House Lawmakers Seek to Revive Bank Century Probe; illegal transfers of bank capital to controlling owners’ personal accounts contributed to Bank Century’s collapse 

House Lawmakers Seek to Revive Bank Century Probe

By Markus Junianto Sihaloho on 08:36 am Jan 20, 2015

Not Over Yet Head of deposit insurance agency tells hearing legal woes led to loss-making sale

Bank Century

Former customers of Bank Century, now Bank Mutiara, demand justice at the KPK’s offices. (Antara Photo/Puspa Perwitasari)

Jakarta. Several lawmakers are pushing for the revival of a House of Representatives inquiry committee into the controversial bailout of the now-defunct Bank Century.

In 2008, the government forked over a Rp 6.7 trillion ($530 million) bailout to the ailing bank. Critics at the time said the revelation that wealthy donors to then-President Susilo Bambang Yudhoyono’s re-election campaign were among the bank’s clients raises questions of propriety, if not legality. Continue reading


The Arena of Multi-Interest, Governance and Fraud: A Critical Review of Indonesia’s Bank Century Bailout


Ruddy Tri Santoso, M. Hartono, M. Agung Prabowo, Guntur Riyanto, Sujoko Eferin, Yenny Tjiamudjaja


The bailout of PT. Bank Century (BC) at the end of 2008 ignites many debates. If the Indonesian Central Bank had not bailed it out, would it have been a systemic disaster for Indonesian economic? BCs total assets were not significant to the national banking asset. Why was it so important to bail BC out? This research wants to find answers to the following questions: 1) considering the internal problems of BC since 2005, was it worth to bail it out, and was the amount paid appropriate? 2) How bad was the internal problem in consideration of corporate governance theory, fraud theory, and in accordance with prudential banking principals? 3) Was the decision to bail out relevant for the national banking stabilization? 4) Was the failure of BC in 2008 a symptom of market failure, or a governance failure of BC and a regulation failure of the Indonesian Central Bank? This research uses descriptive qualitative method by in-depth analysis. The qualitative variables are classified to some significant factors which influence the decision to bail out. The result of this research shows that the historical performance, the corporate government and the fraud of the bank were not appropriately reviewed before the government decided to bail BC out. Even though the bailout was able to keep the national banking stabile at that time, the judgment of the decision was not purely economical. The non-economic factor was that the bank was too politically significant to fail.

Clawbacks Can Lead to Accounting Gimmicks

Related: Substitution between Real and Accruals-Based Earnings Management after Voluntary Adoption of Compensation Clawback Provisions (Link)

Clawbacks Can Lead to Accounting Gimmicks



The clawbacks on executive compensation mandated by the Dodd-Frank Act may discourage one type of accounting manipulation only to encourage another, according to a new study.

Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act contained a provision requiring all publicly listed companies to recover from executives any incentive compensation that was paid to them on the basis of erroneous financial statements. The Securities and Exchange Commission has still not determined exactly how the clawback provision will be enforced and it is not yet mandatory. But many companies have voluntarily enabled or required themselves to implement them. Continue reading

Fraudsters will take advantage of UK pension reforms that give people more control over their retirement savings, industry figures and regulators fear. “It is a racing certainty that fraudsters are going to make hay in this environment”

January 16, 2015 1:47 pm

UK pensions reforms open door for scams

Judith Evans

Fraudsters will take advantage of reforms that give people more control over their retirement savings, industry figures and regulators fear. Continue reading

Top Fraud Predictions for 2015: Technology will shape the fight

Top Fraud Predictions for 2015: Technology will shape the fight

Posted by LOW Hwan Hong, Year 4 undergrad at the School of Business, Singapore Management University


Technology will give fraudsters an edge in 2015, but it will also provide new tools for organizations and investigators, according to three experts from the Association of Certified Fraud Examiners (ACFE) who were asked for their top fraud predictions for 2015.

The experts (Gerald Zack, Bruce Dorris and Jacob Parks) weighed in on digital currencies, information security and other issues that will help shape the effort to prevent and detect fraud in the new year:

1) Technology will increase the sophistication of fraud schemes. This is an existing trend that will accelerate in 2015, according to ACFE Regent Gerard Zack, CFE, Managing Director – Global Forensics for BDO Consulting. “More and more we are reacting to reports of fraud with ‘how did they do that?’, Zack said. “It’s a reflection of schemes becoming more complex and capitalizing on technology, including some of the new technology deployed by companies in the interest of improving efficiency. While simple fraud still exists, we are seeing a distinct proliferation of more complex fraud schemes.”

2) But technology (like data analytics) will also help catch tomorrow’s frauds. Zack is quick to note that for fraudsters, technology is a double-edged sword, as it is leveraged as well by professionals trying to catch criminals. “There will be more breakthroughs in the use of technology to detect fraud – particularly in the use of visual analytics and also in the use of tools to mine unstructured data. Tools that were thought of as cutting edge just a year or two ago will seem ancient in another year or two”, he stated.

3) Improving information security will be a major priority. More massive data breaches, like the ones that have stricken Home Depot, Target Corp. and other large retailers over the past two years, are likely to occur in 2015, according to ACFE Vice President and Program Director Bruce Dorris, J.D., CFE. “These breaches have exposed widespread vulnerabilities among organizations that store and maintain personal information, putting millions of individuals at risk,” Dorris said. “Considering that storage of data continues to grow at an exponential pace, more trouble lays ahead – and there is an increasing need for information security and protecting against data breaches.

4) There will be a re-emergence of financial statement fraud. While Enron, WorldCom and other major financial statement frauds are starting to fade from the public consciousness, there may be more such accounting fraud on the way, according to Zack. One indication is the effort being made by the Security and Exchange Commission (SEC) to step up enforcement in this area.

SEC Gets Busy With Accounting Investigations

SEC Gets Busy With Accounting Investigations

Number of Cases and Investigations Surges at Agency

One of the biggest sanctions involving a U.S. company was the $20 million paid last year by CVS Caremark to settle allegations of misconduct including improper acquisition-related accounting adjustments that boosted reported earnings in 2009. ASSOCIATED PRESS


Jan. 20, 2015 6:51 p.m. ET

The Securities and ExSEC Accounting Fraudchange Commission’s push to step up its policing of accounting fraud has led to a surge of cases and investigations, new agency figures show, as officials again target cooking-the-books offenses that were once a staple of its workload.

The upturn, the SEC’s first year-over-year increase in such enforcement actions since 2007, comes as the agency returns its focus to alleged financial-reporting and disclosure problems that might have gone unpunished as crisis-era misconduct, such as selling of flawed mortgage securities, dominated its attention in recent years.

But the new cases are on a smaller scale and typically involve conduct that is far less egregious than the accounting scandals of the early 2000s, such as the implosion of energy giant Enron Corp.

In addition, the agency’s computerized system for sniffing out accounting fraud has so far proved to be less revolutionary than many expected when it was unveiled in 2012. Continue reading