The role of social control agents in constructing and tackling fraud

This study explores accounting fraud by analysing the interactions and interdependencies among social control agents (SCAs) to understand their influence on how fraud is defined and tackled. It adopts the theoretical lens of the regulatory space to investigate the case of Monte dei Paschi di Siena, typically considered the world's oldest bank in operation, which faced a major scandal for accounting fraud. During the period under investigation (2007-2023), the bank pursued an aggressive acquisition, leading to crisis, fraud allegations, and nationalisation, causing significant societal costs. The analysis examines the actions and omissions of SCAs in both the ex-ante monitoring function and the ex-post sanctioning function, considering the pressures that may have triggered them. This study indicates that SCAs can shape fraud concepts differently, influenced by their functions and expertise, potentially hindering fraud mitigation. Divergent objectives among SCAs can result in coordination challenges, limited inter-organisational connections, and secrecy tendencies. Furthermore, the study illustrates how SCAs might prioritise prosecutable fraud, characterised by narrower boundaries and lesser magnitude, over alternative fraud allegations. This choice could be a response to the growing societal pressure for prompt action while managing scrutiny, thus maintaining existing positions and the status quo.