Financial fraud is as old as a known human history. From the beginning, and the barter trading system, frauds are a part of a socio-economic system. In modern times when trading has developed in multiple directions, fraud has become extensive. Many financial professionals covered this topic in their books. Learning from the best books about financial fraud is a great way to improve overall economic knowledge.
Among many choices, you can choose between fictional and non-fictional books that cover this topic. The most popular non-fictional books are Bad Blood: Secrets and Lies in a Silicon Valley Startup and The Smartest Guys in the Room: The Story of Enron by Bethany McLean and Peter Elkind. Regarding fiction, we can recommend American Psycho by Bret Easton Ellis and The Fear Index by Robert Harris.
These books offer insight into the largest and most famous frauds. How they were planned and executed. Also, some books look at fraud from different angles, offering a deeper understanding of the process. We will go through a detailed list and along with it, explain the terms of the fraud. Stay with us, and learn how to recognize a possible scheme that you are being pulled into.
Top Books About Financial Fraud
If you are looking into a non-fictional approach toward financial fraud we have several excellent examples. We will focus on books written on true stories that offer valuable information but are also captivating.
Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou
This title published in 2018 won a Pulitzer award. It is a story about the rise and fall of Theranos. It was a startup that came onto the scene with promises of a revolutionized approach to blood testing. They wanted to commercialize testing through a single finger prick.
The founder Elizabeth Holmes was seen as the next Steve Jobs. The company gathered over $9 billion in investments while Holme’s worth was estimated at $5.5 billion. The only problem was that the technology didn’t work. It endangered many of the patients. False testing results lead to wrong therapies and unnecessary treatments.
In 2018 Holmes was indicted for fraud and sentenced to 11 and half years in prison.
Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World by Tom Wright
The book deals with the case of a Malaysian national Jho Low who became famous for the 1MDB scandal. It was a case of corruption, bribery, and money laundering. The Malaysian wealth fund was a target of embezzlement. In the United States, this is considered to be the largest kleptocracy case until 2016.
For over a decade Jho Low with the aid of Goldman Sachs and others, transferred billions of dollars. It was done from an investment fund right under the nose of global financial industry watchdogs. Low used the money to finance elections, purchase luxury real estate, and even finance Hollywood movies.
By early 2019 his private belongings were seized and he is facing criminal charges both in the Malaysia and United States. Today he is living as a fugitive in China.
The Smartest Guys in the Room: The Story of Enron by Bethany McLean and Peter Elkind
Written by two investigative journalists, this book unveils a story about the inner workings of Enron and its famous accounting fraud. This book goes from the obscure beginnings of this energy company and its rise to the top of the ladder.
The book vividly presents the whole scandal, which included shady financial statements and numerous ethical practices. In the end, once a giant, it lost $74 billion in the last 4 years in business. The head of the operation Kenneth Lay was sentenced to 10 years in prison on 98 different charges.
This book offers an inside look at the whole timeline of the events. It is based on hundreds of interviews with people who were at the center of the scandal. Authors gathered information from various sources, like internal documents, and emails. The scandal ended up as one of the biggest accounting frauds. Although it was published in 2004 it is still one of the favorite books regarding shady accounting.
Take A Look At The Smartest Guys in the Room by Bethany McLean Book Summary:
Importance of Understanding Financial Fraud
Financial frauds impact individuals, businesses, and the society as a whole. That is why it is important to understand them and be able to identify them on time. Financial frauds bring unique risks on every level so we will go through them.
Financial Fraud On The Individual Level
By identifying financial shenanigans and frauds you can protect your finances. Some tactics and signals that schemers utilize are clear red flags. On an individual level common frauds are scheming with credit cards, investment scams, or identity theft.
Understanding these common schemes can help you protect your bank accounts, credit cards, investments, and personal information. The first level of threat from scams is your bank account. Those include wide possibilities for the exploitation of one identity. With your data, frauds can steal your money, or use it without your approval and knowledge.
But, besides identity theft and use of your bank account, schemes can impact your investments. As your knowledge about scams and frauds grows your investment decisions will improve. You will be able to make better choices when taking loans, and conducting online transactions.
With developed knowledge about fraud, you will also be more relaxed. Once you know enough about scammers you will have improved financial stability and ease of mind. Experience in battling these outright thieves will provide a sense of security and will lower anxiety.
Financial Fraud On The Business Level
People often think that individuals are the common targets of financial fraud. But, businesses are far more in danger from different schemes. Businesses are so often targeted of potential fraud, due to the larger amounts of funds in play. On the top of the list are financial statement fraud, and accounting frauds.
Business owners should be aware of the risk of embezzlement and cybercrime. Also, they are a prime target for vendor scams and accounting manipulation. Knowing what aspects of business are vulnerable allows for stronger internal controls. Also, implementing proactive measures to prevent financial losses is a must.
Businesses should stay informed about new fraud trends and invest in cybersecurity measures. New digital fraud schemes are taking the upper hand, and they require maximum attention and prevention.
Also, nurturing a whistleblower culture can encourage employees to report any suspicious activities. With the help of security teams and top management, the root of the problem can be eradicated before it poses a major issue.
