Journal Cover
Journal of Financial Crime
Journal Prestige (SJR): 0.228
Number of Followers: 367  
 
  Hybrid Journal Hybrid journal (It can contain Open Access articles)
ISSN (Print) 1359-0790
Published by Emerald Homepage  [341 journals]
  • Editorial
    • Pages: 246 - 247
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 246-247, May 2018.

      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:51Z
      DOI: 10.1108/JFC-01-2018-0013
       
  • Police corruption: a comparison between China and India
    • Pages: 248 - 276
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 248-276, May 2018.
      Purpose There is no comparative research into the Chinese (PSB) police and the Indian police generally and none on police corruption in particular. This paper aims to show what police corruption and malpractices look like in China and India and offer up some suggestions as to why wide spread malpractices persists. Design/methodology/approach Horses’ mouth qualitative research is supported by primary public and police survey data. Findings There are many similarities in corruption “tricks of the trade” in both the countries, as well as in the reasons for its persistence. However, petty police corruption is more pervasive and less subtle in India. But both the forces suffer from politicization of policing, criminalization of politics, culture of tolerance towards substantive justice over procedural justice and master/servant attitude towards the public. In China, the police have administrative powers beyond criminal legislation, and Indian corruption is underscored by the culture of “Jugaad”. Research limitations/implications This is largely a qualitative research, so the usual arguments regarding limitations on its generalization applies. However, the insights in this article may provide some understanding of this under-researched topic and may stimulate further research in this field. It may also offer pointers to potential solutions for practitioners and policymakers. Practical implications By providing data on what corruption looks like and why it persists, policymakers can use the findings of this study to develop measures to address them. In so doing they would create a police service in India and China that is less prone to corruption and misconduct, thereby increasing public trust in these institutions. Social implications Peace and security is a prerequisite condition for economic and social modernization through the rule of law. Reform of the police is a critical success factor in this process. Therefore, by reforming the police, India and China stand a better chance of eradicating poverty and reducing inequality. Originality/value There is little in the way of research into the Chinese Police and none into Chinese police corruption. There is also no comparative study of the Chinese and Indian police generally and none on police corruption in particular.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:46Z
      DOI: 10.1108/JFC-10-2017-0096
       
  • The creation of express, resulting and constructive trust in banking
           transactions
    • Pages: 277 - 286
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 277-286, May 2018.
      Purpose This paper aims to analyse the circumstances where an express, resulting or constructive trust may arise in banking transactions, taking in consideration relevant case law. Bankers in certain situations could become a trustee or a fiduciary in relation to their customers. Emphasis is given on the issue of constructive trust as, after many years of inconsistent case law, a recent decision of the Supreme Court clarifies this controversial issue. Design/methodology/approach The paper is focused primarily on examining relevant cases and judicial reasoning to identify the circumstances leading to the creation of express, resulting or constructive trust in banking transactions. Findings In certain circumstances, the banker could become liable as a trustee under equity. An express trust may arise between a banker and a customer in cases where the customer gives the money to the bank to fulfil a specific purpose. Where the bank is not able to fulfil this purpose, a resulting trust may arise and will hold the money as a resulting trustee. There are some exceptional situations, where the bank can be liable as a constructive trustee. An agent who receives benefits in breach of his fiduciary duty holds those benefits on trust for his principal. Practical implications Knowledge of the legal position and the circumstances that can lead to the creation of express, resulting or constructive trust is essential for both bankers and their clients to protect their interests. The flexibility of equitable remedies can be used to fill in the gaps or deficiencies in the common law. Clients of banks or even third parties in the case of constructive trust can be in a very advantageous position in circumstances where a trust for their money is created. Originality/value The paper takes in to consideration all updated academic papers and modern court decisions. The analysis provided in the paper can be very useful for bankers, their clients and practitioners. The paper clarifies the application of equity law and the creation of trust in certain banking transactions.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:05Z
      DOI: 10.1108/JFC-08-2017-0073
       
  • Financing terrorism through hawala banking in Switzerland
    • Pages: 287 - 293
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 287-293, May 2018.
      Purpose This paper aims to illustrate the feasibility of circumventing the Swiss financial sector’s compliance mechanisms by financing terrorism through hawala networks. Design/methodology/approach Based upon a qualitative content analysis of 15 informal interviews with providers of illegal financial services and 15 formal interviews with compliance experts and law enforcement officers, the general suitability of hawala networks for the financing of terrorism was assessed and concrete methods of doing so were better understood. In addition, it is shown how terrorists can limit their risks in using the services of hawala bankers. Findings Hawala banking in Switzerland is extraordinarily useful for the financing of terrorism. Research limitations/implications The findings are based on semi-standardized interviews limited to the perspectives of the 30 interviewees. Practical implications Law enforcement and intelligence agencies must be provided with additional tools, such as a broader scope of allowable activity for undercover police officers and the possibility of secretly conducting remote online searches of electronic devices. While this article focuses on Switzerland, its findings could be applied on a global level. Originality/value While the existing literature focuses on understanding the channels terrorists can use to finance their activities and on developing prevention mechanisms, this paper describes exactly how terrorism can be financed through hawala networks in Switzerland.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:53Z
      DOI: 10.1108/JFC-06-2017-0056
       
