Mapping the individual and structural theories of financial crimes

Published date02 April 2020
Date02 April 2020
Subject MatterAccounting & Finance,Financial risk/company failure,Financial crime
AuthorMark Eshwar Lokanan,Indy Aujla
Mapping the individual and
structural theories of
f‌inancial crimes
Mark Eshwar Lokanan
Faculty of Management, Royal Roads University, Victoria, Canada, and
Indy Aujla
Department of Human Resources, H&I Industries, Surrey, Canada
Purpose The purpose of this paper is to argue for an integ rated explanation of f‌inancial fraud. Greater
emphasis must be placed on the structural and situational factors that are the elements of fraud risks and fraud.
Design/methodology/approach The paper is based on a review of the literatureon the explanationof
f‌inancial fraud. Bothmicro- and macro-theoretical explanations of fraud were analysedto allow for a broader
picture of the types of individualsthat were involved in fraud, the rules governing their conductand the types
of law they broke.
Findings The main reason why people commit fraud is that their crime propensity interacts with the
elements presentin criminogenic environments.Indeed, because most of the research on structuraltheories of
fraud focuses on general criminality, not much has been done in the area of f‌inancial fraud. More research
needsto be carried out to excavate the subterraneancluster of narrativeon fraud risks and fraud.
Research limitations/implications To address the future contingency of fraud risks, the paper
adopted a similar position of prior accounting research on f‌inancial crimes. The structural explanation of
fraudulent behaviour considersindividualsactions to be less the result of individual deviance and more the
cause of societal forces.Structural theories take into consideration the individualpsychology of the offenders
and position it to ref‌lectthe various realities institutional, structural andcultural life they are caught up in.
Future researchmust endeavour to address these concerns.
Originality/value The manuscript is among a new stream of literature that addresses the structural
elementsof f‌inancialfraud.
Keywords Financial crimes, Fraud, Psychological theories, Structural theories
Paper type Research paper
In 2011, the news came out that three senior executives from Olympus were covering up
accounts to falsifying losses that amount to US$1.7bn (BBC, 2013;Accountancy Daily, 2017).
Olympus is a Japanese manufacturing giant that specializes in optical imaging, laboratory and
medical equipment and produces the following core products: microscopes, cameras and
medical devices. According to media sources, Olympussenior executives were involved in
corporate accounting fraud stemming back to the early 1990s (BBC, 2013;Lynch, 2015). The
fraud only came to light after a chief executive who has been with the company for over 30
years was dismissed and later disclosed to authorities the cover-up at Olympus (Lubin, 2011).
The executives at Olympus were all wealthy and from most accounts, were upstanding citizens
(Neate, 2012). Fraud experts looking for answers for the Olympus fraud cases have led to ask
the following questions:
Q1. Why did Olympuss executivesfalsify their books?
Journalof Financial Crime
Vol.28 No. 2, 2021
pp. 420-432
© Emerald Publishing Limited
DOI 10.1108/JFC-12-2019-0165
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