Journal Cover Journal of Financial Crime
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   Hybrid Journal Hybrid journal (It can contain Open Access articles)
   ISSN (Print) 1359-0790
   Published by Emerald Homepage  [335 journals]
  • International symposium on economic crime think tank on "security,
           intelligence, and law enforcement" Jesus College, Cambridge
    • First page: 390
      Abstract: Journal of Financial Crime, Volume 24, Issue 3, July 2017.

      Citation: Journal of Financial Crime
      PubDate: 2017-05-24T11:30:35Z
      DOI: 10.1108/JFC-02-2017-0014
       
  • The digital transformation of intelligence analysis
    • First page: 393
      Abstract: Journal of Financial Crime, Volume 24, Issue 3, July 2017.
      Purpose The purpose of this paper is to highlight the potential of digital transformation and innovation opportunities for intelligence analysis. Its focus is the development individuals to exploit data and information technologies to better understand and counter organised criminal networks. Design/methodology/approach The methodology adopted consisted of an extensive literature review and interview with practitioners in digital technology and transformation focused on intelligence, crime and terrorism. Plus practical experience and field study. Findings Phenomena including the world web, social media and interconnectedness are influencing all aspects of human activity. Effective digital transformation, focusing on data, information technologies and people bestows significant competitive advantage upon those who have transformed. Applications are making previously complex processes and tasks easier for individuals to understand and exploit. An Activity Based Intelligence model provides a platform for intelligence transformation. ABI provides a foundation from which to better fuse and share data to understand and resolve complex human (wicked) problems. To counter increasingly fast moving organised crime networks law enforcement needs to quickly transform. Originality/value This paper serves as a guide to alert and educate law enforcement professionals of the potential of digital transformation and associated evolving intelligence processes. It offers an appreciation of the nature of organisations, and the role of innovation within those organisation, required to better appreciate and tackle complex, human network, challenges such as organised crime. It reveals the emergence and importance of an increasingly applications based culture, and the potential of this culture to simplify and exploit previously complex expert based processes.
      Citation: Journal of Financial Crime
      PubDate: 2017-05-24T11:30:44Z
      DOI: 10.1108/JFC-03-2017-0020
       
  • Filling black holes - using business process analysis in criminal
           intelligence
    • First page: 412
      Abstract: Journal of Financial Crime, Volume 24, Issue 3, July 2017.
      Purpose To highlight the importance of improving financial intelligence capture in understanding organized crime and the funding of terrorism Design/methodology/approach Analytical review of the core business processes used to harvest the revenues from illegal drug trafficking. Assessment of the extent to which modern organised crime – and the dynamics of the relationships between the relevant collaborating parties - can be more accurately defined in terms of these processes. Findings Understanding distinctive capabilities of criminal funding processes as well as their participants offers an approach to filling intelligence black holes which continue to afflict efforts to tackle organised crime and terrorism. Originality/value Establishes a framework for understanding and countering threat through application of competitive strategy analysis
      Citation: Journal of Financial Crime
      PubDate: 2017-05-24T11:30:42Z
      DOI: 10.1108/JFC-03-2017-0023
       
  • Follow the money to achieve success: achievable or aspirational
    • First page: 425
      Abstract: Journal of Financial Crime, Volume 24, Issue 3, July 2017.
      Purpose The purpose of this paper is to highlight the extent to which organised crime and the environment have altered in relation to money laundering and Terrorist Financing and to explore whether strategies to ‘follow the money’ have been successful. Design/methodology/approach This paper is based on personal analysis and involvement as a practitioner in law enforcement coupled with a broad literature review on the subject of terrorist finance and money laundering. Findings Money Laundering, Terrorist Financing and Economic crime activity is being disguised in the ‘noise’ of business by specialists that have become very adept at their craft. Financial Institutions and the lawmakers have invested heavily in countering money laundering and terrorist finance. However, its real effectiveness is somewhat doubtful. Originality/value This paper serves to stimulate further discussion and research on how all actors can increase collaboration and co-operation to increase the effectiveness of disruption strategies associate with these classes of crime.
      Citation: Journal of Financial Crime
      PubDate: 2017-05-24T11:30:41Z
      DOI: 10.1108/JFC-03-2017-0022
       