  • Uncomfortable truths' ML=BS and AML= BS2
    • Pages: 294 - 308
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 294-308, May 2018.
      Purpose The purpose of this paper is to advance debate and prompt new strategies substantially to improve the capacity to disrupt serious profit-motivated crime. Design/methodology/approach Using interdiction rates (the proportion of criminal funds seized or forfeited) as an interim proxy effectiveness indicator, this article challenges elements of the dominant anti-money laundering/counter-financing of terrorism (AML/CFT) narrative, and reflects on policy effectiveness and outcomes. Findings Interdiction rates in jurisdictions surveyed hardly constitute a rounding error in the accounts of profit motivated criminal enterprises. The current AML/CFT model appears almost completely ineffective in disrupting illicit finances and serious crime. Research limitations/implications With such research at an early stage, some data are poorly substantiated and methodological inconsistencies rife. Practical implications For policy interventions with a reasonable prospect for crime not to pay, beyond rhetoric, frank evaluation of results and a potential step-change in policy, regulatory and enforcement vision and capability, may be required. Originality/value Scholars have exposed a paucity of meaningful links between AML/CFT controls and crime and terrorism prevention, yet the dominant narrative persists largely unchecked. This paper examines components of that narrative in the context of scholarship on “bullshit”.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:09Z
      DOI: 10.1108/JFC-08-2017-0071
       
  • Combatting organised crime and terrorism in Central Asia
    • Pages: 309 - 319
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 309-319, May 2018.
      Purpose This paper aims to examine the shift away from the traditional distinction between organised crime and terrorist groups towards their conceptual convergence under the crime-terror nexus narrative in the context of international security and development policy in post-Soviet Central Asia. It assesses the empirical basis for the crime-terror and state-crime nexus in three Central Asian countries – Kyrgyzstan, Tajikistan and Uzbekistan – and argues that the exclusion of the state from the analytical framework undermines the relevance of the crime-terror paradigm for policy-making. Design/methodology/approach This paper draws on a literature review of academic research, recent case studies highlighting new empirical evidence in Central Asia and international policy publications. Findings There is a weak empirical connection between organised crime and Islamic extremists, such as the Islamic Movement of Uzbekistan and Hizbut Tahrir, in Central Asia. The state-crime paradigm, including concepts of criminal capture, criminal sovereignty and criminal penetration, hold more explanatory power for international policy in Central Asia. The crime-terror paradigm has resulted in a narrow and ineffective security-oriented law enforcement approach to counter-narcotics and counter-terrorism but does not address the underlying weak state governance structures and political grievances that motivate organised crime and terrorist groups respectively. Originality/value International policy and scholarship is currently focussed on the areas of convergence between organised crime and terrorist groups. This paper highlights the continued relevance of the traditional conceptual separation of terrorist and organised crime groups based on their different motives, methods and relationship with the state, for security and democratic governance initiatives in the under-researched Central Asian region.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:52Z
      DOI: 10.1108/JFC-07-2017-0069
       
  • Madoff’s Ponzi investment fraud: a social capital analysis
    • Pages: 320 - 336
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 320-336, May 2018.
      Purpose The social network analysis of criminal networks at both the ego and socio-centric level is well established. This purpose of this study is to expand this literature with a social capital analysis of a criminal network. The focus of the analysis will be the recent egregious investment fraud of Bernard L. Madoff Investment Securities (BLMIS). Design/methodology/approach This research involves a case study of the BLMIS financial fraud. The article uses a social capital theoretical lens, with archival sources taken from the court records of Madoff v. NY to include victim impact statements and the defendant’s Plea Allocution. Findings Financial crime literature can be expanded with a social capital analysis which facilitates a socio-economic analysis of ego-centric criminal networks. Research limitations/implications Each financial crime is of its time; however, there are recurring socio-economic network characteristics that could be applied to develop an understanding of criminal networks. Practical implications Any understanding of financial crime, including contemporary instances of criminal innovation, such as cyber-crime, can be enhanced with a social capital analysis of criminal networks. Originality/value A social capital analysis of financial crime draws attention to “human factors” in criminal networks that are integral to this form of crime.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:48Z
      DOI: 10.1108/JFC-06-2017-0057
       
