Application of Razaee (2005) ‘CRIME’ Framework on Organizational Frauds

Discuss About The Split Ballot Experiment Business Ethics?

With the advent of globalization, the business process has tends to become more and more complex. This has turned the business arena into a competitive one. Organizations in order to gain a competitive advantage over their rivals indulge in various frauds and unethical practices that lead to serious consequences at certain times. Over the past decade, several cases of corporate frauds have been reported and as a result, the stability of the market was disrupted. In addition to the organizations, the stakeholders face most of the consequences and tend to suffer significant losses. Unethical practices and cases of fraudulent activities within organizations have become a major cause of concern in the global business community. In regards to this, attempts have been made in the study to present a detailed discussion on the various implications of organizational frauds and its impact on the stakeholders of the organizations. In addition to that, efforts have made in the study to illustrate on real life case studies based on organizations in Australia, Europe and Asia. Moreover, the study also deals with applications Razaee (2005) ‘CRIME’ in each of the cases addressed in the study.

Europe: Barings Brothers and Co. limited

a) The Alleged party: In the year 1995, the bank collapsed due to fraudulent activities. Nick Leeson, the head of the derivates department in Singapore, dissolved one of the branches of the bank in Singapore due to fraudulent activities. In addition to that, not only the head of the department but the operations manager along with other few accomplices were involved in the case (Albrecht et al. 2015).

b) The recipes of the fraud: Notably, the alleged parties were able to make small amounts f gambles in the future arbitrage market and thereby covered for the losses that were reported as gains to the headquarters in London. It was seen that, the alleged parties were involved in alteration of the books of accounts to cover up the unethical practices. Moreover, it was noted that, the alterations in the books of accounts when a fellow members of the organizations brought in 20 new contracts that costs the organizations £ 20,000.

c) Motive behind the frauds: The primary motives behind the frauds were to make short-term gains through small gambles and thereby, make huge profits. In addition to that, the alleged parties were involved in several other fraudulent and unethical practices that earned them millions within a short period (Anand et al. 2015).

Europe: Barings Brothers and Co. Limited

d) Risks factors involved: One of the major risk factors involved in regards to the case study was that of lack of any proper monitoring mechanism to keep a check on the activities of the members of the organizations. Moreover, the governing authorities in London did not put any restrictions in the trade of derivates that allowed Nick to work flexibly and commit the frauds. Additionally, the management of the Singapore branch did not put any effective measures that would have helped them to keep a check on these fraudulent activities (Connelly et al. 2016).

e) End results: In view of the corrupt practices identified above, the organization not only suffered significant amount losses but the business operations were severely hampered. Because of the issue, the Singapore department was dissolved and Nick Leeson along with the other alleged parties were convicted for committing corporate frauds.

a) The Alleged party: In the early 1980s, one of the leading insurance companies in the Australian market got involved in corrupt practices and a suffered a significant amount of losses of $ 336,905. In the year, 1983, the power of control of Bishop Gate was passed to Andrew Stathis, who was allegedly involved in corrupt and financial frauds, which cost the organization millions. Moreover, on investigation, several material misstatements were identified in the financial reports of the organization that was made in order to cover up for the frauds (Dugan, and Taylor, 2016).

b) The recipes of the fraud: It was noted that, Andrew was involved in transferring a significant sum of money to overseas accounts. A sum of $ 2 million was bought to Australia from the overseas pool in order to increase the capital of the organizations. However, as per reports most of the money was unaccounted for after Andrew quietly left the organization and disappeared.

c) Motive behind the frauds: The primary motive of Andrew Stathis was to gain a large sum of money through unethical practices that involved transfer of large sums of money to foreign accounts and alteration of the books of accounts of the organization (Einarsen et al. 2016).

d) Risks factors involved: In regards to the issue identified above, the liquidity factor is one of the major risks involved. In addition to that, prevalence of stringent organization policies and recording mechanisms may have helped the organization to prevent the issue. The management of the organization needs to caters to the operations o the organizations and thereby, keep a thorough check o the transactions made in order to prevent happening of such events in the future.

