Hide and seekNew 

Does information technology necessarily promote transparency? Or does it provide tools to hide what someone does not want others to see and know? To put it even more directly and bluntly, does it make opacity (the opposite of transparency) easier to accomplish, with the availability of greater and greater sophistication in technology? What does history teach us?

Not technology alone

The unearthing of what remained hidden also does not seem be triggered by technology itself but some other aspect, including accidentally stumbled upon facts – the feeling of ‘something doesn’t add up’ that has often accompanied the ‘discovery’ of the hidden.  Of course, legal structuring of entities that exist only on paper is an inevitable part of such attempts to hide because they hide the illegal transfer of funds to entities, domestic and off-shore, controlled by people who initiated the whole exercise.

Perhaps, there is a context to this question, but it will be a nameless context. Two of the recent instances of massive illegal transfer of funds happened in a housing finance company and a housing & infrastructure development company. The number of accounts involved was so large that it made people wonder how was this possible. Several large banks have reported massive amounts in illegal transfer of loans. In the case of one high profile businessman, the amounts mentioned in the media are Rs150,000 crore!  A look at the number of cases filed through the Insolvency and Bankruptcy Code, 2016 demonstrates how serious the problem is. One conclusion that seems difficult to resist is that the system is not daunted by scale when it comes into hiding.

Hiding copper trades for ten years

In 1993, there was a $2.6 billion scandal at Sumitomo Corporation of Japan, where one trader, Yasuo Hamanaka, wrote up contracts that ended up controlling 5% of global copper production. He hid the losses (contracts) for ten years! Writing in September 1996, The New York Times in an article titled ‘Sumitomo Increases Size of Copper-Trade Loss to $2.6 Billion’, remarked that ‘fundamental questions about Sumitomo’s scandal remain unanswered’. Sumitomo didn’t answer how one trader could have hidden such colossal losses over a decade of copper trading. “It offered no clues to whether others might have cooperated with him or how much American financial institutions knew about Sumitomo’s copper dealing. Several American banks, including Chase Manhattan and J. P. Morgan & Company, lent nearly $1 billion in total to Sumitomo’s copper-trading operations”.

Using temporary account

As a derivatives trader at Barings, based in Singapore, Nick Leeson managed to hide his contracts on the SIMEX as his contracts were making losses. The number of contracts increased as he employed a doubling strategy.

In an excellent 2001 essay titled ‘Doubling: Nick Leeson’s strategy’, Stephen J Brown (Stern School of Business and Onno W Steenbeek, Department of Finance, Erasmus University, Rotterdam) offer an analysis of what happened. Typically, derivatives traders open a ‘temporary account’ to deal with minor mismatches which will be squared off at the end of the day. In his case, it increased and he instructed the system  “to change the software to exclude Account 88888 from all market activity reports and the information was only used for the estimation of SIMEX’s margins. In other words, the steps taken by Leeson in the first days of responsibility for activities of BFS, were to ensure that his actions would not be transparent”.

According to an article in The Banker titled ‘30 years on: Nick Leeson and the fall of the house of Barings, 18 June 2025’, Leeson himself says that a similar collapse is unlikely today, because “it is estimated that the big banks in London, for example, employ more than 25,000 compliance officers between them”. “The banks are also better at patrolling and policing themselves. Problems are going to be picked up much sooner.”  We will see how astonishingly wide-off the mark this observation is.

Wide off the mark

The spate of recent scandals in crypto are so staggering that it makes you wonder how such a reputed specialist magazine such as The Banker could simply quote Leeson.  Just recently, “the North Korean cybercrime syndicate known as the Lazarus Group stole $1.5 billion in the February 2025 Bybit hack”. An article titled ‘Top 10 Biggest Crypto Frauds in History’ written on 7 August, 2025 and updated in 2026, which is an eye opener. A rough calculation of the total losses in these ten cases is $24 billion! The biggest among this 10, at FTX, was a scandal ranging between $8-10 billion!, making unauthorized use of funds and hiding liabilities. The person who did this –  Sam Bankman-Fried, the founder! 

And crypto is based on ‘blockchain’ whose primary advantage was touted as transparency!

Technology and transparency – looking for signs of incongruence

The need for transparency has never been greater and also never been under a greater threat. The first aspect to accept that this is not a matter of technology alone, because we are working within complex systems but embrace static precautionary tools such as checklists and runbooks. One of the characteristics of any complex system is that we cannot predict all the outcomes of actions initiated within and through it. Incidentally, this makes such a system difficult to model. However, we can estimate the probability of outcomes.

Perhaps, a dynamic approach to looking for incongruence is a start. The degree of probability of outcomes can help identify incongruity, with some methods of measuring it. What should be the frequency of ‘looking for incongruence’ is a matter of the kind of system and its manner of working. In an investment system, the frequency could be a few seconds. More in others. It is not going to be easy because the battle is not just against misuse of systems but also against entrenched interests which sees such instances only as aberrations that do not warrant too much of ‘inquiry’.