FRAUD AND WHITE COLLAR CRIME

Impact of Fraud and White Collar Crime on

Business and its Stakeholders

Abstract

Insurance fraud as a global economic problem threatens the financial strength of insurers and threatens the survival of the insurance institution. The purpose of this paper is to explore the magnitude of the problem including the industry's and regulatory authority's responses in tackling the menace in Nigeria. The paper is motivated by the recent effort on the part of the Nigerian regulatory authority to strengthen the sector through consolidation. Such renewed vigour on part of Nigeria is geared towards fighting all forms of economic crimes in both public and private sectors in post-military years.

The paper reviews the literature on the existing fraud control mechanisms, i.e. insurance contract design and auditing and the perception of fraud by customers in the insurance market. A survey is conducted by interview method to explore the size of the problem and the effectiveness of the approach the industry and its regulator are adopting to control it.

The paper's findings suggest a lukewarm or no serious attitude on the part of the regulatory authority and the insurance companies in appreciating the enormity of the problem now and in the future. This stems from lack of clear-cut sanctions for offenders and mechanism for enforcement.

The paper reveals the paucity of research of such a topical issue in developing economies and suggests the need for urgent stakeholders' summit that will discuss effects of insurance fraud on the industry with a view to identifying specific roles and responsibilities of each stakeholder group in tackling the problem. This should also be complimented with the establishment of insurance fraud bureau that would promote public awareness campaign on the evil effect of fraud on the economy.

Table of Contents

Abstract2

Chapter 1: Introduction6

Background of the Study9

Problem Statement10

Purpose of the Study10

Significance of the Study11

Chapter 2: Literature Review12

History of White-Collar Crime Enforcement13

White-Collar Crime in the Law17

Points of Contention in Defining White-Collar Crime19

Moral Ambiguity in White-Collar Crime21

White-Collar Crime Enforcement Efforts23

Current White-Collar Crime Legislation25

Current Enforcement Patterns26

Deterrence theory and white collar fraud29

Deterrence through contract design30

Deterrence through auditing32

Other control mechanisms34

Perceptions of white collar fraud35

Chapter 3: Methodology40

Research Approach40

Literature Selection Criteria41

Search Technique41

Keywords Used41

Theoretical Framework41

Sampling and Instrumentation41

Chapter 4: Findings and Discussion43

Key features of Nigerian financial industry reforms43

Discussion of findings45

Methods adopted by the fraudsters47

Industry-wide approach to tackling fraud49

Chapter 5: Conclusion57

Summary57

Recommendation58

Future Directions58

References61

Chapter 1: Introduction

Fraud has to be taken seriously. It costs the Nigerian economy alone an estimated £14 billion a year: £230 for every person in the Nigeria. It facilitates other crime, such as terrorism. There is clear evidence that it is becoming a crime of choice for organised crime and terrorist funding. The response from law enforcement world-wide has not been sufficient. We need to bear down on fraud; to make sure that laws, procedures and resources devoted to combating fraud are fit for the modern age so we can tackle sophisticated economic crime vigorously and effectively. But industry and business has much to do to protect itself from the threat of fraud.

Studies of crime seriousness have existed since at least ...