Are White-Collar Crimes Becoming the New Norm?

There has never been a time when financial mismanagement was more widespread or under-punished. White-collar crime is a type of nonviolent crime that is conducted for the sake of financial benefit. According to the FBI, which is a crucial agency in the investigation of these charges, “these crimes are characterized by deception, concealment, or a breach of the public’s confidence.

” The reason for these crimes is “to get or avoid losing money, property, or services, or to gain a competitive advantage in a personal or business endeavor.” Securities fraud, embezzlement, corporate fraud, and money laundering are only a few examples of white-collar criminal activity. In addition to the FBI, the Securities and Exchange Commission (SEC), the National Association of Securities Dealers (NASD), and state authorities are all involved in the investigation of white-collar crime.

White-collar crime is a nonviolent crime that results in the financial enrichment of those who do it. Misrepresentation of a corporation’s financial situation in order to deceive regulators and others is one example of this crime. There are a plethora of other crimes that include deceptive investment possibilities in which prospective rewards are inflated, and dangers are portrayed as small or nonexistent.

Since the phrase “white-collar crime” was originally created in 1949 by sociologist Edwin Sutherland, it has been linked with the well-educated and wealthy. Sutherland defined it as a “crime committed by a person of respectability and high social status in the course of his work.

” White-collar workers have traditionally been seen to be the “shirt and tie” kind, defined by office occupations and administration rather than “getting their hands dirty” in the field. This sort of worker is in contrast to blue-collar workers, who typically wore blue shirts and worked in plants, mills, and factories, as the name implies.

As new technologies and financial goods and arrangements have spawned a slew of new charges in the decades that have followed, the breadth of white-collar crimes has dramatically grown in the years following. Ivan Boesky, Bernard Ebbers, Michael Milken, and Bernie Madoff are just a few of the high-profile persons who have been convicted of white-collar crimes in recent decades.

And one of the most prevalent new white-collar crimes made possible by the internet is the so-called Nigerian scam, in which fake emails ask for assistance in delivering a large sum of money to a third party.

Are White-Collar Crimes Rising at an Alarming Rate?

Statistics Show That White-collar Crimes Are Rising at An Alarming Rate; in terms of both depth and breadth, white-collar crime is massive. In order to inflate their share price or escape tax, organizations might purposefully deceive investors with incorrect information. They can also hide, delete, or fabricate papers, launder money, or be involved in corruption.

Individuals can embezzle, steal, conceal losses, spy on competitors, damage systems, and manipulate the markets in a number of different ways. The scale of the project is enormous. Approximately half of all fraud was committed by persons who were ‘invited in’ rather than by external factors, according to the PwC 2020 Global Economic Crime and Fraud Survey. It was discovered that 37% of the offenses were perpetrated by workers, while 20% of the offenses involved coordination between employees and a third party.

Furthermore, insiders were responsible for 43% of all recorded scams in 2020 that resulted in losses in excess of USD 100 million. White-collar criminals are able to operate in plain sight. They are often white, middle-class, and in their mid-forties, with a good education. They are frequently married and actively committed to their communities. Because they are employed in positions of trust, they are considered to be trustworthy.

Types of White-Collar Crimes

Although the list of the different types of white-collar crimes is almost never-ending, we have discussed some of the most common ones below.

Corporate Fraud

Some definitions of white-collar crime take into account only offenses committed by an individual for the profit of that individual. However, the FBI, for example, defines these crimes as comprising wide-scale fraud conducted by a significant number of people throughout a corporation or a government agency. In fact, the agency lists corporate crime as one of its top enforcement objectives, according to its website.

This is due to the fact that it not only causes “huge financial losses to investors” but also “has the potential to do immeasurable damage to the United States economy and investor confidence.” The majority of corporate fraud charges involve the falsification of financial information or the manipulation of stock market pricing. This can indicate a stronger financial position or be utilized to avoid paying taxes or complying with regulatory regulations.

To profit from share price swings, businesses or individuals within a firm can manipulate markets, place “front-run” orders, or exploit “inside information.” When a trader anticipates an order for a specific stock or commodity, they buy or sell it on their behalf for the benefit of their company. When the order is received, they will make a profit at the expense of the client. Insider trading is the practice of profiting from privileged information that is not available to the general public.

For example, purchasing a stock knowing that the company will make an announcement that will result in a significant increase in the share price is a good illustration. It can then be sold for a profit when the knowledge is made public and the market price changes in the opposite direction.

Fabrication of Financial Information

Corporate fraud cases are mostly characterized by the use of accounting systems that are intended to “deceive investors, auditors, and analysts about the true financial position of a firm or business organization.” Typical examples of such scenarios entail changing financial data, the stock price, or other valuation measurements in order for the financial performance of a corporation to appear better than it actually is.

A case in point is the 2014 guilty plea of Credit Suisse, which admitted that it assisted U.S. residents in avoiding taxation by concealing their income from the Internal Revenue Service. The bank agreed to pay $2.6 billion in fines and penalties. In addition, Bank of America said in 2014 that it had sold billions of dollars in mortgage-backed securities (MBS) that were attached to properties with inflated prices.

Loans made without enough collateral were among the forms of financial misconduct that contributed to the global financial crisis that began in 2008. Bank of America agreed to pay $16.65 billion in damages and to acknowledge that it had committed misconduct in the past.

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How to Prevent Falling Victim to White-Collar Crimes?

Companies require processes that are robust and that are adhered to strictly. Early discovery can help to avoid a full-scale calamity from occurring. As an additional layer of security, technological advancements can be implemented. Other procedures that can be implemented include carefully screening staff, keeping a rigorous separation of roles, and prioritizing the implementation of an internal audit function.

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Sources & Attribution

• https://www.thenation.com/article/politics/white-collar-crime-crypto/
• https://www.jdsupra.com/legalnews/7-tips-for-combating-white-collar-crime-66643/
• Author: Malcolm Harris – https://trustpair.fr/en/blog/what-is-white-collar-crime-and-how-can-it-be-prevented/