  • A public perception study on bribery as a crime in Turkey
    • Pages: 337 - 353
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 337-353, May 2018.
      Purpose The purpose of this study is to explore the perception of Turkish citizens of the severity of bribery relative to other crimes and violations. Design/methodology/approach A questionnaire survey was administered to 545 Turkish people respondents. A five-point Likert scale that measures attitudes and behaviors using answer choices was used to categorize the degree of seriousness of each crime for data analysis. Findings The results of the study show that bribery ranked 16th among the 33 offences surveyed, that is, it lies in the middle in terms of seriousness. The results also indicate that the average person views bribery as not a very serious crime. When compared to violent crimes, bribery is significantly less serious. As for the property crimes, bribery is significantly less serious than arson and carjacking, but it significantly more serious than damage to public property, shoplifting and bike theft. When compared to white-collar crimes, bribery is remarkably less serious than embezzlement and appreciably more serious than welfare fraud, insider trading, child labor, minimum wage and insurance fraud. The results of this study are substantial; general public do not perceive bribe as a serious crime. Originality/value This is an important study in relation to Turkey. This is as a pioneer study that indicates the relationship between bribery as a crime and other offences in Turkey. The results of this study should be useful to policy-makers in Turkey and elsewhere. Another important sight of this study is the fact that the results show different correlations with similar studies put through in the other countries. According to the studies, bribery was the least serious crime in Australia and New Zealand; it ranked in the middle in terms of seriousness in Mexico, similar to Turkey; and it was also less serious than the average offense in the USA.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:23Z
      DOI: 10.1108/JFC-07-2017-0061
       
  • The law is just the law: analysing the definition of corruption in
           Zimbabwe
    • Pages: 354 - 361
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 354-361, May 2018.
      Purpose The purpose of this paper is to highlight the shortfalls of the legal definition of corruption in Zimbabwe. Design/methodology/approach Defining corruption is a universal challenge. Thus, in reviewing Zimbabwes definition, this paper also draws on other common law system jurisdictions based on English traditions and Sharia law to make a comparative analysis. The paper also takes a multi-disciplinary approach that transcend fields of law and anthropology. Findings Although criminal law can be used as the normative basis in the fight against corruption, it can also be used by the powerful to shield themselves from corruption, through its indeterminacy and interpretation. Be this as it may, real and firm law can assist in curbing the vice. Research limitations/implications The paper’s purview is limited both in terms of subject and scope. Although it starts by considering the definition of corruption to get a broad overview of this subject, it mainly focuses on the meaning of two popular concepts that are popularly identified with our understanding of corruption – abuse of power and public office. Originality/value The paper tries to establish a framework for understanding and curbing corruption through the use of statutory law.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:49Z
      DOI: 10.1108/JFC-06-2017-0055
       
  • Moving in the right direction to fight financial crime: prevention and
           detection
    • Pages: 362 - 368
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 362-368, May 2018.
      Purpose The purpose of this paper is to identify current measures taken for financial crime’s prevention and detection in the context of Indonesia. Design/methodology/approach This study is based on data from articles in Indonesian newspapers relating to the current financial crimes, current measures of preventing financial crimes in Indonesia and based on the literature review. Findings There are some attempts to combat financial crimes in Indonesia, both internally and externally. The attempts that have been made for the internal scope are the enactment of anti-money laundering law, the new monitoring system of financial institutions and the formation of a superintendent institution. The attempts that have been made for the external scope are the agreement between Indonesia’ financial intelligence unit Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK), and other countries’s financial intelligence unit, the affiliation member of the Asia/Pacific Group on Money Laundering (APG) to combat financial crimes through strengthening its anti-money laundering and terror financing capabilities. Originality/value This paper presents an overview of current prevention and detection measures in the context of Indonesia, and it is hoped that this paper will contribute to the current discussion of eliminating financial crimes.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:19Z
      DOI: 10.1108/JFC-06-2017-0060
       
  • Asset misappropriation in small businesses
    • Pages: 369 - 383
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 369-383, May 2018.
      Purpose This paper aims to increase the understanding of the types of insider financial frauds that occur within small businesses by focusing on a sample of businesses that have not employed a certified fraud examiner (CFE) in response to employee theft. Design/methodology/approach The survey data analyzed come from 102 small businesses (100 employees or fewer) in a midsized Midwestern city in the USA, and reflect 125 reported employee thefts. Findings The study results indicate that small businesses that do not hire a CFE report certain thefts with greater and lower frequencies as compared to small businesses that do hire a CFE. For particular types of frauds, CFEs may be no more useful than the efforts of business owners or managers, and other employees. Practical implications There may be important organizational differences between businesses that hire CFEs and those that do not, differences related to the ways in which business finances are maintained, the ways in which specific controls are used and the ability of employees to access business resources. These factors may create business-based opportunity structures that make particular types of insider financial frauds more or less likely to occur within a particular business. Originality/value Existing research on insider financial frauds may not appropriately account for small businesses that cannot afford, or are unwilling, to hire a CFE. The findings discussed in this paper contribute to a more complete picture of the types of frauds that small businesses experience, as well as how these businesses deal with insider theft.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:15Z
      DOI: 10.1108/JFC-01-2017-0004
       
