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Book part
Publication date: 28 May 2019

Mark E. Lokanan

The London Interbank Offered Rate (LIBOR) is considered to be the most important interest rate in finance upon which trillions in financial contracts are decided. In 2008, it was…

Abstract

The London Interbank Offered Rate (LIBOR) is considered to be the most important interest rate in finance upon which trillions in financial contracts are decided. In 2008, it was revealed that the LIBOR traders were rigging the interest rates. Yet, there is an unresolved question that regulators and banking officials did not address in their quest to seek answers to the fraud: Were the banks under financial strain when they underreported their LIBOR rates? To answer this question, the article posits that the pressure to meet market expectations led the banks to experience financial strain. Data were gathered from 2004 to 2008 on the banks that were involved in the fraud (fraud banks) and matched with a control group of non-fraud banks. The results from a logistic regression model found sufficient statistical evidence to support the claim that fraud will be greater in banks characterized by a higher level of organizational complexity. Variables such as percent of outside directors, board members on the audit committee, and number of employees were all found to be statistically significant. These variables may offer key insights into detecting and preventing frauds in banks.

Details

Beyond Perceptions, Crafting Meaning
Type: Book
ISBN: 978-1-78973-224-5

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Article
Publication date: 31 May 2022

Mark E. Lokanan

This paper aims to reviews the literature on applying visualization techniques to detect credit card fraud (CCF) and suspicious money laundering transactions.

733

Abstract

Purpose

This paper aims to reviews the literature on applying visualization techniques to detect credit card fraud (CCF) and suspicious money laundering transactions.

Design/methodology/approach

In surveying the literature on visual fraud detection in these two domains, this paper reviews: the current use of visualization techniques, the variations of visual analytics used and the challenges of these techniques.

Findings

The findings reveal how visual analytics is used to detect outliers in CCF detection and identify links to criminal networks in money laundering transactions. Graph methodology and unsupervised clustering analyses are the most dominant types of visual analytics used for CCF detection. In contrast, network and graph analytics are heavily used in identifying criminal relationships in money laundering transactions.

Originality/value

Some common challenges in using visualization techniques to identify fraudulent transactions in both domains relate to data complexity and fraudsters’ ability to evade monitoring mechanisms.

Details

Journal of Money Laundering Control, vol. 26 no. 3
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 29 April 2014

Mark E. Lokanan

– The purpose of this study is to examine the demographic characteristics of investors who have been victims of investment fraud in Canada from 1984 to 2008.

937

Abstract

Purpose

The purpose of this study is to examine the demographic characteristics of investors who have been victims of investment fraud in Canada from 1984 to 2008.

Design/methodology/approach

Data for this study come from the Investment Dealers Association's tribunal cases that were decided between 1984 and June of 2008. The cases were retrieved from the Securities Regulation Tribunal Decisions database in Quicklaw. Data were collected to examine the demographic profiles of the investors.

Findings

The findings indicate that the victims were not particularly rich and a significant proportion borrowed money and opened margin accounts to invest. Those most vulnerable were investors who were retired and had limited investment knowledge. Many also dipped into their savings to fund their future retirement needs.

Practical implications

The study is useful for regulators in the securities industry because it paints a demographic portrait of the investors who are more vulnerable to investment fraud. Thus, as part of their investors' education mandate, regulators can tailor their fraud prevention programs to the needs of specific subsets of investors.

Originality/value

This is the first study of its kind in Canada that provides a detailed demographic profile of victims of investment fraud. For the first time, data are available to show the occupational classifications, types of accounts and investment objectives of investors who were victims of investment fraud.

Details

Journal of Financial Crime, vol. 21 no. 2
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 30 September 2014

Mark E. Lokanan

The purpose of this paper is to examine the risk factors that led to the Livent fraud, and the procedures that need to be taken by responsible parties to carefully investigate and…

2590

Abstract

Purpose

The purpose of this paper is to examine the risk factors that led to the Livent fraud, and the procedures that need to be taken by responsible parties to carefully investigate and address the incidents of misconduct.

Design/methodology/approach

The paper combs through the chronology of events that led to the Livent fraud by looking at both primary and secondary sources. These sources made it possible to examine how the fraud was discovered, and the investigative steps that should have been taken to uncover the fraud.

Findings

The findings indicate that a corporate culture which focuses on the bottom line coupled with weak to non-existent internal controls were the key elements that led to the Livent fraud. The findings also illustrate that when faced with declining profits, senior managers will go to any length possible to manipulate and falsify their company’s records.

