Journal of Financial Crime

Political will in combating corruption in developing and transition economies: A comparative study of Singapore, Hong Kong and Ghana : Table of Contents

Abdul-Gafaru Abdulai — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – In recognition of corruption as a major obstacle to the development processes of poor countries, the search for effective strategies in combating the phenomenon in developing countries has become a major preoccupation of the international donor community, particularly since the early 1990s. The purpose of this paper is to examine the role of “political will” in combating corruption in Hong Kong, Singapore and Ghana with the view to drawing significant lessons for all developing and transition countries in their anticorruption crusades. Design/methodology/approach – The findings in this paper are based on an extensive review of relevant literature and personal experiences in Ghana. Findings – This paper concludes that controlling corruption in a sustained manner requires a consistent demonstration of genuine commitment on the part of the top political elite towards the eradication of the menace. Where the commitment of the top political leadership to the goal of eradicating corruption in a country is weak, as has been the case in Ghana, governments are only likely to engage in “zero tolerance for corruption” talk but continue to play a “tolerant corruption” game. Anticorruption reforms, in this regard, are bound to fail. Practical implications – The paper highlights a number of lessons from the successful anticorruption crusades of Singapore and Hong Kong that are significant for Ghana and other developing countries in their fight against corruption. These include the need for anticorruption reform initiatives to be participatory and inclusive of all stakeholders including public and private sectors as well as civil society; the need to provide adequate budgets and staff for specialized anticorruption agencies and grant them independence in the execution of their mandates; and the need to establish effective mechanisms for: providing positive incentives for those who comply with anticorruption laws; and exposing and sanctioning compromised individuals and institutions. Originality/value – Whilst studies on the role of political will in combating corruption in developing countries abound, most of these have either not provided in-depth country experiences or relied on single country cases. One major departure of this paper from extant literature is its cross-country comparative nature.

Control of insurance fraud in Nigeria: an exploratory study (case study) : Table of Contents

Tajudeen Olalekan Yusuf, Abdur Rasheed Babalola — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – Insurance fraud as a global economic problem threatens the financial strength of insurers and threatens the survival of the insurance institution. The purpose of this paper is to explore the magnitude of the problem including the industry's and regulatory authority's responses in tackling the menace in Nigeria. The paper is motivated by the recent effort on the part of the Nigerian regulatory authority to strengthen the sector through consolidation. Such renewed vigour on part of Nigeria is geared towards fighting all forms of economic crimes in both public and private sectors in post-military years. Design/methodology/approach – The paper reviews the literature on the existing fraud control mechanisms, i.e. insurance contract design and auditing and the perception of fraud by customers in the insurance market. A survey is conducted by interview method to explore the size of the problem and the effectiveness of the approach the industry and its regulator are adopting to control it. Findings – The paper's findings suggest a lukewarm or no serious attitude on the part of the regulatory authority and the insurance companies in appreciating the enormity of the problem now and in the future. This stems from lack of clear-cut sanctions for offenders and mechanism for enforcement. Originality/value – The paper reveals the paucity of research of such a topical issue in developing economies and suggests the need for urgent stakeholders' summit that will discuss effects of insurance fraud on the industry with a view to identifying specific roles and responsibilities of each stakeholder group in tackling the problem. This should also be complimented with the establishment of insurance fraud bureau that would promote public awareness campaign on the evil effect of fraud on the economy.

Corporate crime and the dysfunction of value networks : Table of Contents

Michel Dion — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – The concept of “value network” makes clear that the mission of business corporations cannot be isolated from three basic elements: making profits, responding to customers' needs, reacting to competitors. Too often, value networks are seen as neutral factors in the way corporate crimes are committed. Value networks are usually considered as morally neutral conditioning factors, while it is not the case. The purpose of this paper is to explain how value networks should be closely linked to any crime prevention system. Design/methodology/approach – Christensen's notion of value networks will be used in order to see if corporate crimes constitute a dysfunction of value networks. The most important “traditional” antecedents of corporate crime will be analyzed. Findings – Both financial performance and growth rate are reflecting a deep concern for profitability. The level of market concentration not only reveals the structure of the market itself but also the way competitors react one to each other (particularly, through mergers and acquisitions). In both cases, what is unveiled is the capacity of value networks to enhance ethical as well as unethical practices. The way competitors react one to another, as component of the industry concentration, actually reveals how value networks are morally unsettled when such reaction could influence organizations to commit corporate crimes. Originality/value – The originality of this paper is to reveal how changing corporate culture could redefine the moral boundaries of value networks within the organization.

Handling conflicts of interest within financial innovation: The case of regulation and supervision of Bermuda sidecars : Table of Contents

William Kattan, Wendy King, Marcelo Ramella — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – The purpose of this paper is to describe the experience of a financial services regulator, the Bermuda Monetary Authority (BMA), in identifying and dealing with conflicts of interest in innovative financial markets and involving sophisticated counterparties. Design/methodology/approach – The paper draws on Bermuda legislation and regulations in force, on corporate records, produced by the BMA, documenting its structure, policies, and procedures in place to identify and manage conflicts of interest, as well as on observation of current corporate practices in this respect. In addition, background and contextual information on Bermuda reinsurance market relies on secondary sources describing and analyzing it. Findings – The paper argues that the BMA has approached the issue of identification and treatment of conflicts of interest within a highly innovative environment involving sophisticated counterparties through two key strategies. First, it has concentrated its regulatory and supervisory efforts and resources at the “entry” stage of the process (e.g. licensing of financial entities). Second, the BMA has drawn on its knowledge of, and partnership with, the close-knitted network of financial services stakeholders operating in Bermuda. Originality/value – This paper is of value to those wishing to explore and better understand conflicts of interest involving sophisticated financial counterparties, and the role of the regulator in identifying and managing them, especially within the dynamics of innovative markets.

Investor protection by securities regulators in the primary share markets in Australia and Bangladesh: A comparison and contrast : Table of Contents

S.M. Solaiman — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – The purpose of this paper is to discover the weaknesses of initial public offering (IPO) regulation in Bangladesh in the light of the relevant law and practice in Australia. Design/methodology/approach – A qualitative analysis of archival materials has been carried out to achieve the objective of the paper. Two different sets of legal provisions dealing with some selected issues relevant to the regulation primary share markets have been compared and contrasted. The level of market development, composition and performance of securities regulators and the level of investor sophistication have been critically in this paper in discussing aspects of regulation. Findings – This paper finds that the IPO regulation in Bangladesh is weaker than that in Australia. The major weaknesses may be attributed to different factors such as the adoption of the disclosure philosophy prematurely by discarding the previous merit regulation in 1999 for a pre-emerging securities market, lack of experienced and well-trained people in the composition of securities regulators, lack of regulatory authority to sue for compensation on behalf of investors in the absence of shareholders class action, lack of authority to regulate auditors and lawyers who play significant roles in preparing defective prospectuses for public consumption. Findings also suggest that adequate investor protection cannot be ensured by regulatory measures alone, investors should be educated to protect themselves in the first place against the cupidity of issuers. Originality/value – It provides an insight into an effective IPO regulatory regime. An immediate implementation of the recommendations made in this paper may contribute to improving the legal and regulatory regime for the primary share market in Bangladesh which may set a good example for others.

Perspectives on financial crimes in Roman-Dutch law: Bribery, fraud and the general crime of falsity (falsiteyt) : Table of Contents

Johan Henning — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – The purpose of this paper is to identity the prevalence and kinds of financial crime in seventeenth and eighteenth century Roman-Dutch law. Design/methodology/approach – The object is achieved by a legal and historical analysis of the available legal sources especially of the main Roman-Dutch and other institutional authorities. Findings – It is found that the general crime of falsity in Roman-Dutch law had a much greater ambit than the present-day fraud and had it survived, would have been very valuable to combat present-day financial crime more effectively. Research limitations/implications – Further research on other Roman-Dutch sources on falsity. Originality/value – The paper shows there is much to learn from legal history in that the recognition of a general crime of falsity will very valuable to combat present-day financial crime much more effectively. Of value to everybody engaged in the battle against financial crime.

Identifying and managing low money laundering risk: Perspectives on FATF's risk-based guidance : Table of Contents

Louis de Koker — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – The purpose of this paper is to investigate Financial Action Task Force (FATF)'s risk-based guidance to combat money laundering and terrorist financing to determine its approach to the identification and management of low-risk providers, products and transactions. Design/methodology/approach – The paper analyses the relevant FATF recommendations and its guidance notes and reflects on key questions for regulators and financial institutions. Findings – FATF has not defined “risk” for purposes of the risk-based approach. The absence of a clear definition complicates the identification of low-risk products. FATF do provide an example of a risk matrix that can be used to identify low-risk banks, but the example is based on assumptions and generalisations that are not sustainable. In addition, it identifies certain low-value transactions as “low risk” transactions. The paper reflects on the role of value as an indicator of risk and concludes with a number of suggestions to clarify the conceptual framework. Originality/value – Low-risk products and transactions are often overlooked because the risk-based approach focuses attention on high-risk matters. Low-risk products are however crucial to the efforts to increase financial inclusion. The paper identifies gaps in the current conceptual framework and indicates ways in which they can be addressed.

Developing an identity fraud measurement model: a factor analysis approach : Table of Contents

Kayvan Miri-Lavassani, Vinod Kumar, Bahar Movahedi, Uma Kumar — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – Though many studies and reports have been published about the scale of identity fraud (IDF), no work has been done on developing models to measure IDF. The purpose of this paper is to propose a measurement model for IDF and test the validity of that measurement model. Design/methodology/approach – After providing a background on the concepts of IDF, the paper discusses the related term, identity theft. Next, a measurement model is developed, based on the current practice of measurement of IDF in four countries. Exploratory factor analysis (EFA) is used in identifying the indicators and factors of IDF. After the EFA is conducted, confirmatory factor analysis is employed to test the validity of the measurement model. These tests are conducted using the data collected from Canadian financial institutions. Findings – The review of the current empirical studies suggests that IDF should be assessed using a measurement model with 33 indicators to measure five factors of IDF. However, the analysis of Canadian financial institutions suggests that a measurement model that includes 27 indicators and four factors is most appropriate for the data. Research limitations/implications – The measurement model developed in the present paper is based on an examination of a sample of financial institutions in Canada. Hence, the results of this paper cannot be generalized to organizations in other sectors of the economy. Further studies in other sectors of the economy are required to identify industry-specific measurement model. Practical implications – This paper is the first approach toward developing a model for measuring IDF. Originality/value – This paper is the first study that attempts to scientifically identify and validate a measurement system in the area of IDF.