  • Proceeds of crime training: bringing it up to date
    • First page: 437
      Abstract: Journal of Financial Crime, Volume 24, Issue 3, July 2017.
      Purpose The purpose of this paper is to highlight the limitations of training provided to Accredited Financial Investigators, police officers generally, the Crown Prosecution Service and the judiciary in relation to the Proceeds of Crime Act 2002, money laundering, the investigation of financial crime and the options to recover the assets of criminals. Design/methodology/approach A literature review of the legislation and statutory instruments; training material; evidence provided to government committees; academic papers and journal articles was undertaken to identify the intention of the legislation and how this is manifested in the training of those responsible for dealing with money laundering; cash detention and forfeiture; restraint and confiscation. Findings The training provided to Accredited Financial Investigators has failed to progress since the implementation of the Proceeds of Crime Act 2002 that legislated for its provision. It is limited to the use of the powers granted to Financial Investigators within the Act, ignoring the variety of roles in which an Accredited Financial Investigator can be used, as well as the changing face of criminality generally and specifically in terms of fraud and money laundering and the predicate criminality behind it. Additionally, the training for the Crown Prosecution Service and Judiciary is inadequate with insufficient lawyers and judges with expertise in Proceeds of Crime work. Suggestions for the improvement in training are made with a recommendation that the training be reviewed regularly to ensure currency and relevance. Originality/value This paper serves as a useful review of the existing training picture in financial investigation and identifies its limitations and areas for improvement. It is essential that financial investigation is not viewed as an inconvenience or a niche role and that it is considered essential to the investigation of organised crime, money laundering, acquisitive and economic crime.
      Citation: Journal of Financial Crime
      PubDate: 2017-05-24T11:30:37Z
      DOI: 10.1108/JFC-04-2017-0028
       
  • A ‘think piece’ on intelligence, investigation and prosecution
    • First page: 449
      Abstract: Journal of Financial Crime, Volume 24, Issue 3, July 2017.
      Purpose The purpose of this paper is to expose the failure of the criminal justice system of England and Wales to provide an effective response to widespread fraud and to point to sources from which a new doctrine may be created. The author's approach draws on public sources,in particular, recent Home Office publications,the work of the House of Commons Home Affairs Committee and studies undertaken by the Mayor of London's offices in 2014/15. Design/methodology/approach A critical assessment of the criminal justice system based on the author's own experience as a fraud prosecutor. Findings Among the findings is that, while the failings of the current system have been apparent for some years, the extent and depth of the same failings have not been publicly realised, nor sufficiently acknowledged by the authorities. It has become obvious that the traditional response of the criminal justice system, when employed against fraud will fail for want of anything corresponding to the resources required. A new doctrine will emerge as the Proceeds of Crime Act 2002 is revised and more flexibly employed.The Criminal Finances Bill also holds much promise,in particular, with its new offences akin to money laundering and the provision of powers of investigation at a significantly lower level of command among investigators. However, there remains an apparent reluctance in law enforcement to explain its methodology or to support reform which would allow a fuller sharing of intelligence and appreciations of threats posed by fraud derived from intelligence with the financial services sector and the victim public. Originality/value The value of the paper derives from the author's long experience as a fraud prosecutor and as an adviser to government, on fraud and organised crime, in a closely related jurisdiction with similar problems, but where greater success has been achieved, Hong Kong.
      Citation: Journal of Financial Crime
      PubDate: 2017-05-24T11:30:35Z
      DOI: 10.1108/JFC-03-2017-0018
       
  • Criminality and suspicious activity reports
    • First page: 461
      Abstract: Journal of Financial Crime, Volume 24, Issue 3, July 2017.
      Purpose To suggest alternative suspicious activity analyses to improve the focus of financial institution reporting to law enforcement, and to identify some limitations in the current practice. Design/methodology/approach Consideration of U.S. and Financial Action Task Force policy and text sources of suspicious activity reporting in the anti-money laundering context in light of how the reports are used. Consideration of confidentiality and privacy constraints on public and private sector in assessing strategies to make the reporting process more effective and aiding the discovery and investigation of crime. Findings The current suspicious activity reporting process takes advantage of the business acumen of financial institutions to identify unusual or unexplained behavior that may assist law enforcement in criminal investigations and prosecutions. It is successful in that regard. However, the process has not been tuned to identifying criminal behavior through systematic feedback. As an alternative to feedback, analysis of criminal organizations vis-à-vis the transactions that flow through a reporting institution is suggested as a means to creating better tuning. The analysis could be accomplished either by law enforcement or by select institutions; but in either case, hurdles of confidentiality and/or privacy would have to be overcome. Originality/value Creating a process for law enforcement and/or reporting institutions to map known criminal activity on a transaction set would allow a new assessment of the role of financial institutions in this regard, and may allow policy makers to reassess whether the financial institutions’ efforts currently required would be more productive if redirected to focus more on criminal as opposed to merely suspicious activity.
      Citation: Journal of Financial Crime
      PubDate: 2017-05-24T11:30:36Z
      DOI: 10.1108/JFC-03-2017-0019
       
