A city health inspector threatens to close down a restaurant by issuing a fake health violation notice if the owner does not make a financial payment to the inspector. If the restaurant owner does not cooperate, he will not be able to open for business and the publicity will drive away his customers permanently. Faced with a threat of economic loss, the owner makes the payment.What type of fraud is this, and what controls can be implemented to prevent or detect the fraud?

Explanation:ECONOMIC EXTORTION is a fraudulent activity which involves the use of Threat,force or other means to forcefully and wrongfully collect money and other resources from others in the Population especially those in business. It is usually carried out by Government agents and other Regulatory bodies etc.

It can be controlled by putting a check and balance system whereby a check on the activities of the regulators are done by a set of inspectors or monitors.

It can also be controlled by putting in place systems to prevent the payment of cash to Government officials and other Regulatory bodies etc.

ogorwyne ogorwyne · Answer 2 · 2022-03-29T14:30:50+02:00

The kind of fraud that has been identified in this question is what is known as economic extortion.

How does this show economic extortion?

The inspector wants to be bribed by the owner of the restaurant. Failure to do so would cause him to implicate the owner on a crime that he is not guilty of.

The ways to prevent this type of frauds are:

The implementation of certain check and balance
Discouragement of payment to individual bodies.
Disciplinary actions on anyone found guilty of such behaviors