Trust is a Facade in the Banking World

What is Trust? In the business world is a fiduciary matter to manage and take responsibility for once asset based on their interest and objective. However, this fiduciary act has some errors, deception and fraud, hence the world we live in, some people live to the quote “take what you can and give nothing back” essentially describe in Wells Fargo account fraud and the CEO, directors and senior managers motive to close the secrecy.

In the fraud story, Wells Fargo was charge for million in saving and checking account transaction fraudulent, where the company increase the accounts to one customer to have 8 accounts with the objective to obtain high income and commission, this is done by transferring funds from checking account to checking account in a cycle which the customer obtains additional fees, credit and expenses unaware of the transaction. The company was penalized around $185 million from the fraudulent action and the executives are currently charge on criminal and civil lawsuits.

This is highly an unprecedented manner and ignorant action by the executive to perform sufficient cross- selling to increase wealth. Then the executives just blamed the employees and retail managers based on the fraudulent, then fired them. We all know that news media did a news coverage on actual incident that it is not the employees and retail manager fault, as they were pressurized by the executives and directors to perform this fraudulent scheme and get fired from this action. This is highly unethical and confirms the word stupidity to the executive of Wells Fargo company.

Hence, another example of greed destroys us all. Followed by fraud techniques enacted in Wells Fargo such as manipulation of revenue and pressurising employees to be fired.

The question is that, why government took so long to detect Wells Fargo or any company’s fraudulent activity? Is it because the difficulties to detect fraud with hundreds of companies in the country? It should not be! Unless the bank provides financial reporting and internal managerial report manipulation which lied to the government and an ingenious move. 

If I was the financial manager in Wells Fargo, to achieve the target sales, the company should attract as many customers as possible, to put specified accounts to the customer and promote Wells Fargo products to be sold to clients, such as giving them insurance investment, credit card promotion such as in using Wells Fargo credit card the customer will obtain 10% discount in product spending online and from retailers, and persuading customers to issue a mortgage which overall should amplify Wells Fargo revenue stream. Customers also include other banks to invest in Credit Default Swaps or Interest Rate Swaps, which should comply with Wells Fargo revenue stream and financial relationship with other banks.

In terms of investors, Wells Fargo should provide safe investment and sufficient capital requirement to cover probable loss in loan transfer default and trading book losses. Thus, Wells Fargo should attract investors to invest in its profitable assets such as bonds and shares which amplify company’s fund to perform further productive investment, such as further lending in mortgages, insurances, and portfolio wealth maximization by diversification.

I am highly interested in the finance and banking industry, hence after I graduate my bachelor’s degree, I will apply a job in Barclays Bank as a Savings, Wealth and Investment Manager, because the bank is a successful financial institution with sufficient corporate governance and often satisfying their employees and clients. I am also a pragmatist individual and I like to innovate, thus currently I have an idea to amplify a banks market efficiency and wealth maximization by performing an Artificial Intelligence programming to Barclays customers mobile application, computerise risk management and volatility forecasting, and asset algorithm to be more efficient and able to use all financial formulas as fast as possible on predicting possible future outcome.

In terms of customers, AI should be able to monitor customer interest, such as if a customer take a picture of a car post on his social media such as Facebook or Instagram and having interest on the car, however the customer does not have the income to buy, the AI will obtain that information, send to the banker which the banker will analyse the customer financial and credit report, and if all are sufficient the banker will provide a car loan digitally to the client, enabling Barclays increase in future revenue stream and the customer able to buy the car and pay the short term loan.

Based on investor, the AI will continuously have 24 hours risk management on investor portfolio and analysing possible stock price to increase or decrease in the future, which the AI will inform the investor by the banks application which the investor is fully informed and educated regarding their portfolio financial sustainability and stock correlation, thus a sufficient decision making by the investor to buy more Barclays assets which should achieve client satisfaction and Barclays wealth maximization.

But right now I know what you might be thinking, all technologies are manipulated by human hands, so what if the AI is manipulated and exploited by a bank? Such as Wells Fargo did with manipulating digital checking and saving accounts.

This is a problem of technological and financial ethics, because AI can control algorithm and even customer accounts easily to amplify a banks revenue or employees’ income. Such as what if there is a rouge banker who persuade many clients to invest on a bank securities or digital deposit accounts and since it is based on digital money the banker can just extract those digital funds by using the AI and leave, which is similar as a Ponzi Scheme. This will lead to a corporate governance problem in the bank, and who is to blame? Obviously, the CEO, directors and senior managers.

This is terrifying how people can use technological power on manipulating the business and banking industry. However, I would recommend that, to preserve ethics and clients safety, those AI program should be monitored by the government, Accounting Standard Board and Securities of Exchange Commission, because it would be effective that the AI is under the control of the government to prevent financial exploitation and manipulation. 

A solution to prevent financial reporting and revenue manipulation I would suggest the government such as Financial Accounting Standard Board should provide a quarterly auditing process by using an auditing software on company’s financial report, accounting report and internal managerial report to ensure viability and integrity, based on authenticity of the reports and if there are misleading information detected the FASB may provide penalties on the fraud. Furthermore, a substantive research should be provided to the company’s stakeholder and account transaction, such as in the manner of Wells Fargo fraud, the FASB should interview the directors, employees and external stakeholder such as other banks, customers and other stakeholder on Wells Fargo activities, which the FASB should detect the fraud easily when the employee confess on the pressure working in Wells Fargo and customers high fees, expenses and unauthorised credit and debit transactions. 

Another personal idea is that accounting and financial regulatory bodies should use AI to detect fraud and sustain sufficient corporate governance, such as AI should detect financial reporting manipulation in revenue manipulation, asset manipulation and financial transaction, and operational activities, with the objective on protecting stakeholders and prevent losses. Hence, AI can investigate a company's financial and operational activities in detail, including activities that are difficult to be detected by our eyes, including detecting Ponzi Schemes and fake accounts would be easier, as  AI has the potential to extract information regarding an entity easily based on public information.