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
- 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.
- The influence of a board’s ethical commitment on corporate governance in enhancing a company’s corporate performance
Purpose The purpose of this paper is to examine the relationship between corporate governance and company performance and how a board’s ethical commitment can influence this relationship. Prior studies documented mixed evidence on the corporate governance and corporate performance relationship, which can be due to the influence of a board’s ethical commitment and will shape the corporate governance mechanism in the company and, in turn, influence performance. Design/methodology/approach This study collected data for two years, i.e. 2013 and 2014, from the biggest 500 Malaysian companies listed in the stock exchange. Corporate governance is measured based on the requirements of the Malaysian Code of Corporate Governance (MCCG), while a board’s ethical commitment is measured based on the MCCG and various international best practices. Corporate performance is measured based on return on equity, return on assets, net profit margin, market-to-book value and TobinQ. Findings A board’s ethical commitment was found to be significant in increasing the strength of the relationship between corporate governance and corporate performance. The findings are robust to the alternative performance measurements and lagged one-year corporate performance. Research limitations/implications This paper provides further evidence on the importance of ethical practices to improve corporate environment and, hence, sustain a company’s performance. This study, however, was conducted on only large companies with a limited data collection period. Practical implications This study provides an indicator that the policymaker and regulatory authorities need to double their efforts in promoting and encouraging a board of directors to take a bold step in improving its ethical culture. Shareholders and investors need to use their power and rights to demand the company to improve their governance and ethical practices. Originality/value This study is original, as it measures a board’s ethical commitment from various sources of local and international best practices such as Malaysia, Australia, Canada, Norway, South Korea, Singapore, Sweden, Turkey, the UK and the USA. It also contributes to the literature and theoretical understanding of the interaction between a board’s ethical commitment and corporate governance on corporate performance, particularly in developing countries like Malaysia, which is scarce in the literature.
- 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.
- Artificial intelligence: accelerator or panacea for financial crime?
Purpose This purpose of this viewpoint is to address the intended good and unintended bad impacts of artificial intelligence (AI) applications in financial crime. Design/methodology/approach The paper relied primarily on secondary data resources, business cases and relevant laws and regulations, and it used a legal-economics perspective. Findings Current AI systems could function as antidotes or accelerator of financial crime, in particular cybercrime. Research suggests criminal law could be applied via three approaches to curb these cybercrimes. However, others considered this to be an inappropriate mechanism to hold AI agents accountable, as present AI systems were not deemed capable of making ethically informed choices. Instead, administrative sanctions would be considered more appropriate for now. While keeping vigilance against AI malicious acts, regulatory authorities in the USA and the UK have opted largely for the innovation-friendly, market-oriented, permissionless approach over the state-interventionist stance so as to maintain their global competitive edge in this domain. Originality/value The paper reinforced the growing arguments that AI applications should be deployed more as panacea for financial crimes rather than being abused as crime accelerators. There equally though is the need for both public and private sectors to be mindful of the unintended negative, harmful consequences to society, especially those connected to cybercrime. This implied the further need to beef up attention and resources to help mitigate these risks.
- 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.
- Lawyers’ predicaments in complying with the anti-money laundering law in Malaysia
Purpose The purpose of this paper is to provide some empirical findings on the predicaments of lawyers’ anti-money laundering (AML) compliance in Malaysia and the rationales for such predicaments. Design/methodology/approach This paper adopts a qualitative research in which the primary data are obtained from seven case studies involving legal firms within the Klang Valley, Selangor, Malaysia, which is triangulated with the data from the Central Bank and the Malaysian Bar Council. Findings The authors contend that despite the vulnerability of their profession to money laundering, the level of awareness of the AML obligations amongst Malaysian legal practitioners is rather minimal. Also, the imposition of obligations upon them in policing their clients and regulating money laundering is not only onerous but also contrary to the ethics of their profession. Originality/value This paper fills the gap in providing the empirical evidence on lawyers’ compliance to their statutory AML obligations in Malaysia. Also, this paper could be a useful source of information for practitioners, academicians and students. It could also be a beneficial guide for policymakers for any possible future amendments to the law.
- 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.
- 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 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...
- Bitcoin transactions: a digital discovery of illicit activity on the blockchain
Purpose The purpose of this paper is to determine if Bitcoin transactions could be de-anonymised by analysing the Bitcoin blockchain and transactions conducted through the blockchain. In addition, graph analysis and the use of modern social media technology were examined to determine how they...
- Holding banks to account for the financial crisis?
Purpose - The purpose of this paper is to examine the ways in which the USA has sought to hold the leading banks to account for the financial crisis and to asses the validity of the methods used. This is the first of two articles which looks at the basis of the Complaints...
- Sight beyond sight. Foreseeing corruption in the Indonesian government through behavioral analysis
Purpose The purpose of this paper, which is based on the author’s study, is to explore the potential use of behavioral analysis in predicting corruption among public officials in Indonesia as part of the corruption prevention measures. Design/methodology/approach This study examines...
- Building anti-corruption compliance through national integrity system in Indonesia. A way to fight against corruption
Purpose The significant role of anti-corruption compliance should be encouraged to create good business and investment climate. Especially, in the circumstances of higher number of bribery and corruption cases, whilst preparing for Asian Economic Community, the necessary actions to reduce the...
- Bitcoin money laundering: mixed results?. An explorative study on money laundering of cybercrime proceeds using bitcoin
Purpose This paper aims to shed light into money laundering using bitcoin. Digital payment methods are increasingly used by criminals to launder money obtained through cybercrime. As many forms of cybercrime are motivated by profit, a solid cash-out strategy is required to ensure that crime...
- Internal auditor’s compliance to code of ethics. Empirical findings from Malaysian Government-linked companies
Purpose The purpose of this study was to determine the professional competency levels acquired by internal auditors in detecting unethical behaviour, to evaluate the position of internal auditors on objectivity and integrity in dealing with unethical behaviour and to examine the extent of...
- 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...
- The major issues that need to be addressed by effective corporate governance in the 21st century
Purpose This paper aims to underline and evaluate what corporations are as artificial entities, the concept of corporate governance (CG) in the twentieth century and whether a corporation owes allegiance to its key stakeholders in the twenty-first century. Design/methodology/approach ...