Plain tok ECONOMIC CRIMES THREATEN STABILITY OF THE FINANCIAL SYSTEM By Titus Boye-Thompson Economic crimes are dangerous. They are white collar crimes committed by high profile characters in expensive suits and flashy lifestyles. Such crimes involve very significant sums of money and in the run of their operation could threaten the stability of the economy, undermine the functionality of the financial system and erode public confidence in public financial management or accountability and may, to some extent, tend to put at risk the very stability of the State. For these reasons, economic crimes are a matter for serious public concern and therefore a very good reason for government intervention in order to strengthen the frameworks for dealing with widespread white collar crimes unleashed on unsuspecting private and state institutions. Sierra Leone was largely insulated from the recent global banking crises for a very simple reason. This economy was not built on a mortgage structure that invariably results in the shared risk of ownership of landed property and other assets. In order to secure a loan in this economy, very strict and sometimes onerous conditions have to be met. The financial markets being non-existent as defined in the Western economies also were a source for that insulation. The spread of credit was restricted to conventional sources of loan finance, credit through overdrafts or direct bank loans secured on property and other negotiable instruments. The lack of sophistication in the financial markets meant that this economy was invariably de-linked from the world economy because of the absence of transferability. Credit in this economy was therefore largely based on an established network of networks. Those to whom much is desired, much was given. The loan and credit market did not depend on a system of credit scoring, neither did it inveigle itself with the faceless system of mechanized credit decisions based on a set of conditions which together adduce to a credit worthiness index. Loans are more dependent on face to face relationships, handshakes and a gut feeling that the lender presents in himself, a good risk. The element of security only comes into play to accord the bank an assurance that if all else fails, then a lien on property may present a viable option to secure repayment or otherwise recover what has been released as loan. In a situation where the lending decisions are made based on a less sophisticated criteria, the element of discretion is very far advanced to the point that the lender is forced to form a serious relationship to the client so as to create that environment where trust and a moral suasion intercedes in the decision to lend and also conversely translates into a fundamental consideration on the decision to make good on the obligation by the client. Where decisions are made largely on discretion, the propensity to flout the rules and stretch the system to breaking point then becomes much more real. It is this tendency to push the boundaries on discretion that has caused the failure of financial markets the World over. Barings Bank used to be a foremost financial institution and so also was the Salomon Brothers. The reputation and integrity of these institutions were second to none. Their staff were expected to be of the highest caliber and so they should be. They were paid well and they invariably have no reason not to act as pernicious custodians of public confidence and trust. History has shown how rogue bankers have used their vast influence and monopoly positions in decision making to flout internationally accepted and established safeguards and supervision. The markets have been the only leveler. Where discretion has been overstretched, it had been the operations of the financial markets and the confidence in the financial systems that had effected control and correction. It is the case that simply put, Sierra Lone does not have a system for dealing or in any event anticipating any attack by sophisticated criminal minds that will from time to time attack the integrity of its financial system. Financial regulations and procedures have to constantly be updated to anticipate the level and type of fraud that is possible in this age. With the advancement in technology and the move towards real time transactions necessary to upscale banking operations, the attempts by hackers, clones and "kiters" would be unmoved. The watchers of this economy have to be vigilant. Those who are responsible for banking supervision more resilient to corruptible influences and practices and in the event, public officials and officials in positions of trust, responsibility and probity should be encouraged to be more transparent in their dealings. Economic stability and financial management are critical components of growth and development. In Sierra Leone, the issues relating to securing development outcomes are intrinsically linked to political and social events. In the main, a secure social and political environment can be anything but well served by a stable economic and public financial management system. Public confidence is eroded when high profile cases of corruption and criminality are unearthed. However, as there is no society without a degree of corruption, the significant aspect of the Sierra Leone situation is the test to which our institutions set up to stamp out corruption are being put. The police and the Anti Corruption Commission must continue to be increasingly vigilant to investigate fraud and to bring those found culpable to justice. What would not help would be the rush to judgment, the trial by rumor or otherwise the guilt by association. The laws of Sierra Leone maintain the intractable balance of fairness in recognition of individual rights and an assessment of the facts supporting an allegation under guidance of the law. In this regard, it accords to all men the presumption of innocence until proven guilty. However, the very fact that systems are in place to bring accountability into the financial system and probity in the public financial management system are positive proof that this Government is serious about fighting corruption. Sierra Leone has for the recent past made good progress on passing the control of corruption index assessed by Transparency International. Sierra Leone must continue to pass on this index. It is for this reason that the vigilance of the law enforcement cadres are to be encouraged to continue with their fight against corruption and wherever it rears its head, they should leave no stone unturned to bring those who are responsible to justice. It is also significant that President Koroma has vocally and publicly supported such vigilance. His support and abhorrence of criminality continues to be a significant factor in the robust manner in which corrupt elements are not being allowed to fester in this economy.
Posted on: Mon, 08 Jul 2013 10:26:39 +0000
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