Journal of Financial Crime
- Emerald Group Publishing Limited
- Publication date:
- Nbr. 26-2, April 2019
- Nbr. 26-1, January 2019
- Nbr. 25-4, October 2018
- Nbr. 25-3, July 2018
- Nbr. 25-2, May 2018
- Nbr. 25-1, January 2018
- Nbr. 24-4, October 2017
- Nbr. 24-3, July 2017
- Nbr. 24-2, May 2017
- Nbr. 24-1, January 2017
- Nbr. 23-4, October 2016
- Nbr. 23-3, July 2016
- Nbr. 23-2, May 2016
- Nbr. 23-1, January 2016
- Nbr. 22-4, October 2015
- Nbr. 22-3, July 2015
- Nbr. 22-2, May 2015
- Nbr. 22-1, January 2015
- Nbr. 21-4, September 2014
- Nbr. 21-1, January 2014
- Political connections, corruption and tax evasion: a cross-country investigation
Purpose This paper aims to examine the association between political connections and tax evasion and test whether corruption level affects this relationship. Design/methodology/approach Tax evasion measure is based on Schneider et al. (2010), while country’s political connection trend is based on Faccio (2006). Findings Using a sample of 35 countries, the authors document that political connections are positively associated with tax evasion and this relationship becomes stronger for high corrupt environment. Originality/value The findings have policy implications for countries aiming to combat tax evasion as political connection trends in one country reduce the level of tax compliance. In addition, political connections and corruption play a complimentary role in increasing tax evasion practices.
- Analysis of employee and management fraud in Tanzania
Purpose The study aims to explore specific motivations, rationalizations and opportunities that are involved in the occurrences of both employee and management fraud in the context of an emerging African country, Tanzania. It builds and extends from the fraud triangle theory. Design/methodology/approach A survey was developed and administered to 114 participants who had witnessed, had examined or had been involved in fraud resolutions. The participants included fraud examiners, business managers and owners, victims, auditors, lawyers, and law enforcement agents. The data collected were analysed using descriptive analysis, principal component analysis and correlation analysis. Findings The results revealed six motivation factors that incentivize employees and managers to engage in fraudulent behaviours. These are business financial strain, social incentives and pressure, greed, operating problems, internal pressures and malevolent work environment. In addition, fraudsters rationalized their behaviour through five significant neutralization techniques identified as social weighting, transferring of blame, denial of injury, attitude and prior fraud history. Lastly, victim organisations were identified to have three main fraud opportunities: poor control environment, inadequate control activities and circumstances that allowed collusive behaviour among fraudsters. Research limitations/implications While the study attempted to explore the motivations, opportunities and rationalizations from the perspectives of the fraud-fighting professionals and witnesses, their views and suggestions might be different from the actual known fraudsters or incarcerated individuals. Practical implications Business organisations, fraud-fighting professionals and general community must understand the factors behind fraud occurrences, so proper measures may be taken to limit the frequency and amount of fraud losses. Social implications Creation of public awareness and dialogue necessary for the prevention, fighting and deterrence against all forms of fraud. Originality/value Despite the occurrences of many scams in both public and private sectors, limited studies exist as to the triggers behind fraud occurrences in the context of the developing countries and whether these triggers are the same as in other contexts. This study is an attempt to fill this gap.
- Short-term performance of stocks after fraudulent financial reporting announcement
Purpose Availability of accurate and reliable information in financial markets helps investors make well-informed decisions on capital allocations which is beneficial for long-term economic growth. In this regards, the role of auditing firms that inspect the financial statements of the publicly traded companies in sound operation of financial markets has been increasing. The Capital Market Board of Turkey (CMBT) has the task and responsibility of investigating fraudulent information disseminated by the firms whose stocks are traded in Borsa Istanbul. The investigations can lead to monetary penalties if fraud is proven and the results are published by CMBT in its weekly bulletin. The present study aims to examine the effect of announcements of financial irregularities of companies in CMBT Bulletin on the performance of the relevant company stock in the short term. Design/methodology/approach This study uses abnormal return, cumulative abnormal return and cumulative average abnormal return as metrics and parametric, as well as non-parametric tests to ascertain whether the announcements of financial irregularities in company operations have any statistically significant effect on the return of its stock. Findings The results indicate that publication of the financial penalty news by CMBT in its bulletin has almost no statistically significant influence on the performance of the relevant companies’ stock in Borsa Istanbul. The findings indicate that either the investors in this particular markets do not consider such news relevant to long-term success of the firm or the announcement does not provide any new information and penalties have been priced into the stock before the announcement in the bulletin. Originality/value In literature there is no more research about the effect of the announcements of administrative monetary penalties and crime complaints on the stock returns.