Practical implications

The paper is useful to management personnel and fraud examiners in that it used an actual accounting fraud case to highlight areas more susceptible to fraud and the approach that can be taken to investigate similar cases of misconduct. The paper also highlighted the practical implications for internal and external auditors in detecting and addressing fraud.

Originality/value

The study used an accounting fraud case to examine the techniques used by management personnel to produce fraudulent financial statement.

Details

Journal of Financial Crime, vol. 21 no. 4
Type: Research Article
ISSN: 1359-0790

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Available. Content available
Book part
Publication date: 28 May 2019

Abstract

Details

Beyond Perceptions, Crafting Meaning
Type: Book
ISBN: 978-1-78973-224-5

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Article
Publication date: 2 May 2019

Mark Lokanan

This paper aims to analyze the processing of complaints against investment advisors and Member firms through the Investment Industry Regulatory Organization of Canada (IIROC…

249

Abstract

Purpose

This paper aims to analyze the processing of complaints against investment advisors and Member firms through the Investment Industry Regulatory Organization of Canada (IIROC) enforcement system between 2009 and 2016. The paper used the misconduct funnel to show the number of complaints that are “funneled in,” and how these complaints are subsequently “funneled out” and “funneled away” at the investigation and prosecution stages of IIROC enforcement system.

Design/methodology/approach

The paper uses data from IIROC enforcement annual reports from 2009 to 2016. A combination of descriptive statistics and correlation matrices was used to analyze the data.

Findings

The findings indicate that while IIROC “funneled in” more complaints, a significant proportion of complaints were “funneled out” of its enforcement system and funneled “away” from the criminal justice system. Fines imposed were often not collected from individual offenders. IIROC, it seems, is ineffective in handling the more serious and systematic industry problems.

Practical implications

It is hard not to see the findings from this study being used by the provincial securities commissions and the federal government to support the call for a national securities regulator in Canada.

Originality/value

This is the first study of its kind to systematically analyze the enforcement performance of IIROC.

Details

Journal of Financial Regulation and Compliance, vol. 27 no. 3
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 13 February 2017

Mark Lokanan

This paper aims to examine the enforcement practices of the Investment Dealers Association of Canada (IDA) and argue that self-regulation simply does not work in the financial…

346

Abstract

Purpose

This paper aims to examine the enforcement practices of the Investment Dealers Association of Canada (IDA) and argue that self-regulation simply does not work in the financial sector, as the sanctions available are neither applied with sufficient severity nor are the responsibilities for enforcement adequately divided between self-regulation, provincial securities commissions and the police.

Design/methodology/approach

The core compliance data for the study came from the IDA’s tribunal cases that were heard between 1984 and June 2008. The theoretical approach involves the invocation of classic articles by the likes of Stigler, Posner and Becker, the essence of whose conclusions is that institutions will act in their own best interests and cannot be expected to act in the public interest.

Findings

The findings show that over the period from 1984 to 2008, the severity of the sanctions increased consistently over the period. When penalty ceilings were increased, penalties increased. When in the latter phase of the period, public members (i.e. non-members of the industry) chaired the tribunals, penalties also increased.

Research limitations/implications

Researchers can use the data to write a paper which asks “Why did the IDA tribunal penalties increase so consistently with time?” Future research could canvass various possible explanations, including the one presented in this paper, to focus sustained attention on the issue of self-regulation.

Originality/value

This study is the first to systematically examine the enforcement performance of the IDA.

Details

Journal of Financial Regulation and Compliance, vol. 25 no. 1
Type: Research Article
ISSN: 1358-1988

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Available. Open Access. Open Access
Article
Publication date: 28 August 2019

Mark Lokanan, Vincent Tran and Nam Hoai Vuong

The purpose of this paper is to evaluate the possibility of rating the credit worthiness of a firm’s quarterly financial report using a dynamic anomaly detection method.

18948

Abstract

Purpose

The purpose of this paper is to evaluate the possibility of rating the credit worthiness of a firm’s quarterly financial report using a dynamic anomaly detection method.

Design/methodology/approach

The study uses a data set containing financial statements from Quarter 1 – 2001 to Quarter 4 – 2016 of 937 Vietnamese listed firms. In sum, 24 fundamental financial indices are chosen as control variables. The study employs the Mahalanobis distance to measure the proximity of each data point from the centroid of the distribution to point out the extent of the anomaly.

Findings

The finding shows that the model is capable of ranking quarterly financial reports in terms of credit worthiness. The execution of the model on all observations also revealed that most financial statements of Vietnamese listed firms are trustworthy, while almost a quarter of them are highly anomalous and questionable.