  • Tackling fraud effectively in central government departments
    • Pages: 384 - 399
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 384-399, May 2018.
      Purpose Fraud has a significant effect on society. It has been estimated to cost the UK economy more than £50bn annually. The Government have signalled their determination to tackle these losses through a range of preventative, enforcement and collaborative activities. Diminishing police resources allocated to fraud means that this activity will need to be delivered by both law enforcement and civilian counter fraud teams. This paper aims to establish whether UK central government organisations have the legal powers, skills and regulation needed to tackle fraud effectively. Design/methodology/approach This research was based upon a literature review, which included academic and other material, a semi-structured interview programme and a survey of counter fraud champions. Findings Empirical data suggested that the effectiveness of central government civilian counter fraud teams is hampered by a fragmented legal landscape and a lack of skills, and that further professionalisation and regulation is needed to protect professional standards and individual legal rights. Research limitations/implications Postal survey had 50 per cent response rate – below gold standard of 70 per cent. Practical implications There are no practical implications, as this is a topical research area which is intended to inform counter fraud practice and development. Social implications This research highlights limitations on the UK central government’s ability to tackle fraud. There is therefore a low risk that, when published, this research could inform those considering fraudulent actions. Originality/value This research was undertaken for a professional doctorate and has been sent to the Cabinet Office to inform their professionalisation programme. It filled a potential gap in the academic literature by looking at the perceived powers, skills and regulatory pressures in place within the UK central government and the extent of the current gap between current practice and the delivery of a fully professionalised service.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:43Z
      DOI: 10.1108/JFC-01-2017-0006
       
  • Impact of fraud on Ghanaian SMEs and coping mechanisms
    • Pages: 400 - 418
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 400-418, May 2018.
      Purpose Small and medium-scale enterprises (SMEs) are the engine of growth of most developing countries, as they employ a large number of people as opposed to large firms. Consequently, these enterprises should succeed in expanding to become significant employers and producers. However, what seems obvious at least through cursory observation is that the current state of SMEs betrays an economic loss with respect to the benefits that ought to be forthcoming from their potential. This loss can be triggered by a number of factors. The study determines the drivers of internal fraud and their impact on Ghanaian SMEs and prescribes coping mechanisms. Design/methodology/approach Primary data collected on 250 SMEs collected from various sectors across Accra, the capital of Ghana, are used for this study. Using a cross-sectional regression, the authors identify the key drivers of internal fraud that hamper the growth of Ghanaian SMEs. Findings The regression results show that although several fraud variables impact negatively the growth of the SME sector, it is only accounting fraud which is significant. This study also revealed that stealing, fake currency issued for the payment of goods or service and non-payment of goods or service account for almost 83 per cent of fraud cases experienced by SMEs. Research limitations/implications The study was limited to the SMEs located in the Accra, the capital of Ghana. Practical implications The study will offer SMEs owners methods that will assist in their determination to fight fraud in the business that they manage. Social implications The survival of SMEs is paramount to job creation. Consequently, combating fraud that stifle the growth of SMEs will allow SMEs to grow to their full potential and create more job opportunities for the unemployed. This will minimizes the social vices such as robbery, stealing, drug trafficking and prostitution that confront nations. Originality/value This study should be useful to managers of SMEs, auditors and the security agencies in developing economies in particular, in their quest to combat fraud within SMEs.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:01Z
      DOI: 10.1108/JFC-05-2017-0050
       
  • Bitcoin money laundering: mixed results'
    • Pages: 419 - 435
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 419-435, May 2018.
      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 proceeds end up with the criminals themselves without an incriminating money trail. The authors examine how cybercrime proceeds can be laundered using services that are offered on the Dark Web. Design/methodology/approach Focusing on service-percentages and reputation-mechanisms in underground bitcoin laundering services, this paper presents the results of a cash-out experiment in which five mixing and five exchange services are included. Findings Some of the examined services provide an excellent, professional and well-reviewed service at competitive cost. Whereas others turned out to be scams, accepting bitcoin but returning nothing in return. Practical implications The authors discuss what these findings mean to law enforcement, and how bitcoin laundering chains could be disrupted. Originality/value These cash-out strategies are increasingly facilitated by cryptocurrencies, mainly bitcoin. Bitcoins are already relatively anonymous, but with the rise of specialised bitcoin money laundering services on the Dark Web, laundering money in the form of bitcoins becomes available to a wider audience.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:41Z
      DOI: 10.1108/JFC-11-2016-0067
       