- Battling corruption in Malaysia: What can be learned?
Purpose Corruption is a serious problem in Southeast Asian countries. Based on the average ranking of Transparency International’s Corruption Perception Index, Malaysia is ranked as the second least corrupt country among Southeast Asian countries. However, this country is still facing problems in its fight against corruption, in which efforts undertaken to prevent corruption have been said to be “unsatisfactory.” The purpose of this paper is hence to examine previous literature for the possible factors affecting the success of anti-corruption efforts in Malaysia. Design/methodology/approach This study analyzes previous studies conducted on Malaysia’s experiences in its fight against corruption. Findings The findings of this paper indicate four attributes that lead to the failure of anti-corruption efforts in Malaysia. Originality/value This paper will be useful for scholars, policymakers and anti-corruption practitioners who are interested in Malaysia’s experiences in fighting corruption.
- Incentive systems in anti-bribery whistleblowing
Purpose While existing literature focusses on the causes and negative consequences of corruption, this paper illustrates the potential use of whistleblowing incentives to combat bribery in multinational corporations. The purpose of the present study is to highlight that anti-bribery mechanisms, which have already been successfully applied in the public sector, may also be deployed in multinational organisations. Design/methodology/approach A two-step qualitative research process was used. Informal interviews were conducted with 35 corrupt public officials, followed by formal interviews with 35 compliance experts and law enforcement officers. During the interviews, the advantages and disadvantages of whistleblowing incentives in multinational corporations were discussed. The interviewees’ responses were subjected to content analysis. Findings The principal finding was that rewarding employees with significant monetary bonuses may help to increase anti-bribery whistleblowing. However, such bonus payments should be made in only major cases of bribery to safeguard multinational corporations, company cultures and trust among employees. Research limitations/implications The findings convey the perspectives of the 70 interviewees based in Austria, Germany, Liechtenstein and Switzerland. Practical implications The paper offers suggestions to multinational corporations on how to effectively combat corruption and other forms of white-collar crime. Originality/value While the empirical findings are based on a European sample, the results may be applied globally.
- Does insider trading pay?. An analysis of trading and tipping activities in insider trading litigation
Purpose This paper analyzes trading and tipping activities in insider trading litigation decided by federal courts from January 1, 2012 to December 31, 2014. Design/methodology/approach Legal documents from the US Securities and Exchange Commission, LexisNexis and Westlaw databases were coded to determine profile, patterns of trading and settlement outcomes. Findings Results of statistical analysis indicate that a defendant in both civil and criminal cases is more likely to trade on the information when he/she receives a direct, financial benefit from breaching his/her duty of confidentiality. The defendant tipper is also more likely to pass on the information to a close personal friend, business associate or family member. The average amount of profit of defendants in both civil and criminal proceedings substantially exceeds the average amount of their settlements. Originality/value This paper offers support for the rational choice model - insider trading is often based on rational calculations of benefits not only to the defendant but also to his/her family and associates. Although the threat of civil enforcement and criminal proceedings may possibly deter him/her from committing the crime, results indicate that the amounts of settlement in both proceedings are considerably lower than the amount of profits obtained from the offense.
