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FORENSIC ECONOMICS Hitting Them Where It Hurts Most Two KPMG consultants who specialise in forensic accounting believe there's another way to tackle terrorist groups: kill their funding.
Dean Nelan is a director, forensic accounting, KPMG, and James Hunter, a partner with the firm's Canada office. In India recently, the two spoke to BT on how money-laundering helps terrorist groups and how the problem can be tackled. For the benefit of our readers, can you give us a quick explanation of what money laundering is? One definition is that money laundering is the illegal integration of the proceeds of crime into the legitimate economy. The first and the most critical step in money laundering is to ensure that one bank accepts these funds as deposits-that's the first contact with the legitimate economy. After that comes the second phase, that of 'layering', where the money is passed from one bank to another, and across borders so that there is little to link the money with its original source. Why is the tracking of money launderers such a difficult task? For the bankers, it means huge deposits. For the money-launderers it is a chance to clean up his finances, without any consideration to the interest rate, which is good news for the banks. In many countries in the world, banks are secretive, and getting information about deposits and accounts is difficult. And layering makes things even tougher. Specifically, what are the difficulties involved in tracking down the source of funds terrorist groups like Al Qaida? Many of these organisations have some legitimate sources of income which makes tracking laundered money that much more difficult. In the case of Osama bin Laden, his father made money in the construction business. So, a lot of bin Laden's money that is already in circulation is legitimate; hence, laundering more money will not be difficult for him. Secondly, most money laundering done in this part of the does not involve a paper trail. The only way to track launderers here is to find an informant, a whistle blower. How does a forensic accountant track money-laundering? The forensic expert looks for a pattern of suspicious behaviour such making a number of cash deposits of $90,000 in one day-just short of the $100,000 mark which will require a statement on the source of funds. He will look for (patterns of) money being moved from one bank to another, from one jurisdiction to another, without any apparent reason.Today, there is a Financial Action Task Force (FATF), set up by the g-7. This regularly publishes the names of countries that do not comply with international money-laundering regulations, and hence are blacklisted. Moreover, most (anti) money laundering regulations make bankers accountable by maintaining that if they refuse to report a suspicious case of money laundering then they can be penalised severely. How difficult is it to prove money-laundering in the court of law? It is almost impossible. That's why the statutes do not go after the money-launderers, but after the legitimate people in the economic cycle who have something to lose. Is KPMG helping the US government track money launderers? Shhhhh... Even if we were doing so, it would be a secret. -Ashish Gupta CONVERGENCE
Call it the urge to converge. Soon after Pramod Mahajan was named the Union Minister for Communications, the GoI indicated that it was only a matter of time before the two ministries he oversaw (he was already minister for it) merged into one unified one-well, they haven't named it yet, but there's no harm in suggesting a name-convergence. That announcement must have caught the imagination of NASSCOM (National Association of Software and Service Companies) chief Kiran Karnik who went to press with his prediction that the chances of his assoc's merger with cousin, Manufacturers Association of Information Technology (MAIT) were good. And with the GoI ready to create the post of Communication Commissioner of India, a sort of super-regulator who will address issues related to broadcasting, telecommunications, and infotech, the era of convergence is well and truly here. ''The idea is to now evolve a holistic policy for telecom and it,'' offers a helpful dot (Department of Telecommunications) official.