  • Inventory control weaknesses – a case study of lubricant
           manufacturing company
    • Pages: 436 - 449
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 436-449, May 2018.
      Purpose For a manufacturing company, inventory control and management is crucial to ensure smooth production and sustainable sales performance, as well as preventing stockout that will result in customer switch to competitors. This paper aims to examine the effectiveness of cycle count activities, one of the inventory control tools to manage inventory. Beside, this study also wishes to identify any loopholes in practices and procedures in inventory control of companies. Design/methodology/approach One of the lubricant manufacturing companies in Malaysia was selected as a case study and mixed method data collection of document analysis and observation were used. The analysis and examination was conducted by using Committee of Sponsoring Organization of the Treadway Commission Framework 2013 as guidance. Findings This study found that problems in inventory control can be caused by inconsistency of practices due to incomplete or absent standard operating procedures. Furthermore, no segregation of duties and excessive reliance on one person to conduct many tasks will lead to human error and fraud. Research limitations/implications This paper enhances the theoretical understanding on the inventory control and management system applied in the manufacturing organization particularly. However, frequent changes of the management in the organization of the case study make the study difficult to obtain consistent information. Not all standard operating procedures were revised or updated and available for examination. In addition, some of the reports needed for investigation are confidential and requests to observe and scrutinize information from those documents are denied by the company. Thus, more in-depth analysis and verification on the issues of interest were unable to be conducted. Practical implications This study provides an indicator that cycle count activities need to be conducted frequently on a regular basis so that the physical inventory and recording system are accurate. Cycle count activities also must involves various related departments in the company in which regular training is essential to ensure employees are aware and understand their responsibility and accountability on the inventory. Originality/value This study is original as it focuses on the inventory control management of one of the largest lubricant manufacturing in Malaysia, particularly on cycle count activities which is scare in literature. Furthermore, the company allows research access to the documents and operations conducted in the company, which is usually difficult to obtain from many companies.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:25Z
      DOI: 10.1108/JFC-11-2016-0077
       
  • Adequacy of law enforcement and prosecution of economic crimes in South
           Africa
    • Pages: 450 - 466
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 450-466, May 2018.
      Purpose Economic crime is a serious challenge to business leaders, government officials and private individuals in South Africa. Given the important role of law enforcement, prosecution and sentencing in deterring economic crimes, the purpose of this paper is to determine if law enforcement, prosecution and sentencing practices are deemed to be adequate in South Africa. Design/methodology/approach Primary data from Web-based and manual questionnaires were used to empirically analyse the perceptions of sentenced economic crime offenders and role-players regarding the statement that law enforcement and prosecution practices of economic crimes relating to fraud, corruption or tax evasion in South Africa are not adequate. The final realised sample included a total of 345 from the various populations of key role-players and a total of 82 economic crime offenders from a Gauteng-based correctional institution. Mann–Whitney U tests were used to test for significant differences between the views of role-players and economic crime offenders. Findings The majority of both groups of respondents is of the opinion that law enforcement, prosecution and sentencing practices in South Africa are not adequate with regard to economic crime offences, although statistically significant differences exist in the degree of agreement. The challenge is therefore to prosecute more economic crime offenders by improving law enforcement, prosecution and sentencing practices. The study also revealed that people have a reluctance to speak out about fraud, corruption or tax evasion or to report such offences for various reasons. Originality/value The research assisted in identifying the challenges economic crime presents and the shortcomings in current law enforcement, prosecution and sentencing practices in South Africa.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:17Z
      DOI: 10.1108/JFC-12-2016-0081
       
  • The art of deterrence: Singapore’s anti-money laundering regimes
    • Pages: 467 - 498
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 467-498, May 2018.
      Purpose In light of the recent 1MDB Scandal in Singapore, this research paper aims to examine the deterrent effect of Singapore’s sanctions against money laundering within financial institutions. Design/methodology/approach Case laws and legislations are examined as are relevant reports by regulators. Findings Singapore’s anti-money laundering (AML) regimes may not act as an effective deterrent against money laundering activities within financial institutions. This is due to the overreliance on the theory of deterrence-based thinking, the lack of an “enforcement pyramid” and economic factors which influence regulators to be lenient towards financial institutions. Research limitations/implications There are limited data available in relation to regulators in Singapore and the prevalence of money laundering activities within Singapore’s financial institution. Any discussions within this article is based on the impressionistic observations of this author, which may not reflect the true state of affairs in Singapore. Practical implications Those who are interested in examining the relationship between money laundering and the deterrent effect of sanctions against financial institutions will have an interest in this topic. Originality/value The value of the paper is to demonstrate that Singapore’s AML regimes may not act as an effective deterrence against money laundering activities within financial institutions.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:41Z
      DOI: 10.1108/JFC-01-2018-0001
       
