Financial Fraud: A Literature Review

Abstract

This paper describes the empirical universe of financial fraud as it has been documented in the academic literature. Specifically, it describes the different forms of fraudulent behaviour in the context of financial market activities, the prevalence and consequences of such behaviour as identified by previous research, and the economic and market structures that scholars believe facilitate it. To structure the discussion, a conceptual distinction is made between three types of financial fraud: false financial disclosures, financial scams, and financial mis‐selling. The findings of the literature review highlight a number of recent developments that scholars think have facilitated the occurrence of financial fraud, including (1) the development of new fundamental conflicts of interest and perverse incentive structures in the financial industry; (2) an influx of unsophisticated, gullible participants in the financial marketplace; (3) the increasing complexity involved in financial market transactions as a result of rapid technological, legal, and financial innovation and an ever‐widening menu of financial products; (4) an increase in the use of justified secrecy in the form of a mystification of trading models adopted by fund managers.

Individual Characteristics, Financial Literacy and Ability in Detecting Investment Scams

“…the views of previous studies (Baker and Faulkner, 2003;Shover, Coffey and Hobbs, 2003;Shover, Coffey and Sanders, 2004;Frankel, 2012;Lewis, 2012), which reveal that investment certain "investment opportunities" that are actually bulging (see (Baker and Faulkner, 2003;Shover, Coffey and Hobbs, 2003;Shover, Coffey and Sanders, 2004). Fraudsters can also recruit brokers or registered dealers to advertise the investment to their clients (Reurink, 2016). In other cases, fraudsters utilise social networks, which quickly arouse interest in word of mouth deception (Baker and Faulkner, 2003;Nash, Bouchard and Malm, 2013).…”

“…Investment is a financial activity where funds are invested in a certain project with the hope of generating a positive return, maintaining or increasing its value (Gitman and Joehnk, 2011) in reality does not exist (Reurink, 2016).…”

Investigating MMM Ponzi Scheme on Bitcoin

“…Financial fraud is a centuries old phenomenon that researchers have been trying to understand and resolve [18,[40][41][42]. With the recent advent of cryptocurrencies, especially Bitcoin [3,9,35], these currency networks have inadvertently become platforms for an array of fraudulent and unlawful schemes [34,36,44].…”

Current State of Personal Data Protection in Electronic Voting: Criteria and Indicator for Effective Implementation

“…Sound laws and regulations are the foundation of law enforcement and the criminal justice system [4]. Another important point with regard to the prevalence of fraud concerns its relationship to financial crises [5]. Thus, this study want to explore the typical legal issues and its demand for personal data protection based on people perception and the importance of legal literacy among them on how they view the current legal for preventing fraud that might occur in the election.…”

“…In Great Britain, there were 232 cases of alleged electoral malpractice (38% to voting offences and 34% related to false statement) reported by the police during the election, which one case had resulted in prosecution and conviction but over half of the cases (137 in total) required no further police action [4]. Meanwhile, in US, approximately 24 million voter registrations are no longer valid or significantly inaccurate, which 1.8 million decease individuals are listed as voters and 2.75 million people have registrations in more than one state while researchers estimate at least 51 million (24% of population) eligible US citizens are unregistered [5]. By recognizing the benefits of IT governance and investment are essential for a competitive advantages and to reducing the failure rate of IT projects [21].…”