Research evaluates how financial criminals evade laws

March 10, 2017

Despite preventative measures against bankruptcy fraud and money laundering, criminals are finding ways to exploit differing regulations in the United States and Europe.

In a recent study published online in the International Journal of Arts and Sciences, two UT Dallas alumnae examine the frequency and implications of bankruptcy fraud and money laundering. They also assess the degree of cultural and ethical differences between these acts in the United States and Europe, where the crimes are more prevalent.

Brenda Limon BS'16 and Pamela Wong BS'16 are the authors of the paper, which they wrote in their International Business class with Dr. Shawn Carraher during their undergraduate studies.

"The lack of uniformity between the financial systems and their regulations makes a lot of room for criminals to participate in these illegal activities. If somehow the nations of the world were able to create uniformity within their financial systems and the way regulations work, it would eliminate a lot of the crime that is happening right now," said Limon, a corporate finance graduate. She is working toward a master's degree in environmental geology.

The pair was among a group of students Carraher took to Harvard University last summer for the International Journal of Arts and Sciences' conference, where Limon and Wong presented their work to a panel.

Carraher, clinical professor of organizations, strategy and international management and undergraduate research director in the Naveen Jindal School of Management, said presenting research benefits students by differentiating them in the marketplace.

"In 2014, a group of international business students in the Jindal School of Management studied the present value of an annuity of presenting papers at Harvard, Oxford, and Cambridge, and the present value of an annuity of presenting a paper at Harvard is $280,000," he said.

Limon and Wong's study found that while auditors and financial analysts are in the process of reducing bankruptcy fraud and money laundering, completely nullifying these issues may never be possible without a uniform structure of financial regulations.

The researchers analyzed Hofstede's cultural model and how it pertains to financial regulations between the U.S. and Europe.

"It was interesting to see the cultural differences across different nations and how they manifest in the policies and financial regulations," said Wong, who graduated from the accounting program and is pursuing a master's degree in the Jindal School. "Specifically for the U.S., one of the dimensions is low power distance, which means Americans prefer an equal distribution of power amongst individuals. This is exactly why the U.S. has strong whistleblower protection against retaliation for people who speak out against corporations that commit these types of fraud."

According to the study, Americans also measure performance on a short-term basis, meaning they prefer quick results.

"We found this tendency to look for short-term results sometimes pushes people in influential positions to commit crimes, either money laundering, bankruptcy fraud or the manipulation of financial statements," Limon said. "Because they find themselves under pressure to show stockholders that the company is growing, or has closed a deal, that pressure instigates them to make the mistake of doing whatever it takes to get quick results.

"On the other side of the coin, the United States has been one of the most active in trying to create uniformity in the rules. They're one of the countries trying to come up with regulations that fit not only their standards, but standards of other countries that are strongly tied to them financially."
-end-


University of Texas at Dallas

Related Fraud Articles from Brightsurf:

Shining a light on the issue of wine fraud
University of Adelaide wine researchers are developing a fast and simple method of authenticating wine - a potential solution against the estimated billions of dollars' worth of wine fraud globally, but also offering a possible means of building regional branding.

Fighting food fraud from farm to fork with a mobile ingredient tracing system
Savvy shoppers increasingly expect to know the origin of the food they eat, whether they shop at farmers' markets or big-box major retailers.

Online romance scams: A modern form of fraud
This paper presents a scoping review of the quantitative and qualitative evidence on this issue, focusing on epidemiological aspects, relational dynamics, and the psychological characteristics of victims and scammers.

Financial pressure makes CFOs less likely to blow the whistle
A recent study finds that corporate financial managers do a great job of detecting signs of potential fraud, but are less likely to voice these concerns externally when their company is under pressure to meet a financial target.

Medicare fraud and abuse linked to patient deaths and hospitalizations
Patients treated by health care professionals later excluded from the Medicare program for committing fraud and abuse were between 14 to 17 percent more likely to die than similar patients treated by non-excluded physicians, nurses, and other professionals, according to a new study from researchers at Johns Hopkins Bloomberg School of Public Health.

Patients of medicare providers committing fraud, abuse more likely to be poor, disabled
A new study from the Johns Hopkins Bloomberg School of Public Health analyzed providers excluded from Medicare for fraud and abuse, and found that the patients they treated prior to being banned were more likely to be minorities, disabled and dually-enrolled in Medicaid to supplement financial assistance for health care.

PSU study finds that money, revenge, morals motivate whistleblowers to expose tax fraud
A study by Portland State University School of Business accounting professor Cass Hausserman finds that people who expose others of tax fraud often do so as revenge that's disguised as their moral obligation.

UCLA researchers and partners work with sushi restaurants to reduce seafood fraud
A new monitoring project involving UCLA researchers and partners aims to take 'fake sushi' off Los Angeles diners' plates.

Researchers teach 'machines' to detect Medicare fraud
Like a 'needle in a haystack,' human auditors have the painstaking task of manually checking thousands of Medicare claims for specific patterns that could indicate foul play or fraudulent behaviors.

Reducing false positives in credit card fraud detection
Consumers' credit cards are declined surprisingly often in legitimate transactions.

Read More: Fraud News and Fraud Current Events
Brightsurf.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.