Detecting and Preventing Financial Misconduct and Fraud: A Literature Review
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Bachelor's thesis
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Date
2024
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Mcode
Degree programme
Laskentatoimi
Language
en
Pages
62
Series
Abstract
Detection and prevention of financial misconduct and fraud is a growing concern in today’s financial landscape, especially as fraudulent schemes become increasingly sophisticated. The goal of this thesis is to evaluate the effectiveness of various fraud detection and prevention methods and mechanisms and assess them from the viewpoint of key stakeholders. As part of this thesis traditional methods such as statistical techniques alongside advanced artificial intelligence based methods were investigated. This thesis also examined the role of internal mechanisms within a company such as internal controls as well as external mechanisms such as external audits in fraud detection and prevention. Some emerging techniques were also investigated such as behavioural analysis. These methods and mechanisms were examined by utilizing a systematic literature review. In the review the strengths and limitations of each approach were identified, and emphasis put on the need for diversified strategies that integrate these methods and mechanisms. The review was mostly based on existing literature, but some real-world cases, such as the Wirecard scandal, were also brought up to exhibit how traditional controls can fail within a company, thereby highlighting the need for more advanced and adaptive techniques. The findings indicate that while traditional methods are valuable for their simplicity and stakeholder accessibility, they often fall short in complex scenarios. Advanced methods offer greater accuracy and predictive power but require specialized expertise. This thesis concludes that a hybrid approach, combining traditional, advanced, and possibly behavioural methods might offer the most efficient defence against financial fraud. This approach not only increases detection capabilities but also aligns with the ethical standards and expectations of diverse stakeholders, providing a comprehensive solution to the challenges posed by modern fraud schemes. Additionally, the importance of strong internal controls is determined to be a crucial line of defence, reinforcing the overall effectiveness of financial fraud prevention strategiesDescription
Thesis advisor
Pham, LyKeywords
fraud detection, fraud prevention, financial fraud, internal control