Fraud Detection And Prevention

Corruption in firms in emerging countries. A matter of isomorphism.

by Bertrand Venard

Reference: Venard, B. (2009). Corruption in firms in emerging countries. A matter of isomorphism. M@n@gement 12 (1): 1-27.

This paper, based on neo-institutional literature, focuses on the influence of organizational isomorphism on... more This paper, based on neo-institutional literature, focuses on the influence of organizational isomorphism on corruption in emerging countries. A questionnaire was administered in face-to-face interviews with top executives in firms across various economic sectors in emerging countries. Our findings lead us to conclude that corruption is influenced by coercive, mimetic and competitive isomorphism. This study indicates that the higher the quality of a given institutional framework, the lower the level of corrupt behaviour. Furthermore, we suggest that corruption is explained by mimetism within the same economic sector. We thus conclude that a firm is more likely to resort to corruption if its
competitors already adopt corrupt behaviour.

Organizational Isomorphism and Corruption: An Empirical Research in Russi

by Bertrand Venard

Reference: Venard, B. (2009). Organizational isomorphism and corruption: An empirical research in Russia. Journal of Business Ethics 89: 59-76.

Based on neo-institutional literature, this paper aims to show the influence of organizational isomorphism on... more Based on neo-institutional literature, this paper aims to show the influence of organizational isomorphism on corruption. The focus is institutional explanations of corruption. Our model is based on empirical research in Russia at the end of the 1990s. A face-to-face questionnaire was conducted with 552 top executives in private firms across various economic sectors. We used the structural equation model Partial Least Squares, PLS, technique to test our hypotheses. The developed model provides an integrated approach to the study of the relationship between corruption and organizational isomorphism. Our empirical data from firms in Russia allowed us to test various theoretical hypotheses concerning the influence of organizational isomorphism on corruption. Our emphasis is on the influence of competitive and institutional isomorphism on corruption.

Organizational Isomorphism and Corruption in Financial Institutions: Empirical Research in Emerging Countries

by Bertrand Venard

Reference: Venard, B., M. Hanafi, M. (2008). Journal of Business Ethics, 81 (2): 481-498.

The globalizations of capital markets in the last 20 years has led to a historic degree of financial integration in... more The globalizations of capital markets in the last 20 years has led to a historic degree of financial integration in the world. It is clear, however, that globalization is not conducive to a complete homogeneity of financial markets and institutions. Among others, one element of diversity is the importance of the impact of corruption in emerging countries. Corruption decreases the credibility of financial institutions and markets.
Scandals and unethical behavior in financial institutions erode confidence in such firms. Relying on neoinstitutional literature, this article focuses on the link between corruption and organizational isomorphism in financial institutions in emerging countries. Therefore, our aim is to examine the institutional reasons for corruption in financial institutions in emerging countries. Our structural equation model is based on empirical research in financial institutions in emerging countries. A questionnaire was administrated to 70 top executives of financial institutions in 18 different emerging countries.

Earnings Distribution Discontinuity from a Continuous Model of Earnings Management

by Andrew Yim

I formulate a tractable model of earnings management with benchmark beating and auditor-client interaction. Prior... more I formulate a tractable model of earnings management with benchmark beating and auditor-client interaction. Prior models have omitted one or both of these aspects. Under mild conditions, the optimal misreporting strategy is unique. A general characterization of the strategy is provided, with two (effectively four) closed-form solutions derived for certain combinations of the extended audit cost distribution and misreporting cost functions. Some of the solutions are expressed in terms of the Lambert W function, which has wide applications in many scientific fields. The shape of the function can lead to a “discontinuity” in earnings related distributions. Simulation results indicate that the model can accommodate the discontinuity phenomenon, as well as the volcano shape of the distributions of earnings change and earnings surprise, documented in the literature. The insights from the simulations can be summarized in two hypotheses, namely, the mixture conjecture and the continuous “discontinuity” conjecture. Maximum likelihood and nonlinear least squares methods can be used to estimate the model parameters. Several applications of the model are suggested, including the construction of an earnings manipulation measure distinct from but complementary to abnormal accruals.

