Let’s say, for the sake of argument, that you wanted to commit large-scale fraud at your company. Manipulating financial statements or inflating revenue to mislead investors would be difficult to pull off alone. You would likely need others to align stories, suppress dissent, and sustain the deception over time. And your colluders would likely be colleagues whom you’d come to trust after months or years of watercooler chats and after-work drinks.
“Most fraud is a team sport,” says Prof. John Barrios. We tend to think of teamwork as something that enhances productivity and innovation, he notes, “but you could also coordinate to heist a casino in Vegas. Coordination is a neutral technology. It can be used to build something or to conceal something.”
When the COVID-19 pandemic pushed millions of employees out of offices and into remote work, everyday interactions changed overnight. Informal hallway conversations disappeared. Face-to-face meetings moved to Zoom. Slack and email replaced conference room discussions.
Having people work in an office is a very powerful coordination technology. It can be used to build great things—but also to sustain bad ones.
How did that physical separation affect the incidence of financial misconduct?
A new study co-authored by Barrios found that firms better positioned to operate remotely before the pandemic experienced significantly larger declines in fraud after 2020, an effect equivalent to cutting the baseline rate roughly in half. This decline was especially pronounced at companies that emphasized teamwork, where misconduct is more likely to depend on coordination among insiders.
One reason may be that remote work altered how coordination happens. Sustaining a fraudulent scheme typically requires insiders to align stories and reinforce trust over time. In-person environments make that easier. Remote work, by contrast, shifts communication onto digital platforms that leave records and may make sustained collusion more difficult.
In-person interactions, it appears, set the stage for like-minded criminals to build trust and join forces. “Having people work in an office is a very powerful coordination technology,” Barrios says. “It can be used to build great things—but also to sustain bad ones.”
Most efforts to address fraud focus on increasing regulations and monitoring. But “rules alone are not enough,” Barrios and his co-authors, Jessie Jianwen Guo and Yanping Zhu of New York University, wrote in their study. After all, major corporate scandals continue to erupt despite the presence of numerous regulations. “You can write a rule,” Barrios says, “but people still decide whether to follow it.” Less attention has been paid to how organizational design and people’s interactions affect the likelihood of misconduct.
The pandemic created what Barrios calls an “economy-wide experiment.” It was not obvious beforehand what the outcome of that experiment would be—whether fraud would increase or decrease. Remote work might weaken supervision. But it might also raise the cost of sustaining collusion.
To find out, the researchers first measured which firms were better positioned to operate remotely before 2020. Using workforce data from Revelio Labs and job-posting data from LinkUp, they mapped each firm’s occupational composition and classified jobs according to whether they could plausibly be performed from home.
The result was a firm-level “remote-work feasibility” score for more than 1,400 public companies, based not on surveys, but on the actual mix of occupations inside each firm. The measure incorporated the fact that some roles require physical presence while others can be performed entirely online. Even within white-collar firms, that variation is substantial. By exploiting these differences, the researchers could compare firms that were structurally more or less exposed to the sudden shift to remote work.
Comparing firms with higher and lower remote-work feasibility, they found that misconduct declined by about 2 percentage points more at highly remote-feasible firms—the equivalent of reducing fraud by about half. “That’s huge,” Barrios says.
But did fraud actually decline, or was it simply detected less often during the disruption of the pandemic? To find out, the researchers turned to another measure called “discretionary accruals,” a technical term for sketchy accounting practices. This indicator can signal potential misreporting even when no lawsuit or enforcement action occurs. Unlike fraud cases, which depend on regulators or courts, discretionary accruals provide a continuous proxy for underlying reporting behavior.
They found that discretionary accruals also declined at firms with higher remote-work feasibility. That pattern suggests that misconduct itself fell, not merely that detection slowed. In fact, when misconduct did occur at those firms, it was uncovered more quickly. The time between the start of alleged wrongdoing and the filing of a lawsuit shortened significantly at remote-feasible firms. Rather than hiding more effectively, fraudulent schemes appeared harder to sustain.
If weaker coordination was the reason for the decrease in fraud, the team reasoned, this effect should be stronger at companies that had a teamwork-oriented culture to begin with. To test that idea, the researchers used a measure of corporate teamwork culture based on language in earnings calls (i.e., how often executives emphasized collaboration and collective effort).
The results were consistent with the coordination story. At firms with stronger teamwork cultures, the decline in misconduct after the shift to remote work was nearly twice as large. Where fraud likely relied more heavily on coordinated action, disrupting in-person interaction had a bigger impact.
A similar pattern emerged along another dimension: employee sentiment. Firms with lower pre-pandemic ratings of leadership experienced larger declines in misconduct after shifting toward remote work. In those environments, collusion may have depended more heavily on dense, in-person relational networks. When remote work weakened those networks and moved communication onto more traceable digital platforms, sustaining coordinated misreporting became more difficult. Notably, employee sentiment in those firms also improved after the shift.
Taken together, the evidence suggests that remote work did not reduce fraud by isolating employees or making them disengaged. Rather, it altered the firm’s internal coordination infrastructure, changing how easily insiders could align stories, reinforce trust, and maintain collusive arrangements.
Culture still matters, Barrios says. In settings where employees feel disconnected from leadership or undervalued, misconduct may be easier to rationalize. “The incentive to commit fraud can come from a place of feeling wronged.” But the study indicates that incentives alone are not enough. How people interact inside the firm—how frequently they meet in person, how communication flows, and how easily informal coalitions form—shapes whether those incentives translate into organized misconduct.
For executives and boards, the implications extend beyond the remote-work debate. Most anti-fraud strategies focus on rules, controls, and monitoring. Those tools matter. But the research highlights another lever: organizational design. “Proximity is powerful,” Barrios says. It supports collaboration and innovation, but under certain conditions, it can also sustain collusion.
The findings suggest that decisions about workplace structure affect more than productivity and culture. They also influence the feasibility of misconduct and, ultimately, the integrity of financial reporting.