Australia: Bishop Gate Insurance Fraud

e) End results: The aftermath of these incidents was reflected when the organization was placed for liquidation, and there was over $ 19 million sum of money that remained unaccounted for. In addition to that, during the time or the collapse, around 5000 claims of the policyholders were outstanding to the organizations

a) The Alleged party: In the year 2015, the Central Bureau of Investigation (CBI) registered a case against the Kingfisher Airlines pressing charges of defrauding of public sector banks. Vijay Mallay, the owner of the owner of the organization was involved in procurement of significant amount of loans from the IDBI Bank of India. However, the loan amount or any related interest was not paid back to the Bank and the money remained unaccounted for (Giacalone and Promislo, 2014).

b) The recipes of the fraud: It was noted that, in the year 2015, Vijay Mallay, the owner of the owner of the Kingfisher Airlines was involved in procurement of significant amount of loans from the IDBI Bank of India. However, the loan amount or any related interest was not paid back to the Bank and the money remained unaccounted for. He was convicted for money laundering and defrauding public sectors banks (Joshi et al. 2015).

c) Motive behind the frauds: The primary motive identified in regards to the corrupt practices was to launder a large sum of money through unethical practices that involved transfer of large sums of money to foreign accounts, alteration of the books of accounts of the organization as well as tax evasion (Wouters et al. 2014).

d) Risks factors involved: The risks factors that were involved in regards to the issue identified above, involved huge laundering of money and tax evasion. There was lack of any proper control mechanism within the organizational structure that led to such incidents. Moreover, the management of the organization was not effective enough in efficient management of the financial resources of the organization (Merchant and White, 2017).

e) End results: Kingfisher Airlines was liquidated in light of the incidents identified. In addition to that, several charges of felony and civil crimes were pressed against the owner of the organization, Vijay Mallaya. Moreover, a heavy fine was also put on him and was put in house arrest initially (Shanahan and Seele, 2016).

In view of the discussion made above, it is very important for the management of the organization to make a critical analysis of the issues identified and accordingly formulates policies that will help the organizations to revive from their current situations. In context to this, the following recommendations are made:

• The management needs to take into consideration all the transactions that are entered into by the organizations.
• Setting up of proper monitoring mechanism that would help the organization to keep a regular check on the business operations
• Adoption of stringent organizational policies that would help to avoid any contingencies in the future
• Promotion of ethical practices within the organizational structure and encouraging the members of the organization to deter from any kind of fraudulent activities (Trevino and Nelson, 2016)
• Regular evaluation of the business operations

• Setting up of proper monitoring mechanism that would help the organization to keep a regular check on the business operations
• Setting up of an extensive database management system that would help in keeping and maintenance of proper records
• Adoption of stringent organizational policies that would help to avoid any contingencies in the future
• Promotion of ethical practices within the organizational structure and encouraging the members of the organization to deter from any kind of fraudulent activities
• Encouragement of Corporate social practices within the organization

• The management of the organization needs to see that, the organizational policies are in compliance with the legislations issued by the government
• Maintenance of a standard amount of liquidity within the organization that would facilitate the management in timely payment of its obligations
• Regular evaluation of the business operations
• Keeping in compliance with the terms and conditions of the various stakeholders of the organization
• Promotion of ethical practices within the organizational structure and encouraging the members of the organization to deter from any kind of fraudulent activities
• Encouragement of Corporate social practices within the organization

Asia: The Case of Kingfisher Airlines

Conclusion

In light of the above study, it can be established that, organizational frauds and increase in unethical practices has become a major cause of concern for many. Due to the increase in the competition in the market, it is noted that sometimes an organization tends to indulge in fraudulent practices and unethical practices in order to gain a competitive edge over their rivals. In addition to that, it was noted that, in almost every country, cases of frauds and unethical practices remains prevalent. This not only hampers the credibility if the organizations but leads to incurring of significant losses of the stakeholders of the organization. In this regard, attempts have been made in the study, to illustrate on the key issues related to frauds and unethical practices based on three practical examples of corporate frauds. Additionally, efforts have been made in the study to present recommendations in view of the issues identified in each of the case studies.

Reference list

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Recommendations for detection and prevention of frauds: