Robberies in Private Banking

Bank Indonesia (BI) should have acted firmly long time ago but it seemed to need more victims and scandals to jolt it into realizing the imperative for enforcing a more stringent code of conduct on private banking services.

BI Deputy Governor Muliaman Hadad on Friday said the central bank would issue a special regulation on private banking services, only after the revelation of a scandal at Citibank Indonesia where a senior relationship manager had siphoned off more than US$2 million from clients’ accounts over a period of almost three years until her fraud was discovered a few weeks ago.

Later in December 2008, preliminary police investigations found how Bank Century (now Bank Mutiara) clients had lost more than $120 million because the investment products of PT Antaboga Delta Securities they bought turned out to be fraudulent. The bank customers seemed to have been lured and misled by Bank Century’s private banking officers to buy those fraudulent securities.

Yet more damaging were the suspicions that many big transactions through private banking seemed to smack of money laundering.

Testimonies in the trial of corrupt tax auditor Bahasyim Assifie in Jakarta in January and the preliminary findings of the investigations of the fraud at Citigold last week showed how private banking relationship managers often conducted big transactions in the homes of wealthy clients.

Assifie was sentenced in early February to 10 years in prison for corruption and money laundering worth around $7 million.

Many major commercial banks, amid the fierce competition to attract big depositors, have set up private banking departments or wealth management services especially to serve customers with deposits of more than Rp 500 million ($55,000).

Private banking is about much more than traditional banking services of deposits and loans.

But don’t confuse private banking with real private banks, such as Swiss UBS, Julius Baer and Credit Suisse, which serve only super-rich individuals. Julius Baer, for example, manages more than $190 billion in assets, and only accepts clients with at least $3 million to invest.

At ordinary commercial banks, the management assigns a relationship manager to each of the rich customers to provide a comprehensive menu of sophisticated products and services that cater for their particular financial needs. The managers address a client’s entire financial situation and needs that can increase fee-based incomes.

The problem, however, is that many of the wealthy clients have very low financial literacy. They are put under the wealth management (private banking) department not because of their educational level, but because of their big financial assets.

Thus many of them tend to fully trust their relationship managers for any transactions they need, unconsciously making themselves vulnerable to scrupulous practices by bank officials who, under fierce competition pressures for career promotions or bonuses, may resort to reckless dealings without taking into account the risk profile of their customers.

Given the increasingly fierce competition in the banking industry, bank managements also tend to reward relationship managers only for the number of wealthy clients or the volume of clients’ financial assets they can bring to their banks, disregarding manners and protocol for how such achievements should have been made.

This is the main reason why BI should establish a strong oversight mechanism and enforce a stringent code of conduct for private banking services.

From : The Jakarta Post

Ex-Israeli president Katsav

An Israeli court ordered former Israeli President Moshe Katsav to prison for seven years Tuesday following a rape conviction, rejecting his attorneys' request for leniency and making him the highest-ranking Israeli official ver sentenced to jail.

The silver-haired Katsav remained stoic throughout most of the reading, but he broke down in tears upon hearing his sentence and screamed at the judges: "You made a mistake! It is a lie! The girls know it is a lie!"

As he exited the courtroom, two of his grown sons scuffled with security guards. "I saw you! You hurt my boy!" Katsav screamed. His lawyers vowed to appeal.

In December, the Tel Aviv District Court convicted Katsav, 65, of raping a former employee and sexually harassing two other women who used to work for him. He also was convicted of indecent acts and obstruction of justice. The rape took place before Katsav became president in 2000, while other crimes occurred after he took office.

The three-judge panel, which ruled 2-1, said Katsav's record of public service would not be weighed in his favor, accusing him instead of exploiting his position to become a sexual offender. The court ordered him to report to prison on May 8, giving him time to prepare an appeal. He must also pay fines of about $25,00 and $7,000 to two of his victims.

"The defendant committed the acts like any other person, and he must bear the punishment like any other person," Judge George Kara read from a prepared verdict. "The message leaving this courtroom has to be sharp and clear."

Tuesday's sentencing capped a dramaticfall from grace for a man who rose from humble beginnings to become a symbol of success for Mizrahi Jews, or those of Middle Eastern descent, who for years were an underclass in Israel. The presidency is a largely ceremonial office, typically filled by a respected elder statesman who is capable of rising abovepolitics and unifying the country.

The case has also been seen as a victory for the Israeli legal system and for women's rights in a decades-long struggle to chip away at the nation's macho culture, which once permitted political and military leaders great liberties. Outside the building, a group of women eld signs with a message directed toward female victims of sex crimes, "You're not alone."

The case began nearly five years ago when Katsav suddenly complained that a female employee was trying to extort him. She went to police with her side of the story, and other women came forward with similar complaits of sexual assaults.

Katsav, Israel's eighth president, resigned under public pressure two weeks before his term was to end in 2007. The current president, Nobel winner Shimon Peres, succeeded him.

Katsav repeatedly denied all allegations against him, claiming he was a victim of a political witch hunt and suggesting he was targeted because of his ethnicity. Katsav was born in Iran and immigrated to Israel as a child.

The Israeli public has been riveted by the case's twists and salacious details.

In one memorably bizarre press conference Katsav lashed out angrily at prosecutors and the media for plotting his demise, shaking in anger, waving a computer disk that he said proved his innocence and screaming. Later, he rejected a plea bargain that would have allowed him to avoid jail time.

In December, the Tel Aviv court ruled that Katsav twice raped a woman who worked for him when he served as tourism minister in the 1990s, and assaulted and harassed two other women who worked for him when he was president, from 2000 to 2007. The scathing ruling called him "manipulative" and said his testimony was riddled with lies.

The conviction brought nearly unanimous scorn for Katsav and widespread praise for a legal system that proved itself egalitarian by bringing him to justice. Katsav's supporters, mostly people from his hometown of Kiryat Malachi, have demanded an explanation about why the court chose his victims' versions of events over the former president's.

At Tuesday's sentencing, Kara said Katsav's acts harmed the public's trust in its officials and carried moral turpitude. He acknowledged that the spectacle of a former president going off to jail would be difficult, but necessary to prove that no individual is above the law.

"We can't forget that the accused is not a victim but a victimizer," he said.

Katsav's attorneys have argued that their client did not receive a fair trial because of a hostile climate created by the media. In a minority opinion, Yehudit Shevach said these circumstances and the pain caused to the Katsav family influenced her to recommend a lesser sentence of four years behind bars.

Throughout the reading, the calls of protesters outside the courtroom were heard clearly inside.

A stone-faced Katsav entered the courtroom accompanied by his sons and confidantes and would not address the media. Neither his wife Gila nor his three accusers were present.

He refused to sit in the dock until the cameras left and then erupted in anger upon hearing his sentence.

"Just because someone is quiet doesn't mean he is guilty," he cried. "It's all lies. You have committed a great injustice."

Katsav's attorney, Zion Amir, said the court trampled his client's rights.

"There are those who think the sentencing is a celebration of democracy in Israel. I think it is a sad day, a day of mourning," he said.

Prime Minister Benjamin Netanyahu and opposition leader Tzipi Livni each issued statements expressing sorrow for Katsav's fate but respect for the sentencing.


From : The Jakarta Post