Generally characterized as a non-violent criminal offense, white collar crimes are typically committed in professional and business environments. The actions that fall under this umbrella encompass a variety of forms of fraud, including money laundering, securities fraud, insurance fraud, and more.
Of course, the extent of the scope goes well beyond these. Here are the most common types of white collar crimes and what to watch for.
1. Ponzi Schemes
This white collar crime involves a wide spread of investment fraud that law firms are all too familiar with. In fact, the name of the scheme comes from the fraudster best known for pulling one off; Charles Ponzi tricked thousands in New England into investing in a postage stamp scheme.
Of course, the only way this scheme works is by continuously recruiting new investors. Once that becomes too challenging, Ponzi schemes tend to collapse. So in this case, your best bet is to avoid anything that sounds too good to be true.
2. Embezzlement
When someone wrongfully appropriates for personal gain corporate assets that have been entrusted to them, this is known as embezzlement. One famous case involves Rita Crundwell, who embezzled $53 million from the city of Dixon, Illinois to pay for her sumptuous lifestyle while the city suffered budgetary shortfalls.
Once again, independent auditors can help identify employees who divert corporate funds into their own accounts, inflate expenses, or falsify records.
3. Corporate Fraud
When a company or individual participates in dishonest or illegal activities to give themselves an unfair advantage, it’s called corporate fraud. This might come from misrepresenting financial reports, participating in a price-fixing cartel or insider trading, or anything else that intends to deceive stakeholders into the company’s true state of affairs.
Corporate fraud has the potential to destabilize markets, much like the Enron and Volkswagen emissions scandals. Independent audits can help catch these threats.
4. Extortion
Extortion happens when someone obtains something by threatening or forcing the other, so it’s not surprising that it’s usually done by those in positions of power. For example, a public official might demand a bribe before agreeing to grant a contract, resulting in financial loss and emotional distress for the victim.
5. Bankruptcy Fraud
In declaring bankruptcy, some fraudsters conceal their assets, lie on the forms, or commit bribery in an effort to improve their case. This white collar crime can be committed by either an individual or a corporation in an effort to save their assets or avoid debt payments.
6. Money Laundering
Money laundering tends to overlap with other white collar crimes as the perpetrator tries to protect illicit funds earned through other means. To combat this, many countries have implemented anti-money laundering regulations, obligating financial institutions to report suspicious activities and aid in prosecution.
Even though they’re non-violent, white collar crimes are nevertheless quite serious and still face legal consequences when convicted. Left unchecked, they can destroy public trust and result in painful financial losses, among other potentially devastating impacts. If you are a business owner or manager, be sure to be on the lookout for white collar crimes.