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Amongst the more serious of these exposés (at least in terms of the sums involved) has been the revelation that, for a number of years, many of Britain’s leading banks and financial institutions have been deliberately manipulating the London Interbank Offered Rate (LIBOR) for their own benefit. However, whilst the LIBOR rate-rigging scandal has justifiably been described as ‘the biggest price-fixing scandal ever’, it remains far from an isolated incident in the recent history of the British financial sector. Indeed, in the years since the global financial crisis of 2007–2008, the number of fines and debarments that have been issued by financial authorities, both in Britain and around the world, has been rising as fresh discoveries continue to be made about new acts of deception and deceit. See: Matt Taibbi, ‘Everything Is Rigged: The Biggest Price-Fixing Scandal Ever’, Rolling Stone (25 April 2013); ‘World Bank Sanctions Investigations: Blacklist Revealed’, Freshfields Bruckhaus Deringer LLP Report (August 2013).
In response to this lack of historical research, the German Historical Exchange organised a conference entitled ‘Shady Business: White-Collar Crime in History’, held at the German Historical Exchange, Washington (18–20 September 2014).
Apart from this, the only other really relevant work for those interested in the history of fraud and white-collar crime in the City of London was David M. Evans’s Facts, Failures and Frauds: Revelations, Financial, Mercantile, and Criminal (Newton Abbot: David & Charles, first published in 1859).
One exception to this rule is Smithies’s (1984) history of the black market in England, whilst the edited collection by Davenport-Hines (1986) also features a number of the figures included in this volume. Likewise, Kynaston (2000) also deals in some depth with both Clarence Hatry and Gerard Lee Bevan in his authoritative multi-volume history of the City of London.
The two other categories of fraud identified in the Act are: (1) ‘fraud by false pretence’, whereby an individual makes any representation as to fact or law that they know to be untrue or misleading; and (2) ‘fraud by failing to disclose information’, whereby a person fails to reveal information to a third party when they are under a legal duty to do so (Smith et al., 2011: 16).
Inevitably, this decision to focus on a specific industry rather than a specific form of fraud has meant that the range of crimes featured in this volume is somewhat varied. Nevertheless, as the subsequent sections will endeavour to show, this does not mean that it is not possible to still draw a number of parallels between the cases discussed in this volume, nor to see certain similarities between the individuals involved in these crimes.
Moreover, given the fact that there are typically such high levels of information asymmetry between investors and lenders in modern financial systems (not to mention the general unfamiliarity that most investors have with the inner workings of the market), the likelihood that investors will entrust their money to the wrong person or organisation is also that much greater (Galbraith, 2004).
The most prominent example of this shift is, of course, the South Sea Bubble crisis of 1720 in which thousands of innocent investors across Europe were duped into buying shares in a trading company that did not have the trading rights that it claimed, nor even the capacity to conduct any actual trade (see Harrington, 2012: 402; Sarna, 2010: 25–26).
The Bank of England’s previous monopoly on joint-stock banking in England was ended with the passing of the Banking Act of 1826, which authorised the establishment of note-issuing banking corporations with an unlimited number of partners. Following this legislation, a total of 138 joint-stock banks were subsequently formed in England and Wales between 1826 and 1844 (Newton, 2010).
For some recent exceptions to this trend, see Godfrey (1999), Hollow (2014a), and Locker (2004).
Though it should also be noted that modern computer technologies do, in theory at least, also have the potential to help companies and regulators better monitor financial transactions and track financial activity (see Bishop and Hydoski, 2009; Picard, 2009).
The first stage refers to the misrepresentative or deceptive act itself; the second stage, meanwhile, incorporates the efforts made by the perpetrator to conceal the act from others; and the third stage describes the eventual attempt to extract some form of concrete monetary or non-monetary gain from the crime.
Such sentiments were echoed in a 2004 report into fraud by the Parliament of Victoria: ‘Motivation is, therefore, a combination of an individual’s personality and the situation in which they find themselves. Conversely, psychological factors will influence the way individuals interpret the situation they are in, and this in turn will influence the action they choose to take’ (quoted in Kapardis and Krambia-Kapardis, 2004: 193).
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© 2015 Matthew Hollow
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Hollow, M. (2015). Introduction. In: Rogue Banking: A History of Financial Fraud in Interwar Britain. Palgrave Pivot, London. https://doi.org/10.1057/9781137360540_1
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