White-collar crime is nonviolent crime committed for financial gain. According to the FBI, a key agency that investigates these offenses, “these crimes are characterized by deceit, concealment, or violation of trust.” The motivation for these crimes is to obtain or avoid losing money, property, or services, or to secure a personal or business advantage.
Examples of white-collar crimes include securities fraud, embezzlement, corporate fraud, and money laundering. In addition to the FBI, entities that investigate white-collar crime include the Securities and Exchange Commission (SEC), the National Association of Securities Dealers (NASD), and state authorities.
+ White-collar crime is non-violent wrongdoing that financially enriches its perpetrators
+ These crimes include misrepresentation of a corporation’s finances in order to deceive regulators and others
+ A host of other offenses involve fraudulent investment opportunities in which potential returns are exaggerated and risks are portrayed as minimal or non-existent
White-collar crime has been associated with the educated and affluent ever since the term was first coined in 1949 by sociologist Edwin Sutherland, who defined it as “crime committed by a person of respectability and high social status in the course of their occupation.”
In the decades since, the range of white-collar crimes has vastly expanded as new technology and new financial products and arrangements have inspired a host of new offenses. High-profile individuals convicted of white-collar crimes in recent decades include Ivan Boesky, Bernard Ebbers, Michael Milken, and Bernie Madoff. And rampant new white-collar crimes facilitated by the internet include so-called Nigerian scams, in which fraudulent e-mails request help in sending a substantial amount of money.
Some definitions of white-collar crime consider only offenses undertaken by an individual to benefit themselves. But the FBI, for one, defines these crimes as including large-scale fraud perpetrated by many throughout a corporate or government institution.
In fact, the agency names corporate crime as among its highest enforcement priorities. That’s because it not only brings “significant financial losses to investors,” but “has the potential to cause immeasurable damage to the U.S. economy and investor confidence.”
Falsification of financial information
The majority of corporate fraud cases involve accounting schemes that are conceived to deceive investors, auditors, and analysts about the true financial condition of a corporation or business entity. Such cases typically involve manipulating financial data, the share price, or other valuation measurements to make the financial performance of the business appear better than it actually is.
For instance, Credit Suisse pleaded guilty in 2014 to helping U.S. citizens avoid paying taxes by hiding income from the Internal Revenue Service. The bank agreed to pay penalties of $2.6 billion. Also in 2014, Bank of America acknowledged it sold billions in mortgage-backed securities (MBS) tied to properties with inflated values. These loans, which did not have proper collateral, were among the types of financial misdeeds that led to the financial crash of 2008. Bank of America agreed to pay $16.65 billion in damages and admit to its wrongdoing.
Corporate fraud also encompasses cases in which one or more employees of a company act to enrich themselves at the expense of investors or other parties. Most notorious are insider trading cases, in which individuals act upon, or divulge to others, information that isn’t yet public and is likely to affect share price and other company valuations once it is known.
Other trading-related offenses included fraud in connection with mutual hedge funds, including late-day trading and other market-timing schemes.
Detection and deterrence
With the range of crimes and corporate entities involved so wide, corporate fraud draws in perhaps the widest group or partners for investigations. The FBI says it typically coordinates with the U.S. Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Financial Industry Regulatory Authority, Internal Revenue Service, Department of Labor, Federal Energy Regulatory Commission, and the U.S. Postal Inspection Service, and other regulatory and/or law enforcement agencies.