Regulating Fraud in Financial Markets: Can Behavioural Designs Prevent Future Criminal Offences?

Journal of Risk Management in Financial Institutions, 2014 (2), Forthcoming

16 Pages Posted: 21 Dec 2013  

Lars Hornuf

University of Trier; Max Planck Institute for Innovation and Competition; Institute for Labour Law and Industrial Relations in the European Union (IAAEU)

Georg Haas

Goethe University Frankfurt - Faculty of Law

Date Written: December 19, 2013

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

JEL Classification: K42, K22, G32, G38

Suggested Citation

Hornuf, Lars and Haas, Georg, Regulating Fraud in Financial Markets: Can Behavioural Designs Prevent Future Criminal Offences? (December 19, 2013). Journal of Risk Management in Financial Institutions, 2014 (2), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2369877

Lars Hornuf (Contact Author)

University of Trier ( email )

Behringstraße 21
Trier, 54296
Germany
+49 651 201 4744 (Phone)
+49 651 201 4742 (Fax)

Max Planck Institute for Innovation and Competition

Marstallplatz 1
Munich, 80539
Germany

Institute for Labour Law and Industrial Relations in the European Union (IAAEU) ( email )

Behringstr. 21
Campus II, Building H, 7. Floor
Trier, DE 54296
Germany

Georg Haas

Goethe University Frankfurt - Faculty of Law ( email )

Frankfurt
Germany

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