery requested by the
customer is stolen or intercepted.
∙ Postal workers are most likely involved.
∙ The original card falls into the hands of the
syndicate, which maximises purchases on
the credit card.
∙ Cash withdrawal will occur if there is an
ATM PIN on the original credit card for cash
withdrawal.
Credit card fraud (3)

33. Recognise the
fraudster profile

34. KPMG: Global profiles of the
fraudsters
• The report was published in May 2016.
• Study of 750 fraudsters worldwide.
• Study period March 2013 - August 2015.
• Identify fraudster profiles - involve fraud
and malpractice in the organisation

35. GENDER
• Men (79%)
AGE
• 36 - 55 years old (68%)
• 26 - 35 years old (14%)
• Over 55 (8%)

36. The majority of fraud is the act
of 'insiders', colluding
• Company employees (65%), most
have worked for more than 6 years
• Former employees (21%)
• 62% of fraud incidents are committed
by more than one person (collusion)

37. Fraud is committed by individuals who
hold positions and are respected
• Executive / Non-Executive Director (34%)
• Manager (32%)
• Staff (20%)
• The majority of fraudsters are respected
individuals in the organisation (38%)

38. Internal control weaknesses
cause fraud to be committed in
the organisation (61%)
The main cause of fraud?

39. The most frequent frauds are:
1. Misappropriation of assets (fraud in procurement)
- (47%)
2. Fraud in financial reports - (22%)
Technology becomes an
assistant (or enabler) for fraud
to be committed.

40. Fraud detection
• Complainant / whistleblower report (43%)
• Examination of the company's
management - for example, through an
audit (22%)
• By accident (14%)

41. Because of
personal gain and
greed
Because he has the
ability
Organisational
culture
To reach the target -
hide losses to receive
bonuses
Why is fraud committed?

42. Why is fraud committed?
To achieve the target -
hide losses to protect
the organisation
To meet budget
targets - hide losses
to stay in the
organisation.
Other motives (loss of
stakeholder trust,
avoiding legal action, for
publicity, for ratings)
Other motives than
those mentioned
before

43. • It is one of the white-collar crimes.
• The effects of bribery are more serious.
BRIBERY

44. ACTIVITY

45. https://www.youtube.com/watch?v=FJWG7Qv0LZs
BANK FRAUD FATHER
AND SON SCHEME 1. Watch the video (7.33
minutes)
2. Discuss the nature of the
offence and how it was
committed.
3. Discuss the effects of this
crime.