Fraudulent money transfers: a case from Turkey

Abstract

Purpose -The purpose of this paper is to show to the public in general and auditors in particular that the money deposited to the banks that operate in an uncontrolled medium can be misused by owners of the banks. Design/methodology/approach -The paper has been designed based on a fraud theory. The theory has been developed on financial analysis and audit tests. The theory then revised and the existence of a bogus company and its intermediary role in the fraud scheme has been proven. Findings -The paper explores that banks controlled by unreliable owners can lead to misuse of public's funds in accordance with the directives of the owner. Public's money can be transferred to other group companies in an illegal manner-in excessive amounts and never returned to the bank by means of applying different accounting techniques. Practical implications -Auditors, who may audit group companies that include a bank or banks with deposit receiving and lending rights should pay attention to the transactions between the group's bank and the other group companies. The lending may be excessive in amount and/or never paid back and various accounting malpractices may exist. Originality/value -The case that the paper covers reflects the author's own audit experiences. The names of the companies have been changed but not the essence of the events. From this perspective it sheds light onto the path of an auditor who happens to be in a similar situation.

Theories of financial crime

“…Fraud theory argues that three conditions of fraud are arising from fraudulent financial reporting (Ilter, 2009): Incentives/pressures. Management or other employees have incentives or pressures to commit fraud. Opportunities.…”

“…An attitude, character, or set of ethical values exists that allows management or employees to intentionally commit a dishonest act, or they are in an environment that imposes pressure sufficient to cause them to rationalize committing a dishonest act.Thus, the risk of fraud is a combination of incentives/pressures, opportunities, and attitude/rationalization. The fraud examination process centers on the fraud hypothesis approach, which has four sequential steps (Ilter, 2009): Analyzing the available data. An auditor gathers document‐evidence depicting all of the business. Developing a fraud hypothesis.…”

The effects of public governance and national culture on money laundering: A structured equation modeling approach

“…For example, Utility Theory argues that criminals will try to maximize the benefits from their criminal behavior such that if he/she is caught and punished, his/her total wealth will be maximized (Gottschalk, 2010). On the other hand, Ilter (2009) states that three conditions lead to fraudulent financial reporting: incentives or pressures that lead management and employees to consider committing fraud, opportunities for management and employees to commit fraud, and an attitude or set of ethical values that allow management or employees to deliberately undertake fraudulent activities.…”

Information management for investigation and prevention of white-collar crime

“…An example of a specialized investigator-to-technology system is a fraud examination process tool that centres on the fraud hypothesis approach, which has four sequential steps (Ilter, 2009): a. Analyzing the available data. An auditor gathers documentevidence depicting all of the business.…”