  • Anti-money laundering – the need for intelligence
    • First page: 472
      Abstract: Journal of Financial Crime, Volume 24, Issue 3, July 2017.
      Purpose The purpose of this paper is to highlight the need for predictive intelligence to support anti-money laundering programs in the financial sector. Design/methodology/approach The methodology adopted consisted of a literature review on the use of intelligence in anti-money laundering, the sources of intelligence and information used in the financial sector, supported by experience gained investigating and prosecuting money laundering cases and providing assistance to financial services companies. Findings Banks and other regulated services are required to meet international standards to deny services to criminals and terrorists, identify suspicious activity and report to the authorities. Regulated businesses have large operations which check customers against sources that confirm identity or check against lists of proscribed or suspected offenders at an individual or national level. Their controls tend to look backwards when other organisations that rely of intelligence, such as the military, value predictive forward looking intelligence. The penalties that banks and other face for failure in their controls are increasingly severe, but looking backwards not forwards reduces the extent to which the controls meet their purpose of reducing the impact of organized crime and terrorism. Originality/value This paper serves as a useful guide to alert and educate anti-money laundering professionals, law enforcement and policy makers of the importance of predictive intelligence in countering organized crime and terrorism. It also considers whether lessons in intelligence handling from other areas can inform a debate on how intelligence can be developed to counter money laundering
      Citation: Journal of Financial Crime
      PubDate: 2017-05-24T11:30:40Z
      DOI: 10.1108/JFC-04-2017-0030
       
  • The foreign policy tool of sanctions, conflict and ensuring continued
           access to finance
    • First page: 480
      Abstract: Journal of Financial Crime, Volume 24, Issue 3, July 2017.
      Purpose This paper argues that the current framework permitting humanitarian transactions into sanctioned and conflict environments needs re-thinking and updating. Design/methodology/approach This article is based on in-depth interviews conducted with banks, humanitarian actors, regulators and government officials. It incorporates a review of relevant literature and has involved extensive field based observations including with jurisdictions experiencing conflict or subject to sanctions. Findings This paper finds that a recalibration of the sanctions architecture is required and that a new equilibrium needs to be created to ensure the ability of international banks to support permissible humanitarian and development payments. It further sets out that the foreign policy intention of economic sanctions, when combined with licensing complexity and other risk factors, such as terrorist financing, are not achieving their intended goals. Originality/value Assessment on the strategic importance of ensuring access to financial services for jurisdictions subject to sanctions and in conflict.
      Citation: Journal of Financial Crime
      PubDate: 2017-05-24T11:30:37Z
      DOI: 10.1108/JFC-05-2017-0035
       
  • Unexplained wealth orders in the Criminal Finances Bill: a suitable
           measure to tackle unaccountable wealth in the UK?
    • First page: 178
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.

      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:16:54Z
      DOI: 10.1108/JFC-02-2017-0013
       