Much of what happens at the ministry-level will be dependent of the fate of the convergence bill which has been tabled in the Parliament, but will probably be referred to a consultative committee (like sticky bills usually are). At the industry assoc level, though, a merger doesn't seem to make much sense. After whingeing for some time about how hardware is being ignored in the country, MAIT has been able to make some headway and now works closely with three other associations, CETMA (Consumer Electronics and Television Manufacturers Association), ELCINA (Electronic Components Industry Association), and TEMA (Telecom Equipment Manufacturers Association). The four boast a joint council that meets every quarter to chart a common strategy. ''We should work closely for the benefit of the industry and collaborate where there are synergies,'' is MAIT director Vinnie Mehta's studied response to questions on the possible merger with NASSCOM. Where's the urge, pal? -Ashutosh Sinha TECHNOLOGY
Some companies realise this. If a big quake hits the western seaboard, the National Stock Exchange's (NSE) data is safe. Data-some 20 GB of it every day-is backed up at the end of the day and stored in two different locations. Additionally, weekly and monthly backups are mandatory. And archive logs of critical databases are transferred to the disaster-recovery site via satellite links. It's not just biggies like NSE who follow such painstaking procedures. Net4india, which runs datacentres in six cities backs up data pertaining to each city in another city. If there is a disaster, each of six branches will move to a state of high-alert. The staff is to start calling customers; simultaneously, the system will start recovery of data. The disaster recovery plan at financial consultants Indiabulls includes periodic backup of data on location as well as off site. ''Backup involves not just data but also the ability to continue operations in the face of a major disaster,'' says Gagan Banga, Chief Marketing Officer, Indiabulls. During the day too, frequent back-ups guard Indiabulls against hardware failures. A replica of the online trading infrastructure is maintained at an offsite office location. This is kept in a state of readiness and will take over operations in case the live infrastructure meets with a disaster. 'The importance of a business continuity plan is imperative in these times when business has become more integrated, the client base is global, and work is 24x7.'' says Dhawan. How much time does it take to bring back systems? That depends on data that has to be restored. With excellent back-up, systems can be up and running in 30 minutes time! If back-ups and fallbacks are infrequent or unavailable, it could take a day-or, depending on a company's laxity, never. -Vinod Mahanta PRIVATE WINGS
Want to
hazard a guess on the size of the charter flight business in India? Well,
it is as low as Rs 41 crore, and there are just around 33 charter planes
in the country. The reason behind the laggardly 7 per cent rate at which
the industry is growing are the regulations governing the operation of
charter flights in the country. Airports in most countries have separate
lounges for charter planes. London has 10-12 air fields for chartered
flights, and Singapore possesses an air strip for charters. But there is
no such facility in India. Also, the charter business thrives on anytime,
anywhere travel. But most airports in India remain shut at night. This
makes it difficult for the charter plane business to take wing in India.
''The only way to grow the sector is to de-bureaucratise the existing
framework of regulations,'' says Captain G.R. Gopinath, the man behind the
country's largest charter operator, Deccan Aviation. Well, these haven't
stopped Gopinath's airline-seven choppers and two light aircraft-from
registering a turnover of Rs 16 crore in 2000-01. That's small change
compared to the Rs 400 crore the world's largest charter airline,
Evergreen made in 2000. -Moinak Mitra The Truth
About Indian IT It's doomed''. ''Post September 11, things can only get worse''. ''Now, they'll have to let people go''. Ask ubiquitous it analysts and economy-soothsayers about the state of Indian it, and these are some of the reactions you'll get. Only, the truth is far from that. Not convinced? Well, an end-September report released by ubs Warburg (The Weekly Global Tech Journey), says that while global spending on it services is expected to fall by 5 per cent this year, Indian software exports will increase by 33 per cent. Still better, India's share of market of global spend on it services is expected to increase from 7 per cent in 2000 to 9 per cent in 2001. Next year, the report says, could be even better. In 2002, India's software exports will grow by 37 per cent and the country's market share will increase to 12 per cent. The Warburg publication lists all the usual suspects-a time-zone advantage, a huge English speaking population, low manpower costs, and the availability to domain expertise-as the factors behind this growth. However, it isn't time to pop the bubbly yet. The flip side includes concerns about transnationals setting up their own development centres in India, a billing rate that remains low, and the mushrooming of other regional software wannabes like China and Philippines. Still, cheer while you still can.
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If
apocalypse does hit India in the form of a massive terrorist strike or a
natural disaster, will India's corporate information survive? Tough. A
yet-to-be-released KPMG survey, shows that about 65 per cent of the
corporate world have no disaster-recovery plan of any kind. And of the 35
per cent who do, three-fourths do just that -a plan. ''It is appaling,''
exclaims Sanjay Dhawan, Executive Director, KPMG. ''Information is the
most important asset that should be protected.''
