Chapter 3 - Impact of Financial Crime on Firms

Question 1

What kind of risk does financial crime pose?

Answer 1

A systemic risk to the industry.

Question 2

What is counterparty risk?

Answer 2

The risk that firm might no be able to deliver on its promises to another.

Question 3

How did fraud at Lehman Brothers cause the collapse of major financial institutions?

Answer 3

Misstatement of financial position led to the value of credit default swaps based on sub-prime mortgages causing the collapse financial institutions.

Question 4

How can a firm counter financial crime such as market abuse and misstatements?

Answer 4

Sophisticated reporting systems like transaction reporting.

Question 5

How much was RBS fined in 2013?

Answer 5

£5.6 million

Question 6

How much was Deutsche Bank fined?

Answer 6

£ 4.7 million.

Question 7

How much was Merrill Lynch fined?

Answer 7

£13.3 million

Question 8

How can criminals target financial firms to steal data?

Answer 8

• Infiltration
• Theft of computers or data files
• Hacking
• Social engineering - deceiving call centres

Question 9

How might an asset theft take place?

Answer 9

Account takeover or other internal or external fraud e.g. forged transfer of assets or forged sale instructions.

Question 10

What are the potential impacts of theft?

Answer 10

1. Reduced profits and risks to the financial stability of the firm.
2. Reputational damage.
3. Increased costs of investigation and remedial work.
4. Increased insurance costs