Journal of Financial Crime
- Emerald Group Publishing Limited
- Publication date:
- Nbr. 27-2, January 2020
- Nbr. 27-1, January 2020
- 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
- Creative accounting a tool for financial crime: a review of the techniques and its effects
Purpose The purpose of this paper is to study the concept and procedure of creative accounting as how is it worked around and how it can lead to financial crimes. The procedure which are followed and which are the people who are involved and who are the victims of such crimes. The methods which are used to perform the action and how is it done. What are the findings of different researchers who have studied the same concept and how can it be curbed is the main purpose of the paper. Design/methodology/approach This paper is designed to find out the working of accounting policies and how the loopholes in the same can actually be taken into account, resulting in a certain number games which can be played around it, and to get the desired outcome in the preparation of financial statements. Findings Creative accounting, though legal and acceptable around the world, gives in the way to loopholes provided by the acts and rules governing the preparation of financial statements and eventually leading to financial crimes and hampering the economy as a whole. Research limitations/implications The limitations of this study remain to the fact that it is an empirical study, as a lot of papers and articles were studied before giving it a shape and reaching a conclusion. Practical implications Creative accounting though not illegal but the excess use of the same has given daunting effects on the financial statements and as a result have resulted into financial frauds and looting of peoples money throughout the world. Social implications Hard-earned money of the investors is looted and no action can be taken against as the mechanism and the legal bodies are still struggling to curb the problem, and thus it is very important to learn about creative accounting. Originality/value This study leads to the understanding of the growth of creative accounting and how it has resulted in accounting frauds leading to financial crimes in an economy.
- The effectiveness of the international anti-corruption legal framework in the context and practice of Colombia
Purpose This study aims to investigate the impact of the enforcement of the international anti-bribery legal framework in developing countries. Design/methodology/approach It uses the PetroTiger case to examine the effects of foreign bribery prosecutions in Colombia, from a bribe-receivers perspective. PetroTiger is a USA-based company that was prosecuted for bribing public officials in Colombia. As a result, the public officials involved were also prosecuted in Colombia for receiving bribes. This case serves to illustrate how international anti-bribery law operates in practice and how it impacts Colombian law enforcement institutions and their capacity to prosecute bribe-receivers. The Colombian response to the international anti-corruption framework is examined in this study through the review of legislative efforts taken to address the problems of bribery and corruption in public procurement. Findings This study finds that enforcement of foreign bribery laws raise awareness of the situation of corruption in developing countries, generate parallel prosecutions of individuals at the receiving end of bribes and helps developing countries to develop technical expertise to fight corruption. Practical implications In practice, due to the transnational nature of foreign bribery, without international agreements, this type of corruption in international business would seldom lead to prosecution. Although the effectiveness of the enforcement of international anti-corruption law is debated, in reality, prosecutions of foreign bribery by developed countries have more positive than negative implications for developing countries. Social implications Assist to continue efforts to deter corruption. Originality/value No many studies have looked at the effectiveness of anti-corruption international law in developing countries. As indicated by Mr. Moulette Patrick head of Anti-Corruption Division at organisation for economic co-operation and development more research on the effectiveness of the UN enacted Convention against Corruption, which is what this paper does.
- Persistence of bribery in West African countries. Generalise methods of moments (GMM) approach
Purpose The purpose of this paper is to empirically test persistence of bribery transactions in West African countries in spite of combative policy measures put in place by various governments in the sub-continent. Design/methodology/approach Data for this paper is obtained from the data set of Trace International’s Bribery Risk Matrix covering 2016 to 2018. The matrix is used to allow firms to determine risks associated with contact with government officials in a particular country. The data set is used to test this paper’s hypotheses. The generalize methods of moments (GMM) was used to estimate panel data of 16 West African Countries in STATA 14.0. Findings The result of the estimations reveals that in spite of combative policy measures put in place and millions of dollars spent, bribery is on the increase in West African countries. Originality/value Prior studies tend to focus on prevalence and pervasiveness of bribery transactions across the globe. This paper is one of the few that focuses on persistence of bribery particularly in West African countries.