Businesses also have their reputation on the line when the question of financial fraud comes into focus. Identifying and resolving these activities helps build trust and demonstrate ethical practices. The last thing the company needs is for example accusations of insurance fraud, insider trading, or false billing.
On top of that, financial businesses have a legal obligation to utilize fraud prevention measures. knowing all the relevant legal aspects can help them avoid legal repercussions and fines.
Financial Fraud On The Societal Level
If financial fraud becomes apparent and widespread spread it will weaken the stability of the financial system. Also, it will hinder economic growth. If the fraud trends, patterns, and threats are understood on a higher level, it will help in the combat against it. A true combat against these negative trends is developing effective policy initiatives and regulations.
When thinking about financial frauds on the level of society a focus should be put on those with less financial experience. In those groups are primarily the elderly, but also individuals who do not come into contact with financial institutions often.
Combating financial fraud starts by educating wide groups of individuals. They should be introduced to different aspects of fraud and how to recognize them. They should know how to avoid being caught in financial fraud and report it when they identify it.
Society should properly label and punish fraudulent activities, bad companies, and individuals. That way society creates a barrier against fraud and knows how anyone who attempts it will end up. This practice will encourage ethical dealing in the financial sector, and lower the chance for fraud to happen. Working on promoting transparency in financial business will also help in creating a fairer and safer financial system.
Factors to Consider When Choosing Books
A lot of books about financial fraud are on the market. Choosing the right ones for you depends on several factors. The most important ones are your level of financial knowledge, area of interest, writing style, and recommendations.
Your Level Of Financial Knowledge
If you are a beginner focus on the books that offer clear explanations, and concise language. Also, books that explain terms through real-life situations can significantly help in understanding the topic. Titles like The Big Con: The Story of the American Hustle” or “Scamorama: Why We Fall for It Every Time” can be good starting points.
If you already have some financial knowledge you can delve deeper into the matter. This includes exploring specific fraud schemes through books. Good examples of this are “Catch Me If You Can: Memoirs of an International Confidence Man” by Frank Abagnale or “Bad Blood: Secrets and Lies in a Silicon Valley Startup” by John Carreyrou.
For readers with extensive knowledge and experience, you should pick titles that focus on in-depth analyses of complex financial systems and fraud methods. Titles like “Flash Boys: A Wall Street Revolt” by Michael Lewis or “Money Men: A Hot Startup, a Billion Dollar Fraud, a Fight for the Truth” by Dan McCrum.
Your Area Of Interest
If you want to focus on a specific case of financial fraud, you should search for appropriate books. Some of the best examples are “Enron: The Smartest Guys in the Room” by Bethany McLean and Peter Elkind or “The Man Who Made Wall Street Walk: Bernie Madoff Inside Story” by Diana B. Henriques.
In case you want to read about specific types of fraud some books offer that type of content. Some books focus only on Ponzi schemes, identity theft, or cybercrime. Titles that are always popular are “Identity Theft: The Crime of the New Millennium” by Frank W. Abagnale and “Kingpin: How One Hacker Took Down the Deep Web” by Wired Magazine.
If you do not want to focus on types or cases of fraud but want to learn about fraud within a specific industry, there are also titles for you. Bestsellers like “The Big Short: Inside the Doomsday Machine” by Michael Lewis for the financial crisis or “Smoke and Mirrors: An Exposé of the Art Market” by Janine di Giovanni for the art world will do the job.
Writing Style and Format
Writing style and format is often the key factor when choosing a book. Are you looking for something easy to read and memorable? Or do you want to dive deep into a financial analysis? There are more accessible books, that do not demand significant focus, but also, those that will demand your undivided attention.
If you are searching for a book with engaging storytelling, opt for books written in a narrative style. Good examples are Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World” by Tom Wright and American Psycho by Bret Easton Ellis.
If you are past the narrative fast-paced style, and you are in search of a book with an analytical approach, we also have a recommendation. “Extraordinary Circumstances: The Journey of a Corporate Whistleblower” by Cynthia Cooper is a prime example of a book based on investigative journalism.
In case you want to go deeper and gain theoretical knowledge you should opt for reading academic works. Texts that focus on exploring the psychology and sociology of fraud are the best pick.
Other Factors To Consider
Libraries have whole sections about financial and economic topics. That is why you should pay attention to several factors before you choose books. We already mentioned some of the crucial factors. But, there are others to consider, to minimize the chance of buying a book that will only collect dust.
- Author’s expertise. Do a background check on the author. Is the opinion of the author relevant in the field? Does the author have the educational background and experience to talk about the topic? Look for authors who have experience in finance, law enforcement, forensics, auditing, or related fields
- Reputation of the publisher. Books go through an extensive review process before publishing. Publishers with a good reputation will fact-check the books from cover to cover. The last thing they want is a book written on pretenses. The result of the review process is the quality and accuracy of the content
- Reviews and recommendations. Some several bloggers and vloggers focus on recommending books. Look at their recommended lists. Also, check the recommendations that financial experts often mention in interviews and publications. Nothing beats the recommendation of a professional from the field
- Publication date. Methods of financial fraud are evolving. New technologies are introducing new ways to scam people. Take this into account when choosing a book. Newer publications usually have updated information, and from them, you can learn about the current fraud trends
- Practical use. Economic and financial books are often full of theoretical knowledge. Although it can be helpful, you should aim for books that provide practical knowledge. Many books offer real-world examples, case studies, and practical tips. That is what you need to prevent and detect financial fraud.
