An embezzler test for norms, standards and regulations
| DOI | https://doi.org/10.1108/JFC-06-2021-0140 |
| Published date | 11 August 2021 |
| Date | 11 August 2021 |
| Pages | 878-889 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial crime |
| Author | Tiago Cardao-Pito |
An embezzler test for norms,
standards and regulations
Tiago Cardao-Pito
ISEG, Universidade de Lisboa, Lisbon, Portugal
Abstract
Purpose –The purpose of this study is to address the question that economic standards, norms and
regulationscan possess weak spots that might be exploitable for the embezzlement of an organization’sassets
with resultant materialconsequences in money laundering,tax evasion, fraud, corruptionand other potential
financialcrimes.
Design/methodology/approach –The author’s methodologicalapproach is to introduce and discuss a
new logical-deductive test that the authornames “embezzler test”. The author’s test investigates regulatory
architectures from the perspective of someone attempting to divert assets from or to an organization. It
appraiseswhether a potential embezzler could divert resources withoutbeing detected and sanctioned.
Findings –The embezzlertest can be applied to a broad range of standards, norms andregulations.
Research limitations/implications –This new test can be improved and further calibrated in future
research.
Practical implications –Researchers, regulators and law makers can use the new test to identifyand
eventuallyfix weak spots for embezzlement in norms, standardsand regulations.
Originality/value –To the best of the author’s knowledge, such a test has never been formulated or
applied beforeto identify weak spots for potentialembezzlement in regulatory architectures.
Keywords Norms, Standards, Fraud, Embezzlement, Economic regulations, Embezzler test,
Accounting, Tax evasion, Money laundering
Paper type Conceptual paper
1. Introduction
Accounting or auditing are not activities purposed for enhancing the embezzlement of
organizations’assets.However, the standards, norms and regulations that guide accounting
and auditing work can have weak spots that can be abused by potentialembezzlers. These
weak spots have material consequences for the perpetuation of other financial crimes such
as tax evasion, money laundering,fraud and corruption because embezzlement channels can
further enhance those other crimes.Several regulatory architectures might not be providing
effective means of detection and sanction. Thus, when such weak spots for embezzlement
are present, embezzlement cannotbe demonstrated even if it had occurred. This problem is
quite significant. As observedrecently, the low efficacy of various policy options for curbing
the accumulation of illegal wealth and wealth inequality may bring long-term negative
impacts on democratic societies (Gilsinan et al.,2020). Furthermore, it may lead to political
turmoil (Gilsinanet al., 2020).
Embezzlement is understoodas “to appropriate something (such as property entrusted to
one’s care) fraudulently for one’s own use”(Merriam-Webster) (Shaw and Bologna, 2000;
The author acknowledges the support from the ADVANCE Research Centre at ISEG, Universidade
de Lisboa (University of Lisbon) and the Portuguese National Funding Agency for Science, Research
and Technology, under the project UIDB/04521/2020.
JFC
29,3
878
Journalof Financial Crime
Vol.29 No. 3, 2022
pp. 878-889
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-06-2021-0140
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