  • Fraud prevention in Malaysian small and medium enterprises (SMEs)
    • Pages: 499 - 517
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 499-517, May 2018.
      Purpose In Malaysia, as in most of the developing countries, small businesses play pivotal roles in the economy. Yet, despite the contribution of small businesses, previous researchers have overlooked the fraud issues that are threating the sustainability of those businesses and instead focus mainly on large and public listed companies. Therefore, the purpose of this study is to identify how small businesses can prevent fraudulent activities. Design/methodology/approach This study used self-administer questioners and distributed 126 questionnaires to general managers, financial managers and supervisors in Malaysian small and medium enterprises (SMEs). Multiple regression was used to test the theoretical model. Findings The output of multiple regressions showed that culture of honesty and high integrity, anti-fraud processes and controls and appropriate oversight functions has a positive and significant effective on fraud prevention mechanisms. Practical implications Overall, this study suggests effective fraud prevention measures to mitigate the fraud risk surrounding Malaysian SMEs and other SMEs in emerging countries. Originality/value There has been a dearth of empirical studies on the effect of culture of honesty, anti-fraud processes and appropriate oversight functions on effective fraud prevention in non-western context, and this study has fulfilled the need for this research.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:31Z
      DOI: 10.1108/JFC-05-2017-0049
       
  • Backdating of executive stock options: comparing financial and
           nonfinancial industries
    • Pages: 518 - 526
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 518-526, May 2018.
      Purpose The 2008-2009 subprime mortgage crisis in the USA caused bankruptcies and closures of many financial institutions. Yet many CEOs of US financial institutions were awarded huge bonuses and pay packages despite the economic collapse, suggesting that their incomes were not in conjunction with those of the shareholders, indicating a serious agency problem. This issue raises the question as to whether stock option backdating, another example of an agency problem, was as prevalent as slack lending policies among these financial institutions. This paper aims to compare the relative magnitude of executive option backdating in financial and nonfinancial firms. Design/methodology/approach Using a sample of CEO stock option grants from 1995 to 2006, obtained from ExecuComp, the authors employ an event study around the grant dates of executive options. The authors compare the abnormal price movements between financial and nonfinancial firms. Findings The abnormal negative stock returns were found before the award dates for both groups of firms. The after-event abnormal returns of both groups of firms, however, show different trends. For nonfinancial firms, there is an immediate turnaround of the abnormal return movement right after the grants; that is, the price increases, indicating the occurrence of significant backdating events. For financial firms, however, there is no significant price rebound after the grant date. In fact, the price continued to decline throughout the after-event period. Research limitations/implications The result shows that nonfinancial firms demonstrate significantly more option backdating behavior than financial firms. Practical implications The findings suggest that previous findings on prevalent backdating among all public listed firms are only partially correct. This paper shows that backdating behavior found in previous studies is indeed driven by nonfinancial firms. This unexpected finding contradicts the initial prediction of authors that option backdating may be more likely among financial firms. Originality/value Based on previous research, the authors recognize that generally the official grant dates of firms must have been set retroactively, as shown by Lie (2005). The findings, however, show that financial firms demonstrate only partial backdating behavior. This study opens a path for future research to further discover why financial firms exhibit less backdating behavior compared with nonfinancial firms, and if option backdating is not an issue for financial firms, why the share prices of these firms decline significantly prior to the grant date.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:17Z
      DOI: 10.1108/JFC-01-2017-0001
       
  • Fraud prevention initiatives in the Nigerian public sector
    • Pages: 527 - 544
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 527-544, May 2018.
      Purpose Detecting and preventing fraud are challenging and risky tasks, especially in a fast developing economy such as Nigeria. The efforts become crucial in the government sectors, as they involve public’s trust and resources. The purpose of this study is to examine the relationships between the fraud incidence and the elements of fraud triangle theory (FTT) with the aim of combating current fraud outrages in the Nigerian public sector. Design/methodology/approach A survey was conducted and 302 questionnaires were distributed to the staff of the departments of accounting, internal auditing and investigation of ten selected ministries, departments and agencies of Kano State, Nigeria. Structural equation modeling (SEM) was used to analyze the data. Findings The study reveals a significant relationship between three elements of FTT and fraud incidences in the Nigerian public sectors (p-value < 0.001 for pressure and opportunity and p-value = 0.024 for rationalization). Practical implications The findings of the study are useful for forensic accountants and the Nigerian anti-graft bodies to enhance existing control mechanisms in fraud prevention initiatives. The research also contributes to bridge the gap in academic theory and empirical study related to FTT. Social implications Fraud scandals can cause public’s frustration, damage the reputation and integrity of the ruling government and result in negative image of the public sector. Originality/value Accordingly, the study suggests a salary scale reform (SSR) in the Nigerian public sector and improvement in fringe benefits to increase employees’ standard of living. The study concludes with recommendations to enhance fraud awareness and training programs to the government employees.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:38Z
      DOI: 10.1108/JFC-02-2015-0008
       
