A recent academic study found that company CFOs are less likely to admit to fraud when they’re facing pressure to meet certain financial goals, according to Forbes. The study illustrates that corporate fraud is a serious and nuanced issue that isn’t necessarily easy to identify and catch, with motivations that aren’t as cut and dry as previously thought.
The study was done by researchers from North Carolina State University, the University of Missouri-Kansas City and the University of Chieti-Pescara in Italy. It asked 204 financial managers about what they would do if they uncovered financial impropriety by an employee.
“It’s an assumption that every fraud begins with a CFO, or the CFO is involved in the very beginning,” said Joseph Brazel, an accounting professor at North Carolina State University, and co-author of "Reporting Concerns About Earnings Quality: An Examination of Corporate Managers."
However, the research showed that CFOs aren’t always the ones behind fraud, and are sometimes pressured to take part. The study tested how they would react under both high- and low-pressure situations, and how likely they were to report the examples. If there wasn’t much pressure, the study found, then it was more likely that the CFOs would report the fraud. However, if the pressure was higher, they were less likely.
“Even in extreme conditions, managers are hesitant to blow the whistle,” the study said.
If a CFO had accounting experience, though, as opposed to banking or finance, they were more likely to blow the whistle, the study found.
In other corporate fraud news, phishing defense firm Agari has concluded an investigation on one of the largest fraud perpetrators in a long time: Exaggerated Lion. The fraud firm uses “physical checks to cash out money pilfered through business email compromise (BEC) attacks,” and it is “spread around multiple countries in Africa, including Nigeria, Ghana and Kenya,” a press release said.
The threat actor set its sights on more 3,000 employees from 2,100 companies between April and August of 2019.
“Since at least 2017, Exaggerated Lion has built a network of trusted 'mules,' people who they could rely on to deposit checks into bank accounts with few questions asked,” the release said. “Most of these mules were initially victims of Exaggerated Lion's romance scams, but — as they were slowly groomed, and a solid foundation of trust was developed — they were converted into mules who would receive illicit checks under the auspices of helping receive a large inheritance, and pass the proceeds to Exaggerated Lion actors without question.”