  • “Coke on Tick”: exploring the cocaine market in the UK through the
           lens of financial management
    • First page: 181
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose This article aims to offer detailed preliminary data and analysis that focuses specifically on the structures and financial aspects of the UK cocaine market. Design/methodology/approach The article is based on in-depth interviews with – among other - four active criminal entrepreneurs involved in powder cocaine supply in the UK. Furthermore, along with a review of relevant literature and open sources, in-depth interviews were undertaken with a range of experts with knowledge of the cocaine market. These experts include law enforcement agents and independent academics/researchers who have researched the cocaine market in the UK and internationally. Findings The cocaine market is a fragmented business dependent on networks of individual entrepreneurs and groups. At the core of collaborations often lie family, ethnic or kinship relationships, as well as relationships forged within legal businesses and in prison. Capital investment practices in this market are flexible, ‘messy’ and mutating, and money comes from a range of different sources. Credit is an integral feature of the cocaine business in the UK. The financial management of the cocaine trade is a result of (and reflects) a number of factors, such as the fragmented and decentralised nature of the trade. Originality/value Empirical research into financial aspects of organised crime manifestations is important in order for the assumptions that are part of public debate to be tested. In addition, understanding the broader range of financial aspects of organised crime is an important component of the process of crimes for gain, and can contribute to both better investigation and better prevention.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:16:56Z
      DOI: 10.1108/JFC-07-2015-0037
       
  • Tax havens, offshore financial centres and the current sanctions regimes
    • First page: 200
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose The paper is to articulates the complexities posed by tax havens and Offshore Financial centres (OFCs) in the global fight against financial crimes such as tax avoidance and money laundering. It suggests possible measures to mitigate the effect of tax avoidance on economic development of countries especially less developed poor countries. Data was evaluated based on examples and case studies drawn in different countries to demonstrate how illicit proceeds of crime are spirited out of countries for safe custody in tax haven jurisdictions around the globe. There is a need for harmonization of international tax and anti-money laundering laws to close regulatory loopholes which make OFCs attractive to money launderers and corrupt political leaders around the globe. Design/methodology/approach Data was evaluated using examples and case studies drawn tax havens OFCs in newspaper reports to demonstrate how illicit proceeds of crime are spirited out of countries for safe custody in tax haven jurisdictions around the globe. The author also carried out a scoping review of the literature to delineate the correlation between tax haves, OFCs and the growth in financial crimes such as tax avoidance and money laundering. Findings There is a close correlation that bank secrecy laws in offshore financial centers fuel the growth of financial crimes such as tax avoidance and money laundering around the globe. The findings also suggest that while imposition of sanctions on countries which transgress international financial regulatory regimes is an essential component in the international efforts against financial crimes, they need to be enforced on all states so that they are not seen as politicized and subsequently undermined. Research limitations/implications It is important that states work in tandem to initiate desired regimes to address financial crimes but enunciating regimes alone cannot generate a far reaching impact unless they are enforced against all transgressing states. Practical implications The paper has practical implications for states, people, governments, oversight institutions, markets and other stakeholders because unravels varied issues relating to tax avoidance, money laundering and policies that need to be adopted to address these challenges. Originality/value The issues explored in this paper help to highlight the challenges posed tax havens, offshore financial centres on economic development of countries. While, the paper was undertaken by the review of primary and secondary data, it offers important contributions that could potentially enhance the fight against tax avoidance.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:17:03Z
      DOI: 10.1108/JFC-01-2016-0008
       
  • Linking earnings management practices and corporate governance system with
           the firms' financial performance: a study of Indian commercial banks
    • First page: 223
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose In the shadow of global financial crisis, practice of earnings management can be hazardous for the growth and development of an economy especially for a developing economy like India. This empirical study is performed to analyse the presence of earnings management practices in Indian public and private commercial banking industry. This study also aims at developing a framework for the three-way relationship existing between the variables of corporate governance, earnings management practices and firm performance Design/methodology/approach Data have been collected for a period of 11 financial years (2003-2013) from Prowess (CMIE) 4.14 database. A bank based accrual model has been used for calculating earnings management practices. OLS regression has been used for analysing degree of interdependence among variables of corporate governance, earnings management practices and financial performance. Findings The analysis supports the fact that there is the existence of income increasing earnings management practices in Indian commercial banks. It is also observed that corporate government practices (Viz. board characteristics, audit practices and performance based remuneration) basically work as restricting variables for earnings management practices. It is evident from the analysis that market based firm performance variables (Viz. PE ratio, yield and PAT) are significantly related to earnings management and corporate governance system. Practical implications The finding of this study will help in monitoring and controlling fraudulent earnings management practices existing in Indian commercial banks. Originality/value This study is the initial research about the presence of earnings management practices in Indian commercial banks.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:16:58Z
      DOI: 10.1108/JFC-03-2016-0020
       