  • A model for preventing corruption
    • Pages: 545 - 561
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 545-561, May 2018.
      Purpose This paper aims to investigate the extent of corruption globally, explains its social and economic consequences and introduces a model, composed of corporate governance mechanisms, internal controls and red flag analyses, which organizations can apply to prevent corruption. Design/methodology/approach This study uses criminology theories to analyze corruption and its prevention. Findings The global cost of bribery alone is estimated at US$1tn annually, not including costs resulting from non-completion and deficient completion of development projects (World Bank Institute, 2004). This paper shows that an effective prevention model should include a positive work environment and ethical governance; the implementation of a compliance risk management program with fraud risk assessments; an accessible psychological assistance program for employees; regular employee anti-fraud training; the implementation of targeted internal controls such as proper segregation of organizational duties; the adoption of fair compensation levels and realistic individual performance goals; a user-friendly and anonymous reporting mechanism; and independent and regular analyses of abnormal patterns (red flags). Research limitations/implications This paper extends previous research by tying together disparate factors into a cohesive model for the prevention of corruption. Practical implications The prevention model developed in this paper assists in deterring corruption, improving internal controls, improving the likelihood of detection and reducing opportunities to perpetrate corruption. By reducing the risk of corruption, this model also helps organizations and governments reduce project costs (public spending) and improve project quality, thus promoting economic competitiveness. Originality/value A comprehensive prevention model is developed to help curtail corruption and its devastating effects.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:43Z
      DOI: 10.1108/JFC-11-2014-0048
       
  • Regulating virtual currencies – the challenges of applying fiat currency
           laws to digital technology services
    • Pages: 562 - 575
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 562-575, May 2018.
      Purpose The purpose of this paper is to consider the recent (Dec`15) introduction of the Bitlicensing rules in New York and consider from a banking perspective how this will impact on their own risk assessment processes. The paper also outlines the challenges of applying financial regulation to companies that have an area of expertise and business that is more aligned to software development, rather than financial service provision. Design/methodology/approach This paper is a viewpoint paper, which offers a critical discussion on the FATF guidelines on virtual currencies. The paper compares developments that are currently occurring within the virtual currency sector in particularly the new Bitlicensing process in New York State and discusses the implications to the banking sector on risk assessment processes for virtual currency transactions. Findings This paper will benefit the banking and regulation industries as well as economic and banking academics and anyone with an interest in virtual and digital currency technology. Originality/value This paper is unique in that it examines the issue of virtual currency regulation from a banking perspective. It explains the virtual currency technology as a means to be enhancing banking risk assessment, for clients seeking to incorporate virtual currency transactions into their business. This paper impacts on the banking and regulatory sectors because it critically examines the current practice of over regulation and the impact that this has on alternative financial systems, such as digital and virtual currencies. The paper offers a theoretical framework as well as citing current practical reports of how regulation has already started to affect the financial services landscape. The impact of getting this wrong can lead to increased criminal activity, and this paper highlights how susceptible the financial sector is to this.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:09Z
      DOI: 10.1108/JFC-08-2016-0055
       
  • Nigerian corruption complex: rethinking complementarities to curative
           measures
    • Pages: 576 - 588
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 576-588, May 2018.
      Purpose The purpose of this paper is to examine the emerging corruption complex in Nigeria, the cultural nexus that influence its enculturation, dynamics and the amoral values that tend to shape it. Design/methodology/approach The paper drew data largely from documentary and empirical secondary sources for analysis. Findings Current institutional responses are not effective and cannot be sustainable in the fight against corruption. The enculturation process needs to be countered through measures other than arrest, prosecution and punishment to include mass mobilisation, values orientation, conscientisation and sensitisation of Nigerians on the evils of corruption. Research limitations/implications The endemicity of corruption in Nigeria suggests the multiplicity of its causative factors. But this study focuses only on primordial cultural fault line which hinders collective conscience in the fight against corruption. Practical implications Implementing the suggestions on moral awakening – value orientation, conscientisation, mass mobilisation and sensitisation – is thought of as enthronement of national values as opposed to primordial ethnic cultural values. It would complement the legal remedies in the fight against corruption. Social implications The building of character of Nigerians alongside existing laws on corruption will checkmate emerging culture of corruption that is attracting adherents in both business and bureaucratic activities in the countries. Originality/value The paper takes a cultural perspective and explains how primordial cultural values inhibit natural cultural values to enthrone amoral values that have contributed to the emergence corruption complex in Nigeria.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:19Z
      DOI: 10.1108/JFC-12-2016-0082
       