Exchanges and Their Investors: A New Look at Reporting Issues, Fraud, and Other Problems by Exchange

by Douglas Cumming

Cumming, Douglas J. and Johan, Sofia A., 2011. "Exchanges and Their Investors: A New Look at Reporting Issues, Fraud, and Other Problems by Exchange." Available at SSRN: http://ssrn.com/abstract=1985319 or http://dx.doi.org/10.2139/ssrn.1985319

Statistics reporting litigated cases of fraud on an exchange-by-exchange basis are not readily available to... more Statistics reporting litigated cases of fraud on an exchange-by-exchange basis are not readily available to investors.  This paper introduces data from three countries with multiple exchanges with different listing standards, – Canada, the United Kingdom and the United States –  to show litigated cases of fraud significantly vary by country, and the different exchanges within the country.  Comparisons are also made to Brazil, China and Germany to assess out-of-sample inferences.  The data examined suggest there are significant differences in the nature of observed fraud across exchanges within the United States; by contrast, outside the United States there appears to be a comparative lack of enforcement.  The data also suggest policy implications for the ways in which fraud ought to be reported to improve investor knowledge, market transparency and market quality.

Tracing

by Peter Oh

Texas Disability Determination Services: A Study of Unemployment Rates, Disability Application Rates, Allowance Rates and Fraud Referrals Over Time

by Texas State PA Applied Research Projects

Campbell, Brook N., "Texas Disability Determination Services: A Study of Unemployment Rates, Disability Application Rates, Allowance Rates and Fraud Referrals Over Time" (2010). Applied Research Projects, Texas State University-San Marcos. Paper 344.
http://ecommons.txstate.edu/arp/344

The purpose of this research project is to explore three areas of behavior and decision-making pertaining to the... more The purpose of this research project is to explore three areas of behavior and decision-making pertaining to the Disability Determination Services program. Specifically, this paper will research (1) the relationship between unemployment rates and Texas Disability Determination Services application rates from 2000 to 2009; (2) the relationship between Texas Disability Determination Services application rates and allowance rates from 2000 to 2009; (3) and the relationship between application rates and fraud referral rates to the Cooperative Disability Investigations (CDI) program from Texas Disability Determination Services from 2001 to 2009. This is accomplished by visual inspections of linear figures based on data from Texas DDS, unemployment data, and CDI data. Method: After reviewing relevant literature, a conceptual framework was developed, allowing the working hypothesis to be generated. The literature and conceptual framework are based on individual level behavior. Based on the individual level behavior the working hypotheses are developed to examine aggregate level data for applicants and agency decision-making. Theories and concepts for the working hypotheses are derived and supported by the literature presented in Chapter II. To fulfill the research methodology, quantitative data is collected from government agency’s online databases. Linear figures represent each working hypothesis, displaying the research results. There is a visual inspection and discussion of the data to test the hypotheses and establish trends over time. Findings: Based on the information provided by the data along with visual inspection positive support was found for each hypothesis. Research results in addition to comprehensive literature support the working hypotheses of a positive relationship over time between Texas unemployment rates and Texas DDS application rates; a negative relationship between Texas DDS application rates and allowance rates; and a positive relationship between Texas DDS application rates and CDI fraud referral rates.

Base-Number Correlation: a new technique for investigating digit preference and data heaping

by Scott Turner

"Co-authored with Robin and Alasdair Crockett and published in History and Computing"

Journal

History and Computing
ISSN

0957-0144
Volume/Edition

14more Journal

History and Computing
ISSN

0957-0144
Volume/Edition

14
Published Date

2002-10-01
Abstract

We introduce and illustrate 'base-number correlation', a novel technique for investigating data-heaping, digit-preference and more generally data-coarsening, rounding, estimation and mis-reporting. Data-heaping is a well-known feature of reported data - both contemporary and historical. It generally arises either because exact counting was not logistically simple (e.g. headcounts of church attenders) or when the quantity being reported was not exactly known by the respondent or enumerator (e.g. persons' ages). Both result in data-heaping, which itself results from preferred terminal digits (e.g. even numbers) and/or rounding to multiples of base-units (e.g. multiples of 10). Historical demographers have used a number of indices, most notably Myers' blended method, to examine heaping of reported ages (age-heaping) and there is also the potential to use autocorrelation techniques to identify heaping effects. In this paper we introduce a novel alternative method to these and other established techniques and indices, which we term 'base-number correlation'. Its potential is highlighted via three mini case-studies of historical data. These illustrate how base-number correlation is an alternative and, in several important senses, superior technique to Myers' blended method and autocorrelation as a means of identifying, visualising and establishing the statistical significance of data heaping.