  • Mitigating asset misappropriation through integrity and fraud risk
           elements: evidence emerging economies
    • First page: 242
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose This research aims to evaluate the effect of fraud risk elements and integrity on asset misappropriation in the Royal Malaysian Police. In addition, this research also examines whether integrity moderates the relationship between fraud risk elements and asset misappropriation Design/methodology/approach Data is gathered from the responses of the questionnaires distributed to the Royal Malaysian Police (RMP). A total of 200 questionnaires were distributed based on simple random selection from five RMP centres in capital city. Out of 200 questionnaires distributed, only 189 were returned. Findings The findings indicate that the existence of fraud risk elements significantly affects the incident of asset misappropriation. An interesting finding was made that integrity is negatively related to asset misappropriation. This implies that integrity is an important value in minimising the occurrence of asset misappropriation. The results also indicate that minimising fraud risk elements is crucial in reducing the incident of asset misappropriation Practical implications Originality/value This present paper contributes to the literature by investigating a commonly proposed but underexplored elements of integrity in mitigating fraud. Incorporating integrity and fraud risk elements simultaneously in a single framework in context of Royal Malaysian Police would enhanced understanding and will be able to provide framework to practitioners on how to mitigate the incident of fraud.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:17:00Z
      DOI: 10.1108/JFC-04-2016-0024
       
  • eZubao: a chinese ponzi scheme with a twist
    • First page: 256
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose In this paper, we report on the single largest peer-to-peer lending scandal in the history of China. We provide details on how the case was perpetrated. We also provide details as to how investors were fraudulently manipulated in the scam. Finally, we provide updates on recent regulation in China in the peer-to-peer lending industry. Design/methodology/approach This is a theoretical paper that provides a better understanding of both Ponzi schemes and fraudulent practices in the peer-to-peer industry. Findings While the Ponzi scheme has been around for many years, fraud perpetrators continue to find new ways to use the scheme to manipulate and take advantage of investors. The case of eZubao provides important insight for both regulators, academics, investors, and financial advisors. Originality/value eZubao, a start-up in an industry with little to no regulation, provides a textbook example of common fraud symptoms (or red flags). The deception was enacted through eZubao’s bold advertising scheme and falsified appearance of success and government support. This was enough to brilliantly deceive over 900,000 susceptible investors. While eZubao was one of the first peer-to-peer lending scandals to be uncovered, it certainly will not be the last.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:17:01Z
      DOI: 10.1108/JFC-04-2016-0026
       
  • Examining the practical viability of internationally recognised standards
           in preventing the movement of money for the purposes of terrorism — a
           crime script approach.
    • First page: 260
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose The purpose of this paper is to examine – using crime script analysis – the practical effectiveness of internationally endorsed and universally recognised CTF standards in preventing the movement of money for the purposes of terrorism. The paper does not seek to examine the originating circumstances of terrorist finances or how laundered value is assigned. Design/methodology/approach Preliminary evaluation focuses on the discrepancies between the practices of money laundering and terrorist financing. Following an introduction to crime scripts, internationally endorsed AML/CTF practices are discussed to identify the process used to trace, prevent, and limit money laundering and terrorist financing. Several terrorist financing case studies are then aligned to the process of crime script analysis to determine whether existing AML/CTF practices are effective at preventing terrorist financing. Findings 1. The AML model ‘Placement, layering, integration’ is only relevant to CTF in the comparatively rare cases when the origin of the money is from crime. This creates a false sense of security through over reliance on AML/CTF for CTF purposes. 2. A crime script approach can be applied to terrorist finance but it is currently hindered by insufficient reporting of low level financing of terrorists’, their addresses and associates. 3. Law enforcement make insufficient use of financial intelligence – as a routine practice– in their crime and terrorist investigations; they have not adopted parallel investigation as a routine approach and consequently remain largely unconnected with the AML/CTF regime. Practical implications Utilising terrorist financing case studies, this paper identifies that existing AML/CTF international standards and practices are not adequate for controlling the movement of funds for financing terrorism due to the lack of focus on a specific script that aligns to known terrorist finance methodologies. While the paper identifies that existing AML/CTF international standards are thorough, the process underpinning the financing of terrorism is too dissimilar to the process of money laundering—namely: placement, layering, and integration, to support practices associated with terrorism prevention and detection. Originality/value This paper provides an examination of the practicalities behind the countering of terrorist financing from a compliance and investigative perspective. The paper is of interest to those involved in policy, compliance, and investigations associated with terrorist financing.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:16:57Z
      DOI: 10.1108/JFC-04-2016-0027
       
