Financial C.R.I.M.Es in small businesses: causes and consequences

Radiah Othman, Fawzi Laswad and Matthew Berkahn

Journal of Financial Crime, 2020, vol. 30, issue 3, 742-758

Abstract: Purpose - The purpose of this paper is to examine the causes and consequences of financial crimes perpetrated against New Zealand small businesses. Design/methodology/approach - A random sample of 200 court cases was selected from 2010 to 2017. A total of 12 cases involving 14 small businesses were analysed. Findings - The results reveal that financial crime is a systemic problem and involves people with diverse demographics, and the victims are not restricted to any specific type of small business. The offenders are mostly middle-level managers. The length of offence varied from 1 year to 12.5 years. Most of them funnelled the stolen money into their personal accounts. The common motive is “keeping up appearance”. The management placed immense trust in their employees and did not vet candidates before employment. The losses suffered by small entities ranged from $6,000 to $590,000 and liquidated one business. The severity of the actual court cases indicates the necessity of an employee screening as the first line of defence in these businesses. Research limitations/implications - The small sample of court cases is a limitation, but the study contributes to the fraud auditing literature by examining actual court cases involving small businesses. Small businesses as victims of employee fraud and their lack of internal controls are known but under-researched to promote thought about fraud risk severity in these businesses. Originality/value - The C.R.I.M.E model has yet been tested on fraud cases involving small businesses.

Keywords: Employee; Financial; Fraud; Internal control; New Zealand; Small businesses (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-03-2020-0032

DOI: 10.1108/JFC-03-2020-0032

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