Law And Economic Analysis Of Financial Fraud

Taking an observation to the financial criminal legislative development process, we can find: China's criminal penalties against financial fraud are very serious, and as soon as crime rate had high trend, corresponding, penalties of financial fraud would be exacerbated. But serious penalty did not achieve the desired good results, financial fraud is still frequent. So there is a predicament: While the penalties severity is continuously improving, and the other is the growing financial fraud. What is the reason of the predicament, how to make a breakthrough, this is the paper's major problem.Crime decision is a process of comparing cost and proceeds, the deterrence effect is that penalty increase the cost of crime, so, forms a counter-force to contain crime. Although felonies increased cost of crime, but because of the influence of other factors, reduce their deterrent effect.The analysis reveals that the cause of this predicament stems from two reasons: First, nonfeasance law enforcement of enforcer; second is the potential criminal penalties for the main right mind awareness.When there exists factitive and nonfeasance law enforcement in society, there will be two different levels of law enforcement: serious law enforcement and pretended serious law enforcement. They may choose the same or a different punishment; nonfeasance law enforcement can freely choose whether or not to pretend. So the level of law enforcement is uncertainty. Conclusion: as long as there is nonfeasance law enforcement, the law enforcement community will deviate from the requirements of the optimal level of deterrence, overdeterrence or underdeterrence, the social welfare losses. The fundamental reason of nonfeasance law enforcement is China's legislative and judicial system, and the law enforcing ability of enforcer is inadequate. The solution lies in improving China' s legislation (justice) system and enhances law enforcement capabilities.Though criminals of financial fraud are intelligence and professional, they are still unable to accurately calculate cost and proceeds in the decision-making process. More often, they make a judgment since psychological perception. Nonfeasance law enforcement aggravates criminals' perception of probability of punishment uncertainty. And this results in the high estimating optimistic results. Thus the deterrent effect of penalties reduces. To eliminate potential criminals' optimism, the key lies in strengthening enforcement of certainty.Because criminals have strong perception on property punishment and the prohibition of employment and participation in the financial business, paper suggests property and prohibition punishment, and the Liberal sentence should serve as an effective complement.