The financial crisis and the haphazard pursuit of financial crime

Abstract

Purpose

The financial crisis has been something of a turning point in the regulatory response to financial crime around the world. The failure of light‐handed regulation and risk assessment by both industry and regulators made the operation of financial regulatory agencies almost untenable, often leading to calls for their replacement by more effective agencies. The purpose of this paper is to assess the nature of this regulatory challenge.

Design/methodology/approach

The paper discusses some of the case studies that have emerged from the dark side of regulatory and enforcement policies in recent times.

Findings

A culture of minimal regulation of financial markets meant that many undesirable practices (such as insider trading, foreign corrupt practices, tax avoidance, money laundering and other frauds) were able to avoid detection until public outrage led to regulatory and prosecutorial agencies being prompted into action following the collapse of financial markets.

Research limitations/implications

More detailed studies of particular institutions will be necessary; this will become possible as the current financial crisis subsides.

Originality/value

This paper explores some of the factors behind this state of affairs and makes policy recommendation in regard to the need for more effective internal controls and monitoring measures within the modern financial corporation.

Citation

Tomasic, R. (2011), "The financial crisis and the haphazard pursuit of financial crime", Journal of Financial Crime, Vol. 18 No. 1, pp. 7-31. https://doi.org/10.1108/13590791111098771