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Durham University

Research & business

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Publication details for Professor Dennis Philip

Engels, C., Kumar, K. & Philip, D. (2020). Financial literacy and fraud detection. The European Journal of Finance 26(4-5): 420-442.

Author(s) from Durham


Who is better at detecting fraud? This paper nds that more nancially knowledgeable
individuals have a higher propensity to detect fraud: a one standard deviation increase
in nancial knowledge increases fraud detection probabilities by 3 percentage points. The
result is not driven by individuals' higher nancial product usage and is observed to be
moderated by individuals' low subjective well-being, e ectively depleting skills to detect
fraud. Interestingly, prudent nancial behavior relating to basic money management is
found to have negligible e ects for detecting fraud. The ndings attest to the fact that fraud
tactics are increasingly complex and it is greater nancial knowledge rather than basic money
management skills that provides the degree of sophistication necessary to detect fraud. The
paper draws policy implications for consumer education programs to go beyond cultivating
money management skills, and provide advanced nancial knowledge necessary for tackling