- Assessment of corruption in the humanitarian assistance in Puntland State of Somalia
Purpose Corruption in humanitarian aid is one of the most worried and worst problems around the world. The existence of corruption acts in humanitarian aid delivery can endanger the already susceptible lives of the neediest individuals in the community. Amid serious humanitarian allegation in the country, this study aims to capture meaningful insights in humanitarian aid corruption in Puntland State of Somalia. Design/methodology/approach The study applied qualitative method and used interview as a technique of data collection. The information obtained through the interview was analyzed by quoting and narration forms. Findings The findings indicated numerous acts of corruption in all project stages including corruption in project granting and humanitarian staff employment, distortion of project targets and diversion of humanitarian project from targeted communities. The research also found that governmental and non-governmental actors are involved in the humanitarian corruption such as project managers and support staffs in addition to line ministries, parliament and community representatives. Research limitations/implications Corruption is a taboo and is difficult to research; people do not want to share the information for fear of victimization. Concerned institutions were not willing to provide necessary materials which led to shortage of secondary data. Another problem encountered during the study has been that the humanitarian stakeholders (for instance, government, non-government and private institutions) acted reluctantly to cooperate because of suspicion that disclosing information may lead to negative effect on their business. To overcome the challenges, the study assured the confidentiality of the members and that information collected would be used for research purposes only. The study further combined various tools of data collection so that the weakness of one tool becomes the strength of the other; while the researcher made efforts to build rapport with the research participants. Originality/value This study will contribute to the literature on corruption in the humanitarian aid. Specifically, the findings of this study will benefit academicians/researchers by giving empirical insights of corruption in the humanitarian aid in Puntland. It will benefit the government policymakers in the formulation of policies to combat corruption in the sector. Donors and aid agencies may also find the findings useful as they are key stakeholders who are interested in corruption in the humanitarian sector and finally the findings will benefit the wider society that is the primary victim of corruption in the humanitarian sector.
- Understanding and controlling financial fraud in the drug industry
Purpose This study aims to assess the fraud cases, factors and control measures of financial fraud in the drug industry with evidence from Ghana. Drug industry and pharmaceutical are the same, and they are used interchangeably in this study. Design/methodology/approach Data from questionnaires were collected from 412 manufacturers, wholesalers and retailers of the drug industry. Data were presented and analysed with descriptive statistics and probit regression. Findings Results show that, in general, stealing of drugs, stealing of cash, usage of fake cheques, falsified documents and dubious accounting practices are some of the fraud cases in the industry. Factors such as gender, educational level, religious beliefs, regulatory 7measures, pressure, rationalization and opportunities influence financial fraud in the drug industry. Control measures such as thorough assessment of products, regular review of fraud policies, installation of fraud-detection software and effective internal systems could reduce the menace. Research limitations/implications The paper addresses a number of theoretical and systemic issues on financial fraud in the drug industry but with limited specific quantitative data or calculations as well as limited sample size. Further studies could offer a more quantitative approach with a larger sample size in an attempt, for instance, to estimate the financial costs of financial fraud to the drug industry. Practical implications This paper openly tackles various attempted frauds and financial malfeasances from stakeholder perspectives in the drug industry. Practical measures have been given to tackle the consequences of the menace. Originality/value This paper is geared towards providing valuable learning points for stakeholders in the drug industry to handle daily operations to assist them in detecting and preventing similar occurrence of financial fraud.