- A strategic approach for the crime of tax evasion
Purpose Crime games cannot be simply read with mixed strategies. These strategies are inconclusive of how the players act rationally. This is undeniably true for the crime of tax evasion, where dishonest taxpayers are rational agents, motivated by the comparison of payoffs, when considering the risk of non-compliance. The purpose of this paper is to illustrate that in the presence of a small “private disturbance” of the players’ payoff, the Nash equilibrium in mixed strategies provides us with the necessary information on equilibria in pure strategies that will be played. Design/methodology/approach In tax-evasion games, an equilibrium must necessarily be interpreted in pure strategies, and the only way to do this is to insert some private information into the game and reinterpret it in a Bayesian scheme. We show that taxpayers’ private,subjective considerations on the effective implementation of the penalty and the revenue agency’s private information on the cost of monitoring and conviction can lead to Bayesian equilibria in pure strategies. The present paper takes issue with this Bayesian equilibrium and the implications for comparative-statics results. Findings In this context, tougher sentencing deters crime, although, as the Italian experience teaches, the necessary condition required is the certainty of punishment and the ability of the government to enforce it. The equilibrium strategies with incomplete information reveal whether it is convenient for the two agents to maintain their “private disturbance” as private information or, on the contrary, it is convenient to expect it to be “common knowledge.” Originality/value A distinct set of studies has adopted a game theoretic approach and shows that the standard economic approach to crime deterrence inspired by Gary Beker’s seminal paper might be flawed. See, among others, Saha and Poole (2000), Tsebelis (1989) and Andreozzi (2010). This paper shows that a greater severity of the penalty and a higher certainty of punishment (a lower possibility of appealing against sanctions and no discounts on due penalties) necessarily lead to a unique Bayesian equilibrium without evasion.
- United Nations vs transnational organized crime: a glimpse of the future?
Purpose The purpose of this paper is threefold; first, to show the role played by the United Nations (UN) in the fight against transnational organized crime; second, to analyze two subject areas, commercial sexual exploitation of children and mutilation of albinos, in which the Organization gives voice to the often voiceless victims; and third, to examine the role the UN may or should be called on to play in the postulated cooperation between high-level investigative means and personnel on the ground. Design/methodology/approach The paper relies on information generated by international organizations (Red Cross and UN) and media reports. Findings Although commercial sexual exploitation of children in many if not most advanced jurisdicitions is a crime with extraterritorial jurisdiction in the sense that perpetrator can be tried in, say, an advanced country for violations in a developing country, and considering that this crime has a strong international component, it has proved difficult to investigate. This is caused by the procedural difficulties in collecting proofs in one jurisdiction for use in another, transport of victims and witnesses, etc. Therefore, among many other measures, advanced countries should further tighten the investigation of so-called sex tourism clearly targeting children. Mutilation of persons with albinism is strongly linked to superstition and although often involving international trade, must be strongly countered by information. Again the UN plays and should play a leading role. Research limitations/implications Research in these and similar areas is quite obvious hindered by the so-called “dark number syndrome”, i.e. as the subject-matter is both illegal and the target of strong moral condemnation, it is difficult to get more than a small, hopefully representative, set of cases to examine. Practical implications Advanced countries must assist in limiting and hopefully stopping the overseas sex tourism involving underage individuals. Also, through the UN, the only moral arbiter we have, the international community should assist in informing and teaching, in particular, in the countries around the big lakes in Africa and in Malawi to bring to an end this kind of superstition. Likewise, the UN should act as a bridge, allowing sophisticated investigative means to link up with less sophisticated ones, in particular in the area of abuse of the environment (pachyderms in Africa and protected fisheries breeding grounds). Social implications From the previous paragraph, it is obvious, so it seems, that at least the commercial sexual exploitation of children and the mutilation of albinos can only be countered though a conscious effort at training aimed at the social layers - mostly in rural areas - where both superstition (albinos and brains of bald males) and the habitual view of children, in particular, but not only girls, as a source of income are prevalent. Originality/value The paper does not attempt to present original material. Rather it emphasizes the role of the UN in protecting the unprotected and promotes ideas with which to commence pushing back against the serious destruction of animals, including fishes.
