A council 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 him. If the restaurant owner does not

cooperate, the restaurant cannot be opened for business and the negative publicity will drive

customers away. Faced with the potential economic loss, the owner makes the payment.

Required:

a) What type of fraud is this? (4 marks, maximum 150 words)

b) What controls can be implemented to prevent or detect the fraud? (6 marks, maximum 200

words)

Answer: Economic extortion

Explanation:

From the question, a council health inspector threatened that he will close down a restaurant through the issuing of a fake health violation notice that promptedthe restaurant owner to make payment to him.

This type of fraud is called Economic extortion. Economic Extortion is a kind of a fraud whereby the perpetrator demands the payment from a salesperson or a vendor in order to influence the decision of a particular company in the favor of the vendor or salesperson.

b. Economic extortion can be prevented when the threatened party doesn't agree with the threats and doesn't comply with what or she is been told and can also takes the party to court.

Also, the threatened business can also join other threatened businesses which offers thesame products or services on order to curtail the threats and find the necessary solutions.