"Legal Remedies for Medical Ghostwriting: Imposing Fraud Liability on Guest Authors of Ghostwritten Articles"

by Simon Stern

PLoS Medicine, vol. 8, no. 8, 1-5, (Aug. 2011)

Ghostwriting and guest authorship of medical journal articles raise serious ethical and legal concerns, bearing on the... more Ghostwriting and guest authorship of medical journal articles raise serious ethical and legal concerns, bearing on the integrity of medical research and evidence used in legal disputes. Ghostwriting involves undisclosed authorship, usually by medical communications agencies or a pharmaceutical sponsor of the published research; guest authorship involves taking authorial credit for the published work without making a substantial contribution to it. Commentators have objected to these practices because of concerns involving bias in ghostwritten clinical trial reports and review articles. We also note the effects of ghostwritten articles on questions involving the legal admissibility of scientific evidence. Efforts to curb ghostwriting practices, undertaken by medical journals, academic institutions, and professional disciplinary bodies, have thus far had little success and show little promise. These organizations have had difficulty adopting and enforcing effective sanctions, for specific reasons relating to the interests and competencies of each kind of organization.

Because of those shortcomings, a useful deterrent in curbing the practice may be achieved through the imposition of legal liability on the ‘guest authors’ who lend their names to ghostwritten articles. We explore the doctrinal grounds on which such articles might be characterized as fraudulent. A guest author’s claim for credit of an article written by someone else constitutes legal fraud, and may give rise to claims that could be pursued in a class action based on the Racketeer Influenced and Corrupt Organizations Act (RICO). The same fraud could support claims of “fraud on the court” against a pharmaceutical company that has used ghostwritten articles in litigation. This doctrine has been used by the U.S. Supreme Court to impose sanctions on the authors and corporate sponsors of a ghostwritten article. We discuss the potential penalties associated with each of these varieties of fraud.

Economic Espionage: How to Protect Your Clients' Trade Secrets

by Robert Tie

COUNTING VOTES THAT DO NOT COUNT: NEGEV BEDOUIN AND THE KNESSET ELECTIONS OF MAY 17 1999, RAHAT, ISRAEL1

by Cedric PARIZOT

Counting votes that do not count. Nomadic Societies in The Middle East and North Africa: Entering the 21st Century. Leiden, Boston: Brill : 176-203

Seeking Redress In a Court of Law: 10-1323

by Jacquelyn N'Jai

Ponzi Finance From Mr. Ponzi to Mr. Madoff

by Yener Coşkun, MRICS

Coşkun, Yener. (2010). Bay Ponzi’den Bay Madoff’a Ponzi Finansman. Sermaye Piyasası Dergisi. Sayı 1. sf: 10-14.

Özet

Ponzi finansman ilave finansal varlık girişi ile, varlık yetersizliğinin geçici biçimde giderilmesi... more Özet

Ponzi finansman ilave finansal varlık girişi ile, varlık yetersizliğinin geçici biçimde giderilmesi ve yükümlülüklerin yerine getirilmesine dayalı sahtecilik ve iflasa eğilimli bir finansman modelidir. 1980’lerde yaşanan Banker Krizi sırasında bazı banker kuruluşların fon temin etmesi, Anadolu’daki bazı şirketlerin menkul kıymetlerini mevzuata aykırı olarak halka arz etmek suretiyle izinsiz para toplaması ve Titan saadet zinciri gibi olaylar ülkemizde ortaya çıkan ponzi finansman olaylarına verilebilecek örneklerin başında gelmektedir. Söz konusu hukuk dışı finansman modeli ABD’de ortaya çıkan Madoff vak’ası ile birlikte yeniden gündeme gelmiştir. Bu çalışmada; Madoff vak’ası çerçevesinde ponzi finansman kavramı incelenmekte ve özellikle finansal şirketlerde ortaya çıkabilecek bu tür sahteciliklerin önlenmesinin ne ölçüde mümkün olduğuna ilişkin bir değerlendirme sunulmaktadır.