- Fraud and guilt: rationalization strategies and the relevance of Kierkegaardian life-views
Purpose The purpose of this paper is to use Kierkegaard’s life-views (aesthetical, ethicist and religious life-views) for better understanding the way fraudsters are dealing with their ontic-existentiell guilt, while developing rationalization tactics. Design/methodology/approach Rationalization tactics make possible to neutralize moral discomfort about fraudulent practices. Endorsing Kierkegaard life-views actually unveils three basic patterns fraudsters could agree with (consciously or not): the focus for individualization processes, the ontic-existentiell quest and the attitude towards guilt. Each Kierkegaardian life-view has deepened this threefold pattern in a very different way. Findings The aesthetician life-view is so emphasizing immediacy and pleasure that it strengthens an amoral perspective. Fraudsters could easily adopt such life-view. The ethicist is so basically concerned with morality (distinction between good and evil) that he/she cannot consciously favour fraudulent practices. At best, fraudsters may be “would-be ethicists”. As long as they are unable to feel repentance, fraudsters will not be able to fully embrace the religious life-view. At best, they may be “would-be religious”. Research limitations/implications The way Kierkegaard’s life-views could put light on fraudsters’ rationalization tactics has not been empirically assessed. Empirical studies that would be focussed on such topics should deepen the relevance and meaning of fraudsters’ psychological, sociological, cultural and religious/spiritual traits. Originality/value The paper analyzes to what extent fraudsters could feel psychological guilt, as well as ontic-existentiell guilt, as it is grounded on ontological-existential guilt (guilt as an ontological category). Taking Kierkegaard’s life-views as reference pattern, it presents the implications of being oriented towards immediacy/pleasure (avoiding guilt, at any cost), towards freedom (being aware of one’s guilt) or towards the infinite (being fully aware of one’s guilt).
- Failure of the Dodd-Frank Act
Purpose - This paper aims to explain the weaknesses and inconsistencies inherent in the Dodd-Frank Act of 2010 (USA). Design/methodology/approach - The approach is entirely theoretical and multi-disciplinary (and relies on some third-party ...
- The burden of proof in market abuse cases
Purpose – The purpose of this article is to determine the burden of proof that is applicable in the range of activities covered by the civil offence of market abuse. It also considers the approach adopted in the USA and discusses the extent to which that approach may be worth applying in this...
- Corruption and socio-political economic structures: a case of Nigeria
Purpose “Corrupt practices” is a recurring feature of media coverage. The paper seeks to encourage debates about the influence of institutional structures on agency to break away from methodological individualism. This paper aims to encourage reflections on the role of both the structures and...
- The juxtaposition of success and failure of corporate governance procedures. The interplay between rules and practice
Purpose The paper aims to explore a multiplicity of corporate governance issues in the narrow purview of different corporate governance systems and procedures across jurisdictional contexts. It shows a correlation between proper implementation of rules and procedures in a corporation for...
- The federal housing finance agency’s complaints against seventeen banks
Purpose - The purpose of this paper is to examine the basis of the complaints against banks which sold private label securities to Fannie Mae and Freddie Mac before the financial crisis. The examination shows that all but one of the cases was settled out of court. Nomura and...
- Investment opportunity and anticipatory smoothing in corporate enterprises in India
Purpose Income smoothing is exercised by the management for numerous reasons. Growth opportunities available to a firm are a very important reason but an undermined area for income smoothing by the management. This paper aims to review the income smoothing practices in corporate enterprises in ...
- Anti-bribery compliance incentives
Purpose This paper aims to discuss an innovative approach to eliminating bribery in multinational corporations. In particular, the concept of using incentive systems to fight corruption is assessed. Design/methodology/approach Based on the analysis of ten formal and ten informal...
- Identity theft and university students: do they know, do they care?
Purpose - This study aims to explain what factors influence the relationship between the university students’ knowledge of the risk of identity theft and the preventive measures they take. Design/methodology/approach - A series of semi-stru...
- General strain and procedural justice in retail banking. A qualitative case study with a multi-theoretical approach to improving compliance policy
Purpose The purpose of the current study is to examine the applicability of general strain and procedural justice theories to retail banking deviance in an effort to improve compliance programs. Design/methodology/approach This objective is achieved through a qualitative case study ...
- Helping auditors identify deception through psycholinguistics
Purpose This paper reviews an array of psycholinguistic techniques that auditors can deploy to explore written and oral language for signs of deception. The review is drawn upon to propose some elements of a forward research agenda. Design/methodology/approach Relevant literature...