  • Online fraud offending within an Australian jurisdiction
    • First page: 277
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose In this paper, we seek to determine the level of online fraud offending within an Australian jurisdiction and how to best apply resources to combat it. Design/methodology/approach Empirical data provided by an Australian law enforcement agency, and qualitative responses obtained from those parties involved in the crimes themselves (the victims, the offenders and the nominated law enforcement agency). Findings Although there was a variance between the ages of the online fraud victims, there was a slighter higher chance of an older member of the population falling victim to an offender than that of a younger person. The number of a particular gender reporting an instance of cyber-crime in a given area can be higher if the total number of participating in that area is also higher. Older victims were more likely to lose larger amounts of money to online fraud. Furthermore, it is found that when the non-gender identifiable data was removed this increased to over 80%. Originality/value Existing literature on online fraud and criminal offending generally focused on the quantitative aspects of measuring offending, whichs do not give an indication into the “why” component of the study: why are these offences being committed; why do these offenders pick particular victims; and why do the victims fall for such ruses? In this paper, we combined the qualitative responses obtained from those parties involved in the crimes themselves (the victims, the offenders and the nominated law enforcement agency) with a quantitative examination of the crime figures provided by an Australian law enforcement agency.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:17:07Z
      DOI: 10.1108/JFC-05-2016-0029
       
  • An assessment of adults' views on white collar crime
    • First page: 309
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose This study updates our understanding of the public’s opinion of white collar crime and explains perceptions of white collar crime using self-interest, political affiliation, and ingroup/outgroup characteristics. Design/methodology/approach A state-wide phone survey of adults in North Carolina was conducted, and 421 adults responded. They provided their views of white collar crime, the need for government intervention, and whether they were more concerned about white collar crime in the public or private sector. Findings In the survey, 74% of responders agreed or strongly agreed that white collar crime is one of the leading problems in this decade, and 74% of responders suggested that it is not being adequately addressed by our legislators. Evidence suggests that individuals who are conservative, have high confidence in their economic circumstances, or are demographically similar to stereotypical white collar criminals perceive white collar crime to be less of a problem than individuals without these characteristics. Originality/value This study shows that perceptions of the dangers of white collar crime have increased since its inception. Additionally, this study extends our understanding about why certain demographics are more likely to care (and why high ranking politicians are less likely to care) about white collar crime.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:16:55Z
      DOI: 10.1108/JFC-05-2016-0040
       
  • The escalating relevance of internal auditing as anti-fraud control
    • First page: 322
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose The purpose of this paper is to discuss critical success factors for the enormeous development that Internal Auditing (IA) as “third line of defense” (IIA, 2016) and one of the strongest anti-fraud controls has reached within the last decades. Additionally, weaknesses of IA are identified and evaluated in order to allow a further improvement. Design/methodology/approach The anti-fraud requirements stipulated in the “International Standards for the Professional Practice of Internal Auditing” are confronted with empirical data about the current situation of the IA as anti-fraud control. The empirical data were extracted from global sources such as “Fraud Reports” (ACFE) and “CBOK”-studies (IIA). Findings Over the years IA has been continuously increasing its auditing quality and effectiveness with new analytical methods, specialized software tools and professional certifications. But all these efforts have hardly been reflected in statistical or research data, especially not in the listing of the top sources of fraud detection. The “ACFE-Fraud Report 2016” revealed that IA is now – for the first time ever – second among the initial detections of occupational frauds (financial statement fraud, corruption, asset misappropriation) worldwide. This positive trend of global anti-fraud auditing was probably no “one-hit wonder”, but a result of a lengthy process of professionalization of IA. Originality/value It is hoped that this paper will facilitate the discussion about the value that IA can add within an anti-fraud-management-system.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:17:05Z
      DOI: 10.1108/JFC-06-2016-0041
       