Research limitations/implications

The study faces several limitations, including the availability of genuine accounting data from stock exchanges, the strong assumptions of a simple statistical distribution, the restricted timeframe of financial data and the sensitivity of the thresholds for anomaly levels.

Practical implications

The study opens an avenue for ordinary users of financial information to process the data and question the validity of the numbers presented by listed firms. Furthermore, if fraud information is available, similar research can be conducted to examine the tendency for companies with anomalous financial reports to commit fraud.

Originality/value

This is the first paper of its kind that attempts to build an anomaly detection model for Vietnamese listed companies.

Details

Asian Journal of Accounting Research, vol. 4 no. 2
Type: Research Article
ISSN: 2443-4175

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Article
Publication date: 7 October 2019

Mark Eshwar Lokanan

The purpose of this paper is to formulate and propose a fraud investigation plan that forensic accountants can use to investigate financial frauds. In particular, the paper sets…

1405

Abstract

Purpose

The purpose of this paper is to formulate and propose a fraud investigation plan that forensic accountants can use to investigate financial frauds. In particular, the paper sets out the structure and rationale of the fraud investigation plan that both forensic accountants and fraud examiners can use in their investigation of false accounting and theft charges.

Design/methodology/approach

The paper uses the material facts from the Polly Peck International fraud as a prototype case upon which to build an investigation plan and detail potential areas of investigation to establish evidence for a criminal trial.

Findings

The findings revealed that the case can be used to provide insights on evidence gathering techniques and test particular models of fraud detection. The concealment and conversion evidence gathering techniques provide fodder on how to gather and triangulate both direct and circumstantial evidence that can be used to avoid mistrials in courts.

Practical implications

The case is of interest to practitioners and forensic and fraud examination students who would like to build on their existing knowledge and obtain insights into the steps to follow to conduct an investigation and gather evidence to build a case. The paper makes specific recommendations to enhance the effectiveness and efficiency of investigations.

Originality/value

The paper is among one of the few to propose a fraud investigation plan designed to investigate cases involving false accounting and theft charges. More importantly, the paper uses a real case to illustrate how to examine documentation/data and how such documentation will be analysed in a trial.

Details

Journal of Financial Crime, vol. 26 no. 4
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 5 March 2024

Sana Ramzan and Mark Lokanan

This study aims to objectively synthesize the volume of accounting literature on financial statement fraud (FSF) using a systematic literature review research method (SLRRM). This…

647

Abstract

Purpose

This study aims to objectively synthesize the volume of accounting literature on financial statement fraud (FSF) using a systematic literature review research method (SLRRM). This paper analyzes the vast FSF literature based on inclusion and exclusion criteria. These criteria filter articles that are present in the accounting fraud domain and are published in peer-reviewed quality journals based on Australian Business Deans Council (ABDC) journal ranking. Lastly, a reverse search, analyzing the articles' abstracts, further narrows the search to 88 peer-reviewed articles. After examining these 88 articles, the results imply that the current literature is shifting from traditional statistical approaches towards computational methods, specifically machine learning (ML), for predicting and detecting FSF. This evolution of the literature is influenced by the impact of micro and macro variables on FSF and the inadequacy of audit procedures to detect red flags of fraud. The findings also concluded that A* peer-reviewed journals accepted articles that showed a complete picture of performance measures of computational techniques in their results. Therefore, this paper contributes to the literature by providing insights to researchers about why ML articles on fraud do not make it to top accounting journals and which computational techniques are the best algorithms for predicting and detecting FSF.

Design/methodology/approach

This paper chronicles the cluster of narratives surrounding the inadequacy of current accounting and auditing practices in preventing and detecting Financial Statement Fraud. The primary objective of this study is to objectively synthesize the volume of accounting literature on financial statement fraud. More specifically, this study will conduct a systematic literature review (SLR) to examine the evolution of financial statement fraud research and the emergence of new computational techniques to detect fraud in the accounting and finance literature.

Findings

The storyline of this study illustrates how the literature has evolved from conventional fraud detection mechanisms to computational techniques such as artificial intelligence (AI) and machine learning (ML). The findings also concluded that A* peer-reviewed journals accepted articles that showed a complete picture of performance measures of computational techniques in their results. Therefore, this paper contributes to the literature by providing insights to researchers about why ML articles on fraud do not make it to top accounting journals and which computational techniques are the best algorithms for predicting and detecting FSF.

Originality/value

This paper contributes to the literature by providing insights to researchers about why the evolution of accounting fraud literature from traditional statistical methods to machine learning algorithms in fraud detection and prediction.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

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