Financial and other frauds in the United States: a panel analysis approach

Abstract

Purpose The purpose of this paper is to report on the findings and implications associated with the millions of financial and other fraud complaints that are reported to the Federal Trade Commission and published in the Consumer Sentinel Network Data Book each year since 2002. Based on the three dimensions, namely, the number of complaints, growth rates and geographic locations of those crimes, this study found similar as well as unique trends that are new and are critical for addressing the rise of cybercrimes in the USA. The trends and patterns identified may also have implications for addressing cybercrimes in other parts of the world. Design/methodology/approach This research is a cross-sectional time-series study that covers frauds and cybercrimes in the USA from 2002 to 2015. The observed cases included the number of total complaints, complaints categories and payment amount or loss incurred both at the national and state levels. First, aggregate fraud totals, categories, payments and payment methods were analyzed and ranked. Second, state data for fraud categories, payments and filing rate per capita were organized into panel data for analysis, comparison and ranking. This cross-sectional and longitudinal approach of the different dimensions of financial and other frauds generate new rankings and more robust results. Findings The key findings are related to the long-term occurrences and trends of financial and online frauds in the USA. While some general trends are consistent with prior studies, the cross-sectional and longitudinal panel analysis produced some unique results. States that reported the most complaints do not necessarily rank high when examined with their growth per capital or their rates of growth. Their rankings could change dramatically due to other factors. In addition, eight of the top ten crime categories are the same both at the national and state levels, indicating that law enforcement could target the same crime categories. Originality/value The panel data analysis is new (first attempt at using this technique on the data set) and robust because it allows cross-sectional and longitudinally analysis of the various financial and online fraud crimes, in aggregate and by state, for a more comprehensive and comparative examination of the fraud behavioral trends. This research can be viewed as an improvement over earlier studies because the panel analysis identifies what fraud trends, scam types and payment amount exist on the national and state levels. The rate of fraud growth in the respective states provides a better understanding about future development of this problem.

Forensic Accounting in the Digital Age: A U.S. Perspective: Scrutinizing Methods and Challenges in Digital Financial Fraud Prevention

“…One of the most notable trends in digital financial fraud is the rise of cybercrimes, such as identity theft, phishing, and online banking fraud. These crimes exploit the vulnerabilities of digital platforms and the anonymity provided by the internet, making them difficult to trace and prosecute (Bai & Koong, 2017). The widespread use of the internet for financial transactions has made it easier for criminals to access and misuse personal and financial information, leading to significant financial losses for victims.…”

“…The use of advanced technologies, such as artificial intelligence and machine learning, in financial fraud has also been on the rise. These technologies enable fraudsters to automate and scale their fraudulent activities, making detection and prevention more challenging (Bai & Koong, 2017). The sophistication of these methods requires equally advanced countermeasures, highlighting the need for continuous innovation in fraud detection and prevention techniques.…”

Dividend payment and financial restatement: US evidence

“…Reputation is essential for firms because a good reputation offers significant benefits, including access to capital on favourable terms (Stuart et al , 1999), growth opportunities (Rao, 1994) and superior financial performance (Rhee and Haunschild, 2006). On the contrary, a firm’s association with illegal or fraudulent activities adversely affects its repute (Bai and Koong, 2017; Cowen and Marcel, 2011; Mishina et al , 2012). In particular, the presentation of falsified or erroneous financial information severely damages a firm’s reputation and market performance (Karpoff et al , 2008; Pfarrer et al , 2008).…”

Does the supervisory ability of internal audit executives affect the occurrence of corporate fraud? Evidence from small and medium-sized listed enterprises in China

“…Internal audit executives instruct the internal audit department to supervise corporate business management activities, evaluate internal controls and risks and provide recommendations for operating. However, financial fraud is just one important component (Persons, 2006; Liou and Yang, 2008; Khanna et al , 2015; Bai and Koong, 2017; Byun et al , 2019). Current academic research on corporate fraud governance and market supervision from the perspective of internal audit executives’ supervisory ability (IAESA) remains relatively limited, and it has not yet been determined whether and how the IAESA affects corporate fraud.…”