  • The effect of cyber-risk insurance to social welfare
    • First page: 329
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose Recently, cyber crime has become a global threat for all people and businesses. Previous studies generally focused on the definition of cyber crime and its effect on the market. In this thesis, following Kesan’s study, the relationship between cyber insurance and social welfare is analyzed for three countries, namely United States, UK and Turkey, and compared. Also, the main obstacles that the cyber insurer has to deal with and its effects on social welfare are examined. This paper basically tries to answer two questions related to cyber insurance at an aggregate level. First one is “What kind of contribution does cyber insurance make to social welfare?” The second one is “What kind of problems do insurers and insured have to face?” Although findings are pretty similar to Kesan’s study, this study gives us an opportunity to make a country base study and interpret the results with a different perspective. Design/methodology/approach The calculation of utility is also important for interpreting social welfare in the market. Consumer behavior under uncertainty constructs the background for this paper because the risks of malicious attacks are contingent and independent, which means that consumers have to make their decisions under uncertainty. Von-Neumann-Morgenstern utility function is used for interpreting consumer’s behaviour. Findings Basically, there are two important conclusions that we can derive for cyber insurance. First, cyber insurance can be defined as a higher security investment when coupled with increased levels of safety and a robust IT infrastructure. Second, cyber insurance, as a high-security investment, would have a positive impact on social welfare by making the Internet safer for all users. The results show that the problems that lead to market failure can be virtually eliminated with an accurate risk assessment that leads to appropriate premium levels for insured. These results are consistent with those of study by (Kesan et al, 2006). Research limitations/implications Data availability for different indiustries have limited teh ability to compare the impact of cyber-crime to different sectors. Originality/value Technologic devices have become part of our daily life. Although they have brought us increasing access to all types of information, including opportunities for business, they have also increased the risk of malicious attacks and the risk of e-crime.This paper basically tries to answer two questions related to cyber insurance at an aggregate level. First one is “What kind of contribution does cyber insurance make to social welfare?” The second one is “What kind of problems do insurers and insured have to face?” By replicating the economic model used in (Kesan, et al, 2006) social welfare losses and insurance premiums are calculated for three countries: US, UK, and Turkey.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:17:02Z
      DOI: 10.1108/JFC-05-2016-0035
       
  • The residence permit for third-country nationals who are victims of human
           trafficking. A double face instrument between compliance strategy and
           protection of human rights.
    • First page: 347
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose The aim of the present study is to explore institutional design strategies that promote compliance by regulating a peculiar sort of agents: human trafficking victims, starting from the point of view that institutions assume addressee virtue, but must also consider hypothesis of non compliance or that the measures adopted reveal their inefficiency in order to satisfy the goals hey were thought for, or that they are applied in order to obtain scopes, which are different from the ones they were conceived for. Design/methodology/approach Different methodological approaches, both deductive and inductive, are combined in the present paper, together with comparative and philosophical insights on national Court decisions, scholar writings, national and international entities official reports and statistics. Findings Since EU member States experts are discussing about common guide lines, policies and standard to manage with migration fluxes and EU integration process, this study highlights some critical points arising from the specific condition of a peculiar human trafficking victim: a migrant. Originality/value The study offers insights into the possible answers in terms of awarding prize and humanitarian protection of victims to fight human trafficking and smuggling in a constructive way, emphasising that those instruments are not mutually exclusive (awarding and humanitarian) and can be mixed together.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:17:06Z
      DOI: 10.1108/JFC-02-2016-0014
       
  • Predicting fraudulent financial reporting using artificial neural network
    • First page: 362
      Abstract: Journal of Financial Crime, Volume 24, Issue 2, May 2017.
      Purpose This study explores the effectiveness of an Artificial Neural Network (ANN) in predicting fraudulent financial reporting in small market capitalization companies in Malaysia. Design/methodology/approach Based on the concepts of ANN, a mathematical model is developed to compare non-fraud and fraud companies selected from among small market capitalization companies in Malaysia; the fraud companies had already been charged by the Securities Commission for the falsification of financial statements. Ten financial ratios are used as fraud risk indicators to predict fraudulent financial reporting using ANN. Findings Indicate that the proposed ANN methodology outperforms other statistical techniques widely used for predicting fraudulent financial reporting. Originality/value The study is one of few to adopt the ANN approach to the prediction of financial reporting fraud.
      Citation: Journal of Financial Crime
      PubDate: 2017-03-14T12:16:59Z
      DOI: 10.1108/JFC-11-2015-0061
       
 
 
JournalTOCs
School of Mathematical and Computer Sciences
Heriot-Watt University
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