- Corruption and FDI inflow to Nigeria: a nonlinear ARDL approach
Purpose This paper aims to empirically explore the asymmetric relationship between corruption control and foreign direct investment (FDI) in Nigeria. Design/methodology/approach The study utilized the non-linear autoregressive distributed lag (NARDL) bounds test technique for the time-series analysis covering the period 1984-2017. Findings The findings reveal that corruption inhibits FDI inflow and corruption control has asymmetric effects on FDI inflow to Nigeria. The coefficient of positive shock or changes in respect of corruption control is positive as well as statistically significant during the long run, while the coefficient of negative shock is negative, but statistically insignificant. This implies that improvement in corruption control encourages inflow of FDI to the country, whereas a decrease in corruption control has an insignificant effect. Practical implications Nigeria needs to intensify its corruption control efforts to effectively enhance the conduciveness as well as attractiveness of its business operating environment for FDI inflow. Originality/value This paper is among the first to use time-series analytical process to empirically verify the asymmetric association of corruption control and FDI inflow in Nigeria. In this regard, the insight generated by outcomes of the study will enable specific inferences to be drawn from the empirical findings by policy makers, academic researchers and business practitioners.
- Financial exclusion as a consequence of counter-terrorism financing
Purpose The purpose of this paper is to analyse the unintended consequences, financial exclusion, of counter-terrorism financing regulations in terms of their impact on financial inclusion and, consequently, the creation of an ineffective counter-terrorism financing framework. A further aim is to make recommendations to mitigate these unintended consequences. Design/methodology/approach This subject is examined by using the practices of a range of countries and organisations. The interdisciplinary approach of the paper is highlighted, which comprises criminal law, banking law, international law and human rights law. Findings Financial exclusion is a focal point that results in ineffective counter-terrorism measures which are caused mostly by the formal financial sector, in particular, the banking system. The financial exclusion also leads to counter-productive counter-terrorism financing through a low risk-appetite, de-risking, de-banking, financial exclusion and using unregulated or less-regulated and supervised financial systems. Originality/value No article comprehensively analyses financial exclusion as a consequence of counter-terrorism financing framework. The paper examines the process of counter-terrorism financing regulations, which leads to financial exclusion. In addition, the impact of financial exclusion on all relevant actors, such as individuals, correspondent banking relationships, money and value transfer services, charities and virtual currencies, is examined.
- Fraud against hedge funds: implications to operational risk and due diligence
Purpose The loss of an amount in excess of $100m cash deposit can be disruptive to the operations, definitely the liquidity of the hedge fund. Should a hedge fund liquidity position deteriorate, its compromised solvency could impact its vendors, most notably creditors and prime brokers. Large successful hedge funds do make basic mistakes. Lawyer Marc Dreier committed the criminal act of selling fraudulent promissory notes to hedge funds and others. Mr Drier’s success in selling fraudulent promissory notes was facilitated by his accomplices who posed as fake representatives of legitimate institutions. Drier and team presented bogus “audited financial statements” and forged developer’s signatures, and even went as far as using the unsuspecting institutions’ premises for meetings to meet potential notes buyers to further falsely legitimize the scheme. He had the notes buyers send their payments to his law firm account, to secure the money. His actions cost his victims, who include 13 hedge fund managers, other investors and entities, $400m in addition to his law firm’s employees who also suffered when his law firm was dissolved. For his actions, he was sentenced 20 years in federal prison for investment fraud. This study aims to direct hedge fund investors and other stakeholders to thoroughly vet the compliance function, especially controls on cash disbursements, even if the hedge fund is sizable (in excess of $1bn). Investors and even other stakeholders also should place a greater focus on what is usually overlooked issue; most notably the credit quality and authenticity of short-term investments bought by their hedge funds. Design/methodology/approach A thorough investigation of a fraud committed by a lawyer against a number of hedge funds. Several important lessons are identified to professionals who conduct due diligence on hedge funds. Findings The details of the case are very remarkable. This case directs investors’ attention to place greater efforts on certain aspects of operational risk and due diligence on not only hedge funds but also other investment managers. Normally investors conduct operational due diligence on the fund and its operations. Investors also vet fund external parties such as prime brokers, custodians, accountants and fund administrators. Yet, investors normally do not suspect the quality of short-term fund investments. In this case, the short-terms investments were the source of unforeseen yet substantial risk. Research limitations/implications Stakeholders in hedge funds need to carefully investigate the issuer of and the quality of short-term investments that a hedge fund invests in. Future research can investigate the association of hedge fund manager failure with a liquidity position of the fund. Practical implications Investors must thoroughly the entirety of the fund including short-term securities. Originality/value Normally, it is the hedge funds that commit the fraud against investors. In this case, it is the multi-billion hedge funds run by sophisticated fund managers, who are the victims.
