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Newcomb–Benford law and the detection of frauds in international trade
- Source :
- Proceedings of the National Academy of Sciences of the United States of America
- Publication Year :
- 2018
- Publisher :
- Proceedings of the National Academy of Sciences, 2018.
-
Abstract
- Significance The detection of frauds is one of the most prominent applications of the Newcomb–Benford law for significant digits. However, no general theory can exactly anticipate whether this law provides a valid model for genuine, that is, nonfraudulent, empirical observations, whose generating process cannot be known with certainty. Our first aim is then to establish conditions for the validity of the Newcomb–Benford law in the field of international trade data, where frauds typically involve huge amounts of money and constitute a major threat for national budgets. We also provide approximations to the distribution of test statistics when the Newcomb–Benford law does not hold, thus opening the door to the development of statistical procedures with good inferential properties and wide applicability.<br />The contrast of fraud in international trade is a crucial task of modern economic regulations. We develop statistical tools for the detection of frauds in customs declarations that rely on the Newcomb–Benford law for significant digits. Our first contribution is to show the features, in the context of a European Union market, of the traders for which the law should hold in the absence of fraudulent data manipulation. Our results shed light on a relevant and debated question, since no general known theory can exactly predict validity of the law for genuine empirical data. We also provide approximations to the distribution of test statistics when the Newcomb–Benford law does not hold. These approximations open the door to the development of modified goodness-of-fit procedures with wide applicability and good inferential properties.
- Subjects :
- Empirical data
Newcomb–Benford law
statistical antifraud analysis
Political Sciences
Social Sciences
Context (language use)
International trade
01 natural sciences
Benford's law
010104 statistics & probability
0502 economics and business
Economics
media_common.cataloged_instance
050207 economics
0101 mathematics
European union
Probability
Statistical hypothesis testing
media_common
Multidisciplinary
business.industry
Statistics
Fraud
05 social sciences
Contrast (statistics)
anomaly detection
customs valuation
PNAS Plus
Anomaly detection
Customs fraud
Customs valuation
Statistical antifraud analysis
Physical Sciences
customs fraud
business
Subjects
Details
- ISSN :
- 10916490 and 00278424
- Volume :
- 116
- Database :
- OpenAIRE
- Journal :
- Proceedings of the National Academy of Sciences
- Accession number :
- edsair.doi.dedup.....52e34822b3fe9816a3a9885dd1322b40