Summary

Ponzi finance is a type of financial fraud based on the principle of continuous fund rasing arising from the newcomers to the system. Ponzi scheme is inherently but necessarily tend to financial failure/bankruptcy. In Turkey, there were at least three well known ponzi schemes after 1980’s. Those cases appeared in the Banking Crisis of 1982, illegal/unauthorized fund-raising of some companies in Anatolia in violation of relevant securities legislations and Titan case. After Madoff scandal in the U.S., ponzi scheme is again come up in the finance world. In this article, we examine the concept of ponzi finance in the context of several cases. More importantly, we also assess whether disciplinary tools, namely self/market/official discipline, would prevent ponzi schemes.

Data Mining Prototype for Detecting eCommerce Fraud

by Narciso Cerpa

M. Lek, B. Anandarajah, N. Cerpa, and R. Jamieson, "Data Mining Prototype for Detecting E-Commerce Fraud", Proceedings of the European Conference in Information Systems, June 27-29, 2001, Bled, Slovenia, pp. 160-165, ISBN 961-232-122-1.

The advent of electronic commerce (e-commerce) has marked a significant change in the way business now approach the... more The advent of electronic commerce (e-commerce) has marked a significant change in the way business now approach the implementation of their sales and marketing strategies. Electronic commerce growth has been accompanied by an increase in fraudulent practices. Researchers have proposed rules-based auditing systems for electronic commerce transactions, but they highly depend on the auditor’s knowledge of e-commerce fraud (Wong et al., 2000). While fraud patterns may occur, the management, control, and application of these patterns is difficult due to the increasing number of online transactions currently handled by e-commerce systems. In this paper, we present research in progress of the prototype of an extension to e-commerce auditing systems that use data mining techniques to generate rules from fraud patterns. Subsequently, the system applies these rules to e-commerce databases with the aim of isolating those transactions that have a high chance of being fraudulent.

Extending The E-Scarf Model For Fraud Detection On Electronic Commerce Systems

by Narciso Cerpa

F. Arias and N. Cerpa
Ingeniare. Revista chilena de ingeniería, Vol. 16, No. 2, 2008, pp 282-294, ISSN 0718-3291.

In this work we extend a fraud detection model, called SCARF, which is based on a concurrent auditing technique that... more In this work we extend a fraud detection model, called SCARF, which is based on a concurrent auditing technique that consists of inserting auditing procedures within an application program; in this case, an electronic commerce system. These procedures undertake the capture of electronic transactions data, which is compared with rules that are previously defined by an auditor with the purpose of detecting fraudulent transactions.

To extend this model, we have a set of some requirements: 1) suggestions from a group of 15 auditors that evaluated the second version of this model, called e-SCARF; 2) improvements proposed by the authors of this work. To evaluate the extended model, we have implemented it together with a testing electronic commerce platform. A set of clients from different countries has tested the model by simulating purchases from a store in the electronic commerce platform.

The result of this work is a validated extended model, with more functionalities than its previous versions, changes in the data structure and new operating rules. Another effect is the prototype that implements the model for a current electronic commerce platform.

A comprehensive survey of data mining-based fraud detection research

by Ross Gayler

Unpublished survey

Phua, C., Lee, V., Smith, K., & Gayler R. (2005). A comprehensive survey of data mining-based fraud detection research. http://arxiv.org/abs/1009.6119

This survey paper categorises, compares, and summarises from almost all published technical and review articles in... more This survey paper categorises, compares, and summarises from almost all published technical and review articles in automated fraud detection within the last 10 years. It defines the professional fraudster, formalises the main types and subtypes of known fraud, and presents the nature of data evidence collected within affected industries. Within the business context of mining the data to achieve higher cost savings, this research presents methods and techniques together with their problems. Compared to all related reviews on fraud detection, this survey covers much more technical articles and is the only one, to the best of our knowledge, which proposes alternative data and solutions from related domains.

