Fiduciary fraud7/23/2023 ![]() According to Herrick (2008), fraudulent activities of fiduciary are very subtle for perpetrators sophisticatedly conceal their activities by creating an illusion of effective management systems and profitability (p.3). Therefore, to defraud their clients and customers, the fiduciary employs several tactics such as promising high compensation rates with low premiums in case of insurance companies, offering high interests rates in bank savings, cheap mortgages in real estate, and manipulation of stocks in stock exchange markets.īoth the government and the public are prone to fiduciary fraud since perpetrators are highly sophisticated. Croall (2009) asserts that, people that are in influential positions commit white-collar crimes for they have immense powers to defraud their clients and influence legal proceedings in their favor (p.78). The fiduciary fraud occurs most in these relationships because it involves entrusting a lot of money to fiduciary coupled with influential powers, which prompt the fiduciary to breach the contract and a commit white-collar crime by defrauding their clients. For example, fiduciary fraud is most common in fiduciary relationships such as the board of directors/company, banks/clients, stockbrokers/investors, trustee/beneficiary, agent/principal and partner/partner. ![]() ![]() Since financial institutions manage a great deal of money and governments hardly regulate the institutions, they are free to commit fiduciary fraud.Īlthough fiduciary fraud occurs in various companies and institutions, some fiduciary relationships are more prone to fiduciary fraud as compared to others. According to Economic Policy Research Institute (2006), fiduciary fraud is a white-collar crime that financial institutions or professionals commit by contravening an agreement and acting against the interests of their clients (p.2). However, because the fiduciary is in a position of influence, it can breach terms and conditions of agreement and act to satisfy own interests against client, thus committing a white-collar crime called fiduciary fraud. Moreover, fiduciary has a noble duty of advising, protecting, and acting on behalf of clients as a trustee. In this case, fiduciary has legal and ethical responsibility to manage property and money according to terms and conditions of an agreement made between the client and the fiduciary. Fiduciary is a person or a financial institution that clients have entrusted with management of their property or money.
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