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Case study

Regulating fraud in financial markets: can behavioural designs prevent future criminal offences?

Lars Hornuf and Georg Haas
Journal of Risk Management in Financial Institutions, 7 (2), 192-201 (2014)
https://doi.org/10.69554/FPUW9133

Abstract

This article explores the anatomy of three recent financial scandals and investigates how the legal system has responded to them. Furthermore, it analyses whether behavioural designs can prevent future criminal offenses. The article comes to the conclusion that the social as well as the physical environment can diminish the human propensity to commit a fraud. Moreover, misconduct was often made attractive to fraudsters by means of external rewards. Reforming performance incentives might therefore be an efficient measure to reduce deception in financial markets.

Keywords: cheating; fraud; behavioural designs; Bernard Madoff; Kweku Adoboli; LIBOR scandal

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Author's Biography

Lars Hornuf is a postdoctoral researcher at the University of Munich. He holds an MA in Political Economy from the University of Essex and a PHD in Economics from the University of Munich. Lars is a Certified Exchange Trader (Frankfurt Stock Exchange). Moreover, he was a Visiting Scholar at UC Berkeley in 2010 and Stanford Law School in 2012. Currently, he is a Visiting Research Fellow at the Social Science Research Institute of Duke University. Prior to this Lars had worked for Deutsche Bank, the Ifo Institute for Economic Research and the Institute for International Law. His research interests include law and finance, empirical legal studies as well as behavioural economics. Lars is a founding partner of the law and economics consultancy Academicon.

Georg Haas is a research assistant at the University of Munich.

Citation

Hornuf, Lars and Haas, Georg (2014, March 1). Regulating fraud in financial markets: can behavioural designs prevent future criminal offences?. In the Journal of Risk Management in Financial Institutions, Volume 7, Issue 2. https://doi.org/10.69554/FPUW9133.

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cover image, Journal of Risk Management in Financial Institutions
Journal of Risk Management in Financial Institutions
Volume 7 / Issue 2
© Henry Stewart
Publications LLP

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