Temporal Representation In Spike Detection of Sparse Personal Identity Streams

by Ross Gayler

Phua, C., Lee, V., Gayler, R., & Smith-Miles, K. (2006). Temporal Representation in Spike Detection of Sparse Personal Identity Streams. Proc. of PAKDD06 Workshop on Intelligence and Security Informatics, pp. 115-126. [pdf]

Identity crime has increased enormously over the recent years. Spike
detection is important because it... more Identity crime has increased enormously over the recent years. Spike
detection is important because it highlights sudden and sharp rises in intensity
relative to the current identity attribute value (which can be indicative of abuse).
This paper proposes the new spike analysis framework for monitoring sparse
personal identity streams. For each identity example, it detects spikes in single
attribute values and integrates multiple spikes from different attributes to
produce a numeric suspicion score. Although only temporal representation is
examined here, experimental results on synthetic and real credit applications
reveal some conditions on which the framework will perform well.

On the Approximate Communal Fraud Scoring of Credit Applications

by Ross Gayler

Phua, C., Gayler, R., Lee, V., & Smith-Miles, K. (2005). On the Approximate Communal Fraud Scoring of Credit Applications. Proceedings of Credit Scoring and Credit Control IX, University of Edinburgh, Edinburgh, Scotland.

This paper describes a technique to generate numeric suspicion
scores on credit applications based on implicit... more This paper describes a technique to generate numeric suspicion
scores on credit applications based on implicit links to each other,
and over time and space. Its contributions include pair-wise
communal scoring of identifier attributes for applications,
definition of categories of suspiciousness for application-pairs,
smoothed k-wise scoring of multiple linked application-pairs, and
the incorporation of temporal and spatial weights. With fixed
parameters, results on a moderate-sized synthetic data set illustrate
the potential strengths (handles implicit links, categories, relative
time and space) and expose the weaknesses (parameter tuning and
scalability issues) of our technique. In the near future, our
attention will be on the linking and empirical scoring of a few
million real applications with different parameter values.

Adaptive spike detection for resilient data stream mining

by Ross Gayler

Phua, C., Smith-Miles, K., Lee, V., & Gayler, R. (2007). Adaptive Spike Detection for Resilient Data Stream Mining. Data Mining and Analytics 2007. Proceedings of the Sixth Australasian Data Mining Conference (AusDM 2007), pp. 181-188.

Automated adversarial detection systems can fail
when under attack by adversaries. As part of a resilient data... more Automated adversarial detection systems can fail
when under attack by adversaries. As part of a resilient data stream mining system to reduce the possibility of such failure, adaptive spike detection is
attribute ranking and selection without class-labels.
The first part of adaptive spike detection requires
weighing all attributes for spiky-ness to rank them.
The second part involves filtering some attributes
with extreme weights to choose the best ones for computing each example’s suspicion score. Within an
identity crime detection domain, adaptive spike detection is validated on a few million real credit applications with adversarial activity. The results are
F -measure curves on eleven experiments and relative
weights discussion on the best experiment. The results reinforce adaptive spike detection’s effectiveness
for class-label-free attribute ranking and selection.

Communal detection of implicit personal identity streams

by Ross Gayler

Phua, C., Gayler, R., Smith-Miles, K., & Lee, V. (2006). Communal Detection of Implicit Personal Identity Streams. Proc. of ICDM06 Workshop on Mining Evolving and Streaming Data, pp. 620-625.

The purpose of this paper is to outline some of the major
developments of an identity crime/fraud stream... more The purpose of this paper is to outline some of the major
developments of an identity crime/fraud stream mining
system. Communal detection is about finding real
communities of interest. The algorithm itself is
unsupervised, single-pass, differentiates between normal
and anomalous links, and mitigates the suspicion of
normal links with a dynamic global whitelist. It is part of
the important and novel communal detection framework
introduced here for monitoring implicit personal identity
streams. For each incoming identity example, it creates
one of three types of single link (black, white, or
anomalous) against any previous example within a set
window. Subsequently, it integrates possible multiple links
to produce a smoothed numeric suspicion score. In a
principled stream-like fashion and using eighteen
different parameter settings replicated over three large
window sizes, this paper highlights and discusses
significant score results from mining a few million recent
credit applications.