Fraud and pandemics

DOIhttps://doi.org/10.1108/JFC-06-2021-0137
Published date06 August 2021
Date06 August 2021
Pages413-432
Subject MatterAccounting & finance,Financial risk/company failure,Financial crime
AuthorMichael Levi,Russell G. Smith
Fraud and pandemics
Michael Levi
School of Social Sciences, Cardiff University, Cardiff, UK, and
Russell G. Smith
Australian Institute of Criminology, Canberra, Australia and
Department of Government and Law, College of Business, Flinders University,
Adelaide, Australia
Abstract
Purpose This study aims to draw out the commoncharacteristics of frauds associated with pandemics
and to identifyany risks unique to them.
Design/methodology/approach It considers the range of frauds and their reporting lags and
examines what is known about current frauds againstindividuals, businesses and government, principally
using public and privatesector data from Australia and the UK.
Findings The study identif‌ies some novel crime types and methodologies arising during the current
pandemic that were not seen in previous pandemics.These changes may result from public health measures
taken in response to COVID-19, the current state of technologies and the activities of law enforcement and
regulatory guardians. It showsthat many frauds would occur anyway, but some specif‌icmainly online
frauds occur duringpandemics, and because of large scale government assistanceprogrammes to businesses
and individuals,far more opportunities were created from COVID-19 than in previous eras.
Social implications The study concludes with a discussionof the policy implications for prevention,
resilience and for private and public policingand criminal justice. It stresses that plans for future pandemics
must include provisions for better early monitoring and control of fraud and associated procurement
corruption and notes that these require greaterpolitical will and organisation. It recommends a more serious
analysisof the impact of prevention communications outreachto citizens, businesses and government.
Originality/value The study uses fresh data on frauds fromthe private and public sectors and assesses
some measuresof controlin a holistic way.
Keywords Policing, Tax fraud, Corruption, Prevention, Fraud, Cybercrime, Pandemics, COVID-19
Paper type Research paper
Introduction
Frauds come in many forms, some of which have a prima facie connection to pa ndemics and
others of which may not. The plausible direction of causality is important to consider. Do frauds
exacerbate the effects of pandemics or even contribute to them in some parts of the world, e.g.
via counterfeit medicines and false claims of effectiveness? Do health crises always generate
opportunities for fraud or are these risks connected to specif‌ic factors contingently developed in
The present article is a shortened and updated version of the report by MichaelL eviand Russell G. Smith,
Fraud and its relationship to pandemics and economic crises: From Spanish Flu to COVID-19, in Research
Report, No. 19, Australian Institute of Criminology, Canberra. It is published with the kind permission of
the Australian Institute of Criminology.
This research is drawn from work funded by the Australian Institute of Criminology, the British
Academy (SRG20\201612) and the UK Economic and So cial Research Council Partnership for Conf‌lict,
Crime and Security Research (ES/S008853/1). The authors are grateful to the Australian Competition and
Consumer Commission for providing current data on reported COVID-19 consumer scams in Australia.
Fraud and
pandemics
413
Journalof Financial Crime
Vol.29 No. 2, 2022
pp. 413-432
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-06-2021-0137
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
response to crises? Do pandemics change the fraudster population and how do they impact
potential victim behaviour? What lessons have been learned or not learned, from previous crises
and what are likely to be actually learned from the present one, though after every crisis and
scandal, we usually say and perhaps believe we will learn lessons?
There is a dark f‌igureof undetected and detected but unreported and unrecorded
frauds. This can vary from countryto country and over time, but its precise dimensions are
unknowable or contestable.The elapsed time from a fraud beginning to its formal detection
and successful bringing to justice can take decades or far more often, never happen. Large
internal frauds and corruption usually take longer to surface and also to investigate and
prosecute than volume frauds.This is a particular problem when analysing historical frauds
as contemporary techniques of survey analysis and forensics are not readily used on them.
The shift from mail and funds transfer via packet ships to Telegraph was the biggest time
difference in fraud commission, though the Web whether email or fake advertising or
social media enablesfar less effort-per-fraud and has thus transformed fraud opportunities
at a distance.
Changes in monitoring and policing or regulatory responses might be responsible for
changes in off‌icial data, so we need to be wary of assuming that changes in reported or
recorded fraud ratesare real ref‌lections of underlying fraud behaviour. Likewise, the
pandemic alters the shape of off‌icial responses. It might be expected that it would lead to
less police investigation due to constraints on transport and face-to-face working: but some
law enforcement agencieshave used the opportunity to ramp up arrests, which have become
more eff‌icient as more domestic suspectsare at home during lockdown than is normally the
case. The hacking of encrypted criminal communications like Encrochat or the planting of
pseudo-encrypted apps like ANOM might have more impact on economic crimes if
distributed beyonddrug traff‌icking networks: but this merely coincided with the pandemic.
Despite some level of regional and international harmonisation, we cann ot assume that the
criminalisation of economic crimesor fraud is universal and unchanging over time. For
example, price gouging is not criminal everywhere, although it is a federal crime in the USA
(King and Spalding LLP, 2020). The UK Competition and Markets Authority (2020) has
displayed a leisurely approach to the regulation of price increases, whilst in Australia regulators
can deal with price gouging as a form of unconscionable conduct in some jurisdictions
(Queensland Government, 2020). Elsewhere price gouging may be dealt with administratively if
at all, and in a prof‌it-driven economy there is legal and indeed ethical debate about the threshold
for def‌ining price setting as excessive gouging(House of Commons, 1919). There remain some
contestable issues: when do homoeopathic and prescription curesfor which there is no good
scientif‌ic evidence become criminaldeceptions?
Finally, the article examines whether anything has been learned or reasonably could be
learned, from the economic crime andcrime control responses that followed previous pandemics.
This article focusses primarily on the UK and Australia as the objects of study
concerning the Spanish f‌lu pandemic of 19181919 and COVID-19 of 20192021. Other
pandemics, such as the Asian f‌luin19571958, the Hong Kong f‌lu A (H3N2) of 1968 and
Swine f‌lu A (H1N1) or 20092010 hit the above jurisdictions much less hard. Though there
have been efforts during eachpandemic to discredit fake cures, the COVID-19 one is the f‌irst
time that serious and systematicgovernmental and private sector efforts have been made to
combat frauds, and that large funds have been made available by governments to support
businesses and people. These efforts are connected to the perceived risks to health and
f‌inancial behaviour, especially via the Web and social media apps, which provoked a more
proactive responsefrom both government and the private sector.
JFC
29,2
414

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