Key Concepts in Financial Fraud
To be able to identify a financial fraud you need to understand its core concepts. At the heart of every fraud are deception, lies, and greed. But, since there are different approaches to scams and fraud, they come with different key elements. When you are in doubt are you the target of financial fraud, pay attention to these factors:
- Deception and misrepresentation. A fraud always aims to mislead the target of his scheme. The core of its trickery can be lying, hiding information, or misrepresenting data. These actions can create a false picture that is fraudulent to begin with. Ponzi schemes, cooking of accounting books, and fake investment opportunities are common examples of these schemes
- Breaching fiduciary duty. Investment advisors and corporate executives have a responsibility toward their clients. On their behalf, they will utilize their investments for their best benefit. This is called a fiduciary duty. In case they disregard their client’s well-being for the sake of personal interest can result in several scenarios. Some of them are embezzlement, self-dealing, and inside-trading
- Misappropriation of assets. Individuals often aim to use funds or assets for their own gain. The specter of fraudulent activities they can do depends on their position in the company. They can divert the capital from company accounts, or steal credit card information. Also, they can conduct identity theft to access financial resources
- Exploitation of vulnerabilities. Scammers frequently aim to find gaps in the system that they can exploit. These gaps can be potential security weak spots, faulty processes, or particular individuals. These scams focus on gathering information or capital by manipulation or security breaching
- Abuse of power and authority. Individuals in positions of power can use their influence to commit fraud. There is a wide array of potential schemes they can organize. Pressuring subordinates into illegal activities is just one example. Others include taking advantage of privileged information for personal gain or buying off officials to secure favorable outcomes.
FAQs
How Do You Fight Financial Fraud?
To properly fight financial fraud it must include the effort of the individual, combined with the collective effort. These are some actions you can take to protect yourself from financial fraud:
- Personal alertness
Sometimes it is good to be skeptical. If something sounds too good to be true, it usually is. If someone is pressuring you into a financial decision, slow it down, and think about it. People rushing you into massive deals can shave off all the investment capital.
Keep your personal financial information safe. Do not share your credit card PIN, passwords, or banking accounts. Use only protected channels to share this information.
Individuals are frequently targets of phishing attacks. These attacks aim to steal the target’s identity. Phishing often happens through social media and online surveys. Phishing fraud can be particularly harmful because you can lose all your sensitive financial data.
To minimize the chance of becoming a target practice diligence, and use strong passwords. Do not click on suspicious links or download unknown files.
- Proactive measures
Using proactive measures will lower the chances of becoming the target of fraud. Install security software including antivirus, and anti-malware. These provide solid protection from cyber attacks.
Either destroy or properly store sensitive documents. These include all documents that include bank statements, PINs, or credit card numbers.
Keep yourself educated and up to date. New fraud approaches are developed every day. Try to stay in the loop, and be diligent.
- Collective action
If you suspect that someone is managing a financial fraud, report them to the authorities. When discussing anti-fraud laws, take participation. Try to understand the intent of these laws, and whether are there ways to improve them.
Financial fraud is the problem of the whole society. When you have a chance, discuss this topic with your friends, colleagues, and family. Raise awareness about potential approaches scammers develop, and what negative results they can inflict.
What Are the Top Fictional Books About Financial Fraud?
Focusing on well-developed landscapes of fictional books about financial fraud has several upsides. Your mind will be riddled with stories that offer an insight into the thoughts behind these elaborate schemes. These books offer both a thrilling reading experience, that is backed by a chance to learn about fraud and manipulation. Some of the best examples of fictional books about financial fraud are:
- American Psycho by Bret Easton Ellis
This book published in 1991 is already considered a classic. Most of us are acquainted with the story through a masterful movie. The story of the book focuses on Patrick Bateman a wealthy investor banker. He is already consumed by materialism, greed, and violence. He doesn’t have any moral or ethical dilemma when gaining capital is in question.
- The Fear Index by Robert Harris
The setting of this book is in the middle of the 2010 flash crash. In less than one hour United States stock markets lost trillions of dollars. The story focuses on a group of employees of Hoffmann Investment Technologies a fictional hedge fund. One of the employees is a physicist who creates an algorithm to predict market trends. After the introduction, an algorithm takes its independent form, leaving its inventor as a part of a financial conspiracy.
Final Thoughts
Combating financial fraud is a multifaceted process that demands the effort of a whole society. There will always be individuals overcome by greed looking for an easy way to earn money. The rest of the society is to join forces and develop protective measures against these activities.
Constant learning and sharing of information is the best way to avoid being scammed. Also, books offer a multilayered view of fraudulent actions. From them, you can learn the driving force behind fraud, the concepts, and how far these frauds can go. Stay diligent and curious about this topic. Learn about it and keep your personal information safe. It is better to learn from books than from your example.
