Financial Fraud in Canada

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FINA 402 – Short-term Financial Management Term Project
Financial Fraud in Canada

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Analysis presented to
Ms. Julie Slater
by
Anouck Cinq-Mars (9197710)
Anthony Liscio (9097856)
Angelo Vaccaro (9356290)
Joe Vincelli (9234403)
Kyle Zarmair (9055177)

John Molson School of Business
April 4th 2011

Table of Contents

Evolution of financial fraud in Canada…………………………………………...……4

Current types of fraud Canadian financial institutions
A) Internal fraud…………………………………………………………………………..5 Identity theft……………….……………………………………………………….6 Illegal insider trading………………………….…………………………………...7 Wire fraud…………………………….……………………………………………7 Bank fraud…………………………….…………………………………………....8

B) External types of fraud…………………………………………………………………8
Debit and credit card fraud……………………………………………………..…9 E-mail fraud/phishing……………………………………………………………10 Identity theft and Title fraud……...……………………………………………...10

C) Investment Fraud: Ponzi Scheme……………………………………………………..11 History of the Ponzi Scheme……………………………………………………..11 Recent financial scandals…………………………………………………….......13 Ponzi Schemes and Market Regulation………………………………………….14

Organized crime and financial crimes
A) Organized Crime in Canada……..…………………..………………………………..15 B) Money laundering………………………..…………………………………………...16 C) Mortgage fraud………………………………………………………………………..17 D) Market Securities fraud……………………………………..………………………...18

Effects of fraud in Canadian financial institutions
A) Economic implications……………………………………………………………….19 B) Public implications……………………………………………………………………21

Future Challenges………………………………………………………………………22

Bibliography……………………………………………………………………….……24

Exhibit 1…………………………………………………………………………………27

Exhibit 2…………………………………………………………………………………27

Exhibit 3…………………………………………………………………………………27

Exhibit 4…………………………………………………………………………………28

Exhibit 5………………………………………………………………………………...28

Exhibit 6…………………………………………………………………………………28

Exhibit 7…………………………………………………………………………………29

Exhibit 8…………………………………………………………………………………29

Exhibit 9…………………………………………………………………………………30

Exhibit 10………………………………………………………………………………..30

Exhibit 11………………………………………………………………………………..31

Exhibit 12………………………………………………………………………………..31

Part 1 – Evolution of Financial Fraud in Canada

Financial fraud in Canada has particularly evolved over the past three decades due to rapid innovation in technology. Until the early 1980s, ATM fraud, check fraud, counterfeited currencies and fraudulent accounting were the most frequently encountered forms of financial fraud. Today, technology has now “[enabled the ability] to commit old crimes in new ways and also undertake new activities”[1] with the use of “email, Global Positioning Systems (GPS), cell phones [and] instant messaging”[2]. Financial fraud in Canada has evolved into a new format that allows the “access of large amounts of electronic data and [the transfer of] funds quickly and securely”[3]. Consequently, authorities and regulatory bodies are witnessing an increase in new types of financial fraud such as phishing, Identity Theft, money laundering, mortgage fraud as well as various forms of investment frauds. Other types of financial fraud that “emerged over the course of the century”[4], such as the concealment of illegal proceeds in foreign financial institutions, continue to be predominant. Indeed, due to technological progress in the field of wire transfers, they have now made it far more intricate for regulatory bodies to trace the source of these funds. In parallel, organized crime has also profited from technological advances by “ [adapting] the direction and scope of their illicit activities according to existing conditions and new opportunities”[5]; furthermore, they are now reported to have activities in all types of financial frauds in Canada. Consequently, Canadian legislation has also had to pursue an evolution of its own....
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