Preempting fraud: A financial distress prediction perspective on combating financial crime

Khaled Halteh, Milind Tiwari

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

PurposeThe prevention of fraudulent activities, particularly within a financial context, is of paramount significance in all spheres, as it not only impacts the sustainability of corporate entities but also has the potential to have a broader economy-wide impact. This paper aims to focus on dual implications associated with financial distress, the first being associated with the temptation to launder funds due to financial distress, and the second being the potential for illicit activities, such as fraud, money laundering or terror financing, to give rise to financial distress.Design/methodology/approachThe paper examines the literature on financial distress and uses theories of financial crime to establish a link between financial distress and financial crime.FindingsIn recent years, there has been a surge in corporate financial distress, particularly in the aftermath of concurrent crises such as the COVID-19 pandemic and the Russia–Ukraine war. Through a comprehensive examination of literature pertaining to financial distress and financial crime, this study identifies a proclivity towards fraudulent conduct arising from instances of financial distress. Moreover, the engagement in such illicit activities subsequently exacerbates the financial distress. An analysis of the relationship between financial crime and financial distress reveals the existence of a vicious cycle between the two.Originality/valueThe results of this study have the potential to advance understanding of the relationship between financial distress and financial crime, which has been previously underexplored.
Original languageEnglish
Pages (from-to)1194-1202
Number of pages9
JournalJournal of Money Laundering Control
Volume26
Issue number6
Early online date07 Apr 2023
DOIs
Publication statusPublished - 28 Nov 2023

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