Governance, Risk, and Compliance Handbook: Technology, Finance, Environmental, and International Guidance and Best Practices

CHAPTER 9

FRAUD AND CORRUPTION

Hrishikesh D. Vinod

9.1 WHAT ARE FRAUD AND CORRUPTION? HISTORICAL BACKGROUND FROM ETHICS

9.2 CONSEQUENCES OF FRAUD AND CORRUPTION FOR AN INDIVIDUAL, BUSINESS, AND COMMUNITY

9.3 PRINCIPAL-AGENT PROBLEM WITH PRACTICES AND PROCEDURES FOR MANAGING FRAUD AND CORRUPTION

9.4 BEST PRACTICE GUIDELINES FOR DETECTION METHODS, INCLUDING CHECKING OF BACKGROUND AND REFERENCES

9.5 DATA MINING FOR DETECTION OF FRAUD AND CORRUPTION

9.6 CORPORATE GOVERNANCE, COMPLIANCE ISSUES, AND KNOWING YOUR EMPLOYEES AND CLIENTS

9.7 ENFORCEMENT, INCENTIVE SCHEMES, AND MARKET SOLUTIONS PREVENTING FRAUD AND CORRUPTION

REFERENCES

The topic discussed in this chapter is rather vast in its scope and impossible to cover within the confines of a single chapter. For brevity, I will focus on topics with which I am most familiar as evidenced by my own publications and refer the reader to those sources for additional information, detailed references, and background discussion. The chapter is divided into seven sections with descriptive self-explanatory titles.

9.1 WHAT ARE FRAUD AND CORRUPTION? HISTORICAL BACKGROUND FROM ETHICS

Fraud and corruption have many facets, including cultural, legal, socioeconomic, and ethical aspects. Fraud is defined as deliberate deception designed for gain by hurting another person's interests. Corruption is defined as abuse of a position of trust for dishonest gain, such as taking a bribe. An economist's or business manager's materialistic definitions of fraud ...