The second type of financial scandals is normally connected to laundering of capital generated in "black economy", namely: income not reported to tax authorities. Such money passes through banking channels, changes ownership a few times, so that its track is covered and identities of owners of money are concealed. Money generated by drug dealings, illicit arm trade and less exotic form of tax evasion is thus "laundered".

The financial institutions which participate in laundering operations, maintain double accounting books. One book is for purposes of official authorities. Those agencies and authorities that deal with taxation, bank supervision, deposit insurance and financial liquidity are given access to this set of "engineered" books. The true record is kept hidden in another set of books. These accounts reflect real situation of financial institution: who deposited how much, when and under which conditions - and who borrowed what, when and under which conditions.

This double standard blurs true situation of institution to point of no return. Even owners of institution begin to lose track of its activities and misapprehend its real standing.

Is it stable? Is it liquid? Is asset portfolio diversified enough? No one knows. The fog enshrouds even those who created it in first place. No proper financial control and audit is possible under such circumstances.

Less scrupulous members of management and staff of such financial bodies usually take advantage of situation. Embezzlements are very widespread, abuse of authority, misuse or misplacement of funds. Where no light shines, a lot of creepy creatures tend to develop.

The most famous - and biggest - financial scandal of this type in human history was collapse of Bank for Credit and Commerce International LTD. (BCCI) in London in 1991. For almost a decade, management and employees of this shady bank engaged in stealing and misappropriating 10 billion (!!!) USD. The supervision department of Bank of England, under whose scrutinizing eyes this bank was supposed to have been - was proven to be impotent and incompetent. The owners of bank - some Arab Sheikhs - had to invest billions of dollars in compensating its depositors.

The combination of black money, shoddy financial controls, shady bank accounts and shredded documents proves to be quite elusive. It is impossible to evaluate total damage in such cases.

The third type is most elusive, hardest to discover. It is very common and scandal may erupt - or never occur, depending on chance, cash flows and intellects of those involved.

Financial institutions are subject to political pressures, forcing them to give credits to unworthy - or to forgo diversification (to give too much credit to a single borrower). Only lately in South Korea, such politically motivated loans were discovered to have been given to failing Hanbo conglomerate by virtually every bank in country. The same may safely be said about banks in Japan and almost everywhere else. Very few banks would dare to refuse Finance Minister's cronies, for instance.

Some banks would subject review of credit applications to social considerations. They would lend to certain sectors of economy, regardless of their financial viability. They would lend to needy, to affluent, to urban renewal programs, to small businesses - and all in name of social causes which, however justified - cannot justify giving loans.

This is a private case in a more widespread phenomenon: assets (=loan portfolios) of many a financial institution are not diversified enough. Their loans are concentrated in a single sector of economy (agriculture, industry, construction), in a given country, or geographical region. Such exposure is detrimental to financial health of lending institution. Economic trends tend to develop in unison in same sector, country, or region. When real estate in West Coast of USA plummets - it does so indiscriminately. A bank whose total portfolio is composed of mortgages to West Coast Realtors, would be demolished.

In 1982, Mexico defaulted on interest payments of its international debts. Its arrears grew enormously and threatened stability of entire Western financial system. USA banks - which were most exposed to Latin American debt crisis - had to foot bulk of bill which amounted to tens of billions of USD. They had almost all their capital tied up in loans to Latin American countries. Financial institutions bow to fads and fashions. They are amenable to "lending trends" and display a herd-like mentality. They tend to concentrate their assets where they believe that they could get highest yields in shortest possible periods of time. In this sense, they are not very different from investors in pyramid investment schemes.

Financial mismanagement can also be result of lax or flawed financial controls. The internal audit department in every financing institution - and external audit exercised by appropriate supervision authorities are responsible to counter natural human propensity for gambling. The must help financial organization re-orient itself in accordance with objective and objectively analysed data. If they fail to do this - financial institution would tend to behave like a ship without navigation tools. Financial audit regulations (the most famous of which are American FASBs) trail way behind development of modern financial marketplace. Still, their judicious and careful implementation could be of invaluable assistance in steering away from financial scandals.

Taking human psychology into account - coupled with complexity of modern world of finances - it is nothing less than a miracle that financial scandals are as few and far between as they are.

Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, United Press International (UPI) and eBookWeb and the editor of mental health and Central East Europe categories in The Open Directory and Suite101.

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I have learned that no matter what we do, we must sell something - our ideas, our capability to produce a product or service, or someone else's ideas, goods and services. Even heroes of my childhood - teachers and preachers - must sell their customers on notion that they bring value to table.

In effect, all of us sell each day of our lives. Those who excel at it deliver on their promise; their products and services bring added value to their users. Those who purchase them tell their friends, who tell their friends, and so on.

For me, it has been a long road to realizing that one has little control over one's destiny and wealth as long as there is dependency on a corporation or some entity (other than oneself) for employment. At end of day, we must look to our personal capabilities to support our family and ourselves. Just ask any of hundreds of thousands who were recently laid off through no fault of their own, or read lessons learned by millionaires.

It has been an equally long road for me to become sufficiently confident to develop some of those creations my brother and I attempted back in Locust Hill. I've known for some time that people who need my expertise, and who will be happy to trade money for its value, will not find out about it through osmosis. I must let them know about it, just as I happily touted goods and services of my corporation all those years. Expertise, brainpower, or product, no matter how wonderful, must be successfully marketed, or "sold."

As I more closely examine my evolving notion of selling, I realize that it isn't "selling" that makes me such a reluctant participant in an arena that creates wealth faster than any other. (By way, it is also fastest way to get ahead in corporate world). It is my link to a childhood misunderstanding of wonderful act of providing people with something that actually fulfills a dream, makes lives easier, and provides financial freedom for so many. Each time I receive a thank you for sharing my opportunity, book, time, or words of wisdom, I am so thankful that I've learned to appreciate marvel of selling.

My reluctance has turned into eagerness and gratefulness as I continue to discover ways to put my own brainpower and skills to good use, on what I consider to be relatively close to my own terms. Each day I seek out new opportunities that I share with my new and lifelong friends. Together, we are embracing wealth-building wonders made possible to each of us through modern technology.

Copyright 2001 Joyce M. Coleman. All rights reserved, except as noted above.

http://www.locusthillpublishing.com. Joyce Coleman is author of acclaimed book, Soul Stirrings - How looking back gives each of us freedom to move forward. Subscribe to her newsletter, The Business of Life at http://www.locusthillpublishing.com/newsletter/newsletter_subscribe.html for practical tools that enhance living. Includes self improvement, wealth- building, family issues, recipes.