The Fickle Finger of Fraud

By | 2017-07-17T12:21:27+00:00 March 28th, 2017|Global Market Update|

How do you smell a rat? Charles Ponzi, author of the first Ponzi scheme. Source: Boston Public Library Detecting financial fraud can be challenging. We know there are lots of people who want our money. It takes decades, sometimes a lifetime, to build a nest egg. It’s important to safeguard it. But in the real world people lie, cheat, and steal. Financial products are especially prone to distortion and deception, with complex legal provisions and mind-bending mathematical formulas. How can we protect ourselves? First, [...]

Lies and the Lying Liars with Fake Financials

By | 2017-07-17T12:21:28+00:00 March 9th, 2017|Global Market Update|

Can we find financial fraud in advance? Enron Logo. Source: Wikipedia Not always. But published financials can give us clues when managers might be cooking their books. Published financial statements are supposed to reflect reality: they’re supposed to give let us know how the business is doing in its day-to-day operations. But we live in a world where investors – and computer trading systems – often fixate on just one number: earnings per share (EPS). That number is supposed to the single best indicator [...]

What’s Cooking?

By | 2017-07-17T12:22:06+00:00 March 16th, 2016|Global Market Update|

Are corporate accountants imitating each other? Photo: PP. Source: Pixabay A group of accounting professors from the US and Singapore looked at accounting errors that came to light over the course of 12 years. In all, they examined over 2300 restatements, and found a curious pattern. When a prominent firm in an industry admits it has mismanaged its books, many of its competitors will start to overstate their own earnings in the same way—usually for about two years, until they get caught. These episodes [...]

Hacking, Crime, and Fraud

By | 2017-07-17T12:22:21+00:00 November 12th, 2015|Global Market Update|

What does the latest hacking prosecution say about online security? Photo: Victor Hanacek. Source: Picjumbo The US Attorney for New York just disclosed the biggest hacking prosecution ever. In a news conference, Breet Bharara described it as securities fraud on cyber-steroids. A gang of criminal hackers from the US, Russia, and Israel broke into Scottrade, Dow Jones, and JP Morgan. They obtained the personal data and email addresses of over 100 million people. But rather than steal money directly, they used this information to [...]

Fraud, Fraudsters, and False Financials

By | 2017-07-17T12:22:42+00:00 July 20th, 2015|Global Market Update|

Fraud, Fraudsters, and False Financials Can we see financial fraud before it hits us? Photo: Dave Meier. Source: Picography Not always. But published financials can give us some clues as to when managers might be cooking the books. Published financial statements are supposed to reflect reality on the ground. They’re supposed to give an accurate picture about how the business is doing in its day-to-day operations. But we live in a world where investors often fixate on one number—earnings per share (EPS). That number [...]

Being There

By | 2017-07-17T12:22:43+00:00 July 7th, 2015|Global Market Update|

Being There Why do business owners work so hard? Photo Credit: Vladimir Kudinov. Source: Unsplash One reason is to prevent fraud. Restaurants or gas stations or convenience stores do a lot of cash business. It can be pretty easy for an employee to skim a little “off-the-top” when ringing up receipts. Modern cash registers make this more difficult—even more significant has been the shift to debit and credit cards for even minor transactions. More common is when employees give merchandise away: waiters and waitresses [...]

Forex Fixings and Fraud

By | 2017-07-17T12:22:47+00:00 May 21st, 2015|Global Market Update|

“The fix is in.” Photo: Clara Natoli. Source: Morguefile This usually means someone is cheating. In sports, one or more players agree to fail, or at least to let the other side look good. In finance, though, “the fix” often refers to the determination of a certain price on a financial instrument at a certain time. Global markets calculate a “fix” on interest rates, precious metals prices, and foreign exchange at 4 pm London time. This pricing convention may also be referred to in [...]

Balancing the Books (Part 2)

By | 2017-07-17T12:23:05+00:00 February 2nd, 2015|Global Market Update|

Why are balance sheets important? Source: Clipartbest.com Balance sheets give a snapshot of a company’s finances. They list and value all their financial assets and liabilities. As such, they’re subject to abuse by any firm that wants to present a distorted picture of how it’s doing to investors or creditors. […]

Duck Walking

By | 2017-07-17T12:23:13+00:00 November 14th, 2014|Global Market Update|

Sometimes, there’s no question what something is. Source: Wikipedia If it looks like a duck, walks like a duck, and quacks like a duck, then it’s probably a duck. There’s no ambiguity. Yesterday several news outlets reported that a popular foreign exchange trade site had vanished, along with over $1 billion in account balances. […]

Finding Financial Fraud

By | 2014-09-18T09:57:48+00:00 July 21st, 2014|Global Market Update|

How do you smell a rat? Detecting financial fraud can be challenging. We know there are lots of people who want our money. It’s taken us decades, sometimes a lifetime, to build a nest egg. It’s important to safeguard it. But in the real world people lie, cheat, and steal. Financial products are especially prone to distortion and deception, with complex legal provisions and mind-bending mathematical formulas. How can we protect ourselves? First, be suspicious. Ask questions. Double-check the answers. If it’s taken years [...]