Wednesday, March 5, 2014

Financial Fraud Trilogy

There once was a fellow named Chubley
Who mortgaged collateral doubly.
"It's a trick," he confessed,
"I effectuate best
When markets are frothy and bubbly."

It's fruitless to place one's reliance
On oneself in defrauding one's clients;
Much better to work
With the back-office clerk
And ideally, the head of compliance. 

A credit swap trader named Moore
Keeps tickets of trades in his drawer.
Though transactions all post
By an e-trading host,
It's a throwback to dealing room lore. 


Today's idle limerick musings, unlike most of the verses in this space, do not describe any particular incident or people.  However, I was prompted to reflect on financial fraud by events at the Citigroup subsidiary Banamex, which has just suffered a $400 million loss from nefarious goings-on at one of its customers. The Mexican oil field services company Oceanografía, a supplier to the national oil company Pemex, had been selling their Pemex receivables to Banamex to raise funds - a routine trade finance transaction - and apparently were so pleased at their funding success that they decided to sell another $400 million of receivables that they didn't have. 

It's another reminder that financial fraud may be detectable and even, in our too-big-to-jail era, punishable; in the hands of a determined practitioner, however, it is rarely preventable. 

Here is a link to the latest background on this case from the Wall Street Journal:

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