Financial crime – is there any way out of the theoretical deadlock?
DOI | https://doi.org/10.1108/JFC-06-2016-0043 |
Pages | 529-540 |
Date | 02 October 2017 |
Published date | 02 October 2017 |
Author | Paul Eisenberg |
Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Financial crime –is there any way
out of the theoretical deadlock?
Paul Eisenberg
University of Portsmouth, Portsmouth, UK
Abstract
Purpose –This paper aims to approach fundamental topics of financial crime and the law. What does
constitutefinancial crime? Which field of law is best suited to address the threatsof transgression by financial
executives?What does motivate highly rewarded financiers to becomewhite collar criminals?
Design/methodology/approach –To answer these research questions, contemporary theories of
criminology in generaland of white collar crime in particular, as well as theories on motivation, are critically
discussed. Benefits and limitations of the theories in use are exemplified on the background of the London
InterbankOffered Rate (LIBOR) scandal.
Findings –The paper criticisesthat the state-of-the-art theories are not able to embracefinancial criminality
in its entirety. A provoking pacefor further research might be that of psychopathic disordersamong white
collar criminals.Thus, white collar crime maintains its challenging character.
Originality/value –This paper provides a thorough testing of multidisciplinary theories that emerged
over the past decades against the recent LIBOR scandal. The research questions addressed and the
methodologies applied provide a framework for the assessment of the prevailing theories against other
financialscandals.
Keywords American dream theory, Differential association theory,
Harm principle and welfare principle, Preservation of social order and social order theory,
Rational choice theory, White collar crime and LIBOR scandal
Paper type Conceptual paper
Introduction
Financial scandals in the UK banking sector continuously dominate media headlines and
attract interest of public prosecution. This is not surprising –annual monetary losses run
into tens of billions (Harrison and Ryder, 2016, p. 4). At the same time, there is a wide
spectrum of victims. It ranges from a household consuming electricity in case of
manipulated electricity market prices (Calix, 2013;Beder, 2003, p. 10) to public treasury in
case of tax evasion (Anderson, 2016). Moreover, aggressive bankers even undermine public
health when transferring the money of international drug dealers (Hanning and
Connett, 2015). Also, they jeopardise public security when facilitating terrorist financing
through money laundering(HM Treasury, 2015,p.36).
Different theories of law and motivation have been developed on white collar
criminality –that is, financial delinquency of persons of reputable occupation and social
status (Friedrichs,2010, p. 5). But it has proved notoriously difficultto stop such misconduct
or at least to reduce it significantly(Mastnak and Dobovšek, 2012, p. 289). Thus, the purpose
of this essay is to discuss whether the prevalent theories effectively address financial
misbehaviour to helpunderstand, prevent and combat this threat.
The LIBOR scandal sets the stage for the discussion. The acronym stands for London
Interbank Offered Rate (LIBOR) –a rate at which a panel of leading London banks agrees
upon to borrow funds from each other. Though hypothetical,the rate is a central benchmark
for financing rates all over the globe, “the mother of all reference rates”, as stated by Gary
Financial
crime
529
Journalof Financial Crime
Vol.24 No. 4, 2017
pp. 529-540
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-06-2016-0043
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