- Anti-bribery information. Extent and impact on banking performance of UAE Islamic and conventional banks
Purpose This paper aims to explore the extent of anti-bribery disclosures in the annual reports of the banks listed on UAE financial markets by differentiating between Islamic and conventional banks and examine the effect of anti-bribery disclosure on bank’s performance. Design/methodology/approach This study uses in the first stage the content analysis to explore the extent of anti-bribery disclosure in the annual reports of the banks. In the second stage, the dynamic panel two-step robust system has been applied to study the impact of the anti-bribery disclosure on banking performance. Findings The empirical results show that the anti-bribery disclosure is at low levels for all banks and that there are no significant differences in overall anti-bribery disclosure between the two banking systems while there are significant differences in “anti-bribery human resources practices” between Islamic and conventional banks. The dynamic panel data results show that the association between the anti-bribery disclosure and the bank’s performance is not significant as this kind of information is not clearly disclosed in the annual reports of the banks. Research limitations/implications The study suggests to the UAE central bank and financial markets regulators to design a framework of anti-corruption disclosure by considering the international anti-corruption regime as an effort to respond to the international development of the bribery practices. Originality/value Anti-bribery concerns all the banks over the world and this research is the first study that constructs an index to measure the anti-bribery disclosure and helps in providing the status of the banking industry in terms of anti-bribery disclosure within an emerging market in the objective to improve the transparency in combatting the bribery.
- 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 ...
- 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...
- Asset confiscation in Europe – past, present, and future challenges
Purpose The purpose of this paper is to paint a general picture of the asset confiscation regimes used in Europe and to outline potential challenges, practical and related to issues of principle, associated with the current development with regard to the confiscation of the proceeds of crime...
- Documentary letter of credit fraud under criminal law regime in England and China
Purpose - The purpose of this paper mainly is to examine the relevant rules concerning documentary letter of credit (L/C) fraud under criminal law in England and China. Design/methodology/approach - The paper analyses the regulations about ...
- TBML suspicious activity reports – a financial intelligence unit perspective
Purpose The purpose of this paper is to share research data from the Financial Intelligence sector on trade-based money laundering (TBML), as a way to better inform banking risk assessment and the submission of suspicious activity reports (SARs). Design/methodology/approach The...
- What made base erosion and profit shifting project possible?. Identifying factors for building momentum for reform of international taxation
Purpose The purpose of this paper is to unveil the true background of the Base Erosion and Profit Shifting (BEPS) Project and to suggest crucial indexes for bringing a movement into a future ceiling causing a struggle of the international tax system. Design/methodology/approach This...
- Determinants of sales misconduct in Indian retail banking services. Does sales approach lead malpractices?
Purpose The purpose of this paper is to demonstrate those factors which are responsible for the sales misconduct in Retail banking services across the world and try to find out the determinants which majorly affect the Indian Retail banking industry. The authors also try to find out whether...
- Financial exclusion as a consequence of counter-terrorism financing
Purpose The purpose of this paper is to analyse the unintended consequences, financial exclusion, of counter-terrorism financing regulations in terms of their impact on financial inclusion and, consequently, the creation of an ineffective counter-terrorism financing framework. A further aim is to...
- A dedicated place for volume fraud within the current UK economic crime agenda?. The Greater Manchester police case study
Purpose The purpose of this study is to explore how a large UK police force - Greater Manchester Police (GMP) - sought during a period of continuing budget reductions to take a cost-effective approach to certain types of fraud through the establishment of a central Volume Fraud Team (VFT),...