Preventing bank crimes through exercising corporate governance principles

دانشنامه حقوق اقتصادی

Article 4, Volume 26, Issue 15, July 2019, Pages 77-108   

Document Type: Scientific research

DOI: 10.22067/le.v26i16.75354

Authors

Ramin Alizadeh^{* 1}; hossein gholami²; mohammad ali jahed¹

¹, law department, Ardebil branch, Islamic Azad University, Ardebil, Iran

²allame and azad

Abstract

Introduction
Nowadays, a bank is considered as a significant institution, a financial and economic organization where the absence of effective regulatory systems can provide a platform for abuse and widespread offense that have brought inappropriate social and economic consequences to the community; it may affect not only the entire banking system of a country but also the entire global financial system. In this article, we will discuss the four concepts of banking crime and corporate governance, the principles of corporate leadership for prevention, the effects of principles of corporate leadership on the prevention of the banking crimes and the application of corporate leadership principles in Iran.
Theoretical Framework
Criminal law on the banking crimes constitutes a part of the crimes and penalties in support of the economic order against abuses and illegitimate possessions which are largely jobbery or cause damage to the economic system. Corporate governance is a structure that includes a set of relationships between company management, the board of directors, stakeholders and other beneficiaries in which the objectives of the organization are explained and defined as the necessary means for achieving the objectives and supervision of the units’ performance. The earliest and first concept of the corporate governance taken from the Latin word "Gouberance" means guiding, which is commonly used to navigate the ship.
Research Method
In this study, we use descriptive and analytical methods based on library resource. We also use case-by-case judgment from the Iranian Court.
Results and Discussion
One can refer to Basel's standards as the soft resources of corporate banking governance. Basel's Standards anticipate international banking rules for better banking activity and risk prevention, which are presented as recommendations. Basel's fourteen principles, released in 2010, have recently been reviewed in October 2014. In these fourteen principles, in addition to preventive mechanisms such as the system of rewarding managers, disclosure and transparency, employee reporting systems to the board of directors, the way to select the board members, etc., specific bank roles have also been predicted or strengthened which is for prevention of crimes. For examples, we can mention the role of chief risk officer (CRO) and chief channel officer (CCO).
The prevention of bank embezzlement by establishing corporate governance systems is of paramount importance. The occurrence of this crime necessarily involves a series of crimes and offenses, including false accounting, one-sided audits and supervision, and collusion between managers and employees that provides a setting for committing crimes. Effective governance of corporate governance systems in the country's banking network can easily limit the scope of this crime and pay more attention to preventing aspect rather than punishing severe executions and imprisonment for their perpetrators.
The displacement and so-called cleaning of these illegitimate funds by the bank's network can generate a variety of corruption in the direction of hidden revenues and further strengthen the productive and illegitimate infrastructure. Therefore, the formulation of anti-money laundering regulations in the banking system of the country (quite seriously and operationally) and, more importantly, its principled implementation, is one of the essential requirements that should be in line with the strengthening of the corporate governance of the Iranian banking system. Therefore, it is imperative that the corporate governance institution, or in other words, Corporate Leadership in the interests of transparency, accountability and justice and observance of operating rules, in order to prevent bank offenses.
In the current situation, the Central Bank of Iran is structurally subordinated to the level of authority in order to impose corporate governance regulations in banks, and thus to respond to the consequences of monetary policy.
Obviously, with the establishment of corporate governance in the country's banking system, instead of adopting a criminal law approach by the legislator, a crime prevention approach has to be taken that has not paid special attention to the Iranian legal system. There is no doubt that criminal law should not be relied upon as long as it is possible to predict appropriate legal systems to prevent the occurrence of crimes in the banking sector.
In fact, corporate governance is a regulatory tool used by economic entities, especially financial institutions, to monitor activities and to achieve goals such as accountability, transparency, justice, and respect for stakeholders' rights. And in fact, determines the structure by which the goals of the organization are formulated and the means for achieving these goals and monitoring the performance are specified.
In this regard, the philosophy behind the formation of the Basel Committee in response to a global need for cooperation in the field of banking supervision, including the provision of regulatory guidelines and recommendations, encourages convergence in the use of banking standards and practices in countries with the aim of providing health and safety of the banking sector. In fact, corporate governance follows a unique approach as a mechanism for protecting values ​​and business relationships. This mechanism is in full compliance with business codes, codes of ethics, code of conduct, ethical charter, and ... as well as local corporate laws and commercial laws.
 

Keywords

prevention; corporate leadership; banking crimes; new paradigm

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