  • Cheque kiting' I have an idea!!
    • Pages: 589 - 597
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 589-597, May 2018.
      Purpose The paper aims to explore the present cheque clearance system in the USA and its possible misuses in the practical sense. Cheque kiting has been a way of creating fictitious cash balances on the balance sheet, which is a fraud. This practice can be prevented by a different accounting treatment. Design/methodology/approach The paper compares the cheque clearance system in the USA with the author’s own experiences from Turkey. It purports the riskiness of the present cheque clearance system on the financial statements and suggests a practical accounting application to prevent possible financial statement misrepresentations. Findings The paper explores that if the present accounting treatment is changed both for the banks and the businesses, the possibility of cheque kiting and misrepresentation of cash balances on the balance sheet will end. Basically, cash is the amount that can be used by the customer, the rest is not cash, it is “cheques in collection” and it should be treated as an account receivable until it is collected. Practical implications Financial statements are vital for the business world. Based on these statements, banks lend money, governments collect taxes and people buy and sell stocks. They need to be presented fairly. The present accounting application on cheque clearance is not transparent enough in the USA, and this might lead to misrepresentation of financial statements. The paper suggests a practical solution to this problem. By changing the accounting treatment, the companies will only show cash in their cash accounts and not the cheques in the collection process. Social implications Fair treatment is the motto for any situation we face in our daily lives. One may be a poor or rich person but the treatment should be fair unless he/she is a fraudster. A rich person’s cheque is deposited in his/her bank account the next business day, and a poor person’s cheque might take days to be credited. This is not a fair treatment. The paper suggests that there must be a one-way accounting treatment, regardless of the depositor’s financial situation. Originality/value This paper has been prepared based on the author’s past business experience in Turkey and his study of the US cheque clearance system, comparing the two. It reflects the real-world examples of cheque kiting and its negative consequences in the USA and proposes a solution.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:35Z
      DOI: 10.1108/JFC-05-2017-0036
       
  • Greed of the elite; capital flight from a fragile country: case of Burundi
    • Pages: 598 - 618
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 598-618, May 2018.
      Purpose This study aims to undertake an institutional analysis of capital flight and examine the drivers of capital flight from Burundi. Design/methodology/approach Given the episodes of political instability and poor governance which have characterized Burundi’s landscape in the past decades, coupled with macroeconomic instability which has been prevailing, political, economic and institutional factors are used to explain the trend and magnitude of capital flight which were recorded. An econometric analysis using robust least squares is also used to examine the determinants of capital flight from Burundi. Findings The estimation results seem to be sensitive to capital flight measurement used, but in general, they suggest that external debt, political instability and wars, as well as exports, are the main drivers of capital flight from Burundi. Research limitations/implications The findings of this study imply that to discourage capital flight, the government of Burundi should promote peace and political stability. In addition, more responsibility, more transparency and accountability are required from the government of Burundi in managing resources from external debt. Moreover, some actions are needed to fight trade misinvoicing, which was seen to be a major channel of capital flight from Burundi. It is however to be acknowledged that our econometric analysis results might not be robust because of data limitations related to data availability on capital flight for only the period 1985-2013. Originality/value This study contributes to the existing capital flight literature in two ways. First, by undertaking the first ever country-specific study focusing on Burundi, and second, by undertaking an institutional analysis of capital flight to understand the political, economic and institutional issues behind capital flight from Burundi. The focus in this study is on Burundi because of the burden that capital flight imposes on the country already impoverished.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:44:34Z
      DOI: 10.1108/JFC-11-2016-0075
       
  • Borderless crimes and digital forensic: Nigerian perspectives
    • Pages: 619 - 631
      Abstract: Journal of Financial Crime, Volume 25, Issue 2, Page 619-631, May 2018.
      Purpose This paper aims to determine the extent to which the myriad of cybercrimes is within the purview of extant Nigerian laws against the backdrop of the modicum of legal and institutional mechanisms available at international law for combating cybercrimes. Design/methodology/approach This study is library based. It relies on secondary data generated by the variegated multilateral agencies, law reports of international and municipal tribunals, relevant books, journals, monographs policy papers and so forth as the basis of analysis. Findings Findings suggest that cybercrimes are very difficult to unravel because their traces are imperceptible and require highly specialised skills and digital protocols to find, store and save them for evidential purposes. Such gathered evidence are in the form of digital data stored in variegated hardware and software media, such as storage peripherals, electronic components, working memory, hard discs and external discs. The difficulty is how to identify, weigh for evidential value and capture the multiplicity of evidence unearthed in a digital forensic investigation. The foregoing underscores the digital forensic problematic which is engendered by the difficulties of contriving a thoroughgoing concept of digital evidence given the malleable nature of the variegated storage media. Practical implications This paper engenders considerable acquaintance of the entire sphere of digital crimes and cyber threats, which is contended with in the information epoch, and recommends both legal and institutional mechanisms to counter the clear, real and present danger, which digital crimes represent for the survival of human civilisation, sustainable economic growth and development. Originality/value This paper dwells on the infinite potentiality of deploying the instrumentality of national and international law to deter, control and prosecute the myriad of cybercrimes.
      Citation: Journal of Financial Crime
      PubDate: 2018-05-21T12:43:07Z
      DOI: 10.1108/JFC-12-2016-0079
       
 
 
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