Ethics in Finance(Banking)

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Faculty of Business Management and Social Sciences

(Business Ethics)

Summer term 2005
Lecturer: Prof. Dr. Peter Mayer

Student: Klaudia Sušková
Date: 20. 05. 2005

Table of Content

1 Introduction3

2 General principles of banks4
Banking secrecy6
1. The Identity of the Client is Always Known to the Bank6
2. Preserving Documents7
3. Protection of Personal Data7
Code of conduct8

3 Money Laundering8
Money laundering - Interpol's definition8
Actions to combat money laundering10
Anti – money laundering (Citigroup)11
The Citigroup Anti-Money Laundering Program12

4 Fraud12
Definition of Fraud12
Credit Card Fraud13
Preventing Card Fraud18
How to recognize potential phishing scams?19
Basic email advice19

1 Introduction

Ethics is the integrity measure, which evaluates the values, norms and rules that constitute the base for individual and social relationships, from a moral perspective. Ethics in business means trying to be a good corporate citizen; trying as an organisation to adhere to certain ethical values; and trying to do the right thing by all the various stakeholders – customers, employees, suppliers and shareholders – that any business organisation has. It means "choosing the good over the bad, the right over the wrong, the fair over the unfair".

Since banks, in a modern day society, almost everywhere play an important role which includes unifying and intermediary roles between the fund-supplying and fund-demanding sides of the society, executing savings and investment functions, are obliged to obey certain ethical principles of the banking profession and organizational ethics.

What is called ethics in banking?
Ethical values such as honesty, integrity, fairness, responsible citizenship and accountability? Is there any bank that would claim that it was right to accept bribes in return for loans, to lend to connected parties and to cheat customers? Unfortunately, it is not as simple as this. However, there is sometimes a gap between what banks claim and what they do. As the Asian crisis has demonstrated, ethical values are still not firmly entrenched and followed in many banks in the region. Bribery and corruption have been one of the root causes of the banking problems, and the Bank Bali scandal has shown that the process of reform still has a long way to go.

The business of banking and finance and those engaged in it, has a long history of providing financial services to society. Banking business is becoming more and more complex with each passing day. One reason is perhaps the globalization of business activities, which may be summed up as the tendency of the world to become one market place. We have seen time and again that as the banks reach out beyond their home market, they become increasingly exposed to unfamiliar business environments and customers whose ethical standards may vary and may be quite different from their own. This, according to financial experts, puts an extra strain on the ‘know your customers policy' about which the regulators are so unrelenting. It has been noticed quite often that when banks stray outside their home territories, ethical dilemmas crop up. Banks therefore need to be extra cautious about their business dealings and relationships with people having dubious track records.

2 General principles of banks

Considering the requirements for protection of the rights and interests of depositors, establishment of stability and confidence in financial markets, along with requirements for economic development, the banks have no options but to pursue their operations in compliance with certain general principles. They are: [a]integrity; [b] impartiality; [c] reliability; [d] transparency; [e] consideration of public benefits and interests, and environmental awareness;...
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