Red flag behaviors in financial services frauds: a mixed-methods study

Abstract

Purpose

This study aims to enlist the red flag behaviors exhibited in financial services frauds.

Design/methodology/approach

A pluralistic mixed methodology was adopted in this study. Data collected via semi-structured interviews were coded, quantified and subjected to descriptive analysis to identify the most frequently exhibited red flag behaviors in financial services frauds. The relative risk of exhibition of the identified red flag behaviors was assessed by intuitively comparing the red flag behaviors identified in financial services frauds (experimental group, n = 24) with the red flag behaviors identified in a heterogeneous control sample of non-financial services frauds (control group, n = 28).

Findings

This study identifies six red flag behaviors likely to be more frequently exhibited in financial services frauds than in non-financial services frauds.

Practical implications

Results of this study can be used to develop a typical behavioral profile of a financial services fraud perpetrator. Active communication of this profile in fraud awareness training can help make fraud conspicuous in the financial services industry.

Originality/value

This study is unique because human behavior as a possible fraud indicator is an under-researched area. Further, this study examines first level of evidence and attempts an ex-post analysis of actual red flag behaviors exhibited in acknowledged fraud cases in which the perpetrator/perpetrators has/have been clearly identified.

Citation

Sandhu, N. (2022), "Red flag behaviors in financial services frauds: a mixed-methods study", Journal of Financial Regulation and Compliance, Vol. 30 No. 2, pp. 167-195. https://doi.org/10.1108/JFRC-01-2021-0005