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While I try to avoid posting on matters not directly relevant to Australia, this one I thought had particular importance to the global financial system and anti-money laundering in particular.

This article on the FT Asia website today, if confirmed to be true, may indicate that China is starting to realise that money laundering, even by close friends, is not in its interest.

On the other hand, they could just be trying to send a political message and will resume normal service soon. Either way, it will be some time before Australian banks can certify any Chinese bank as a true partner in the fight against money laundering.

It is a good first step, though. Maybe the amount of US currency arriving here that was not printed in the US will diminish.

One little thing that has been bugging me for a while – the spoofing of websites and the installation of keystroke loggers to get customer details. The banks actually make this easier for the fraudsters in the way they implement their websites.

Not to pick on any one in particular, as they all do this to some extent, but the ANZ, for example, when you go into the site to do your banking, it opens a pop-up window for your details. You then put in your full transaction card number followed by your password. A keystroke logger makes mincemeat of this – log the keys and then you have the full string needed to get in and create havoc. The website spoofers also find it easier, as the popup can be faked with a link embedded in an email, and the details then transmitted.

Update

Finextra has something to say on this re. Citibank. I think this just reinforces the possible solution over the fold.

Read the rest of this entry »

Just in case your printers have not finished printing out the November 2005 update to the accord, you can now save the expense of printing it out. The BCBS have now released a consolidated version of the new Accord.

At 347 pages we are now comfortably more than 11 times the length of the original accord, so make sure you have a new ream of paper in your printer and try to double side it, please. Your shareholders will notice the difference in the dividends.

Here is the BCBS’s summary of their latest publication:

This document is a compilation of the June 2004 Basel II Framework, the elements of the 1988 Accord that were not revised during the Basel II process, the 1996 Amendment to the Capital Accord to Incorporate Market Risks, and the November 2005 paper on Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework. No new elements have been introduced in this compilation.

I just want to get one thing off my chest. The day you let accounting standards dictate to you what you should or should not do in business is the day you should be retiring. Sure, have a look at the standards and see if you can do the right thing a different way to get better treatment under the standards, but, no matter what the accountants say the cashflows are unaffected by the accounting treatment.

It is the cashflows that really matter.

[UPDATE]

OK – there are areas to be careful of. Ones that are going to hammer your P&L without any future or current P&L benefit. An easy example is a no-interest loan from a parent company, with the initial plus being to equity and the unwind going through your P&L. Evil stuff. If you want details, ask a question.

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