White-Collar Crime: Definition, Examples, and Consequences
White-collar crimes can comprise corruption, fraud, or money crimes involving government or business officials or professionals from other official entities. These crimes are typically non-violent.
White-collar criminals can target companies, organizations, or individuals. Many white-collar criminals are a part of a company or organization that commits crimes during regular business operations. Some criminals engage in real or false business operations for the sole purpose of profiting from fraud.
Common examples include securities fraud, insurance fraud, government corruption, and money laundering. A white-collar criminal could make false insurance claims to get payouts from the insurance company, or they could get insider information about a company and use it to gain an unfair advantage in the stock market.
Money laundering is another type of white-collar crime. It involves running money from criminal activities through a legitimate business or investment scheme.
White-collar crime can be complicated, but some are very simple. A company may hide money so that they don’t have to pay taxes on it (tax evasion) or use official assets or money that they have been entrusted with for personal gain (embezzlement).
Individuals and businesses who are victims of white-collar crimes often need legal assistance to help them recover the assets or money that they lost as a result of the white-collar crime.
Types of White-Collar Crimes
There are different types of white-collar crimes.
- Insider trading involves using privileged information to gain an advantage. An example would be if the company’s CEO told a family member about a problem with the company that was not yet public knowledge. The family member would then sell the company’s stock before the problem is announced. Insider trading is unethical because it gives insiders an unfair advantage over other traders.
- Embezzlement involves using official assets or money for personal purposes. For example, a financial advisor may take money that they are supposed to be managing for clients and use it on personal investments.
- Racketeering is a broad term that includes white-collar crimes that the criminal repeatedly commits for profit. The most common example of racketeering is when a criminal organization offers “protection” to businesses in a specific area.
- Ponzi schemes involve luring investors to an investment opportunity and paying off early investors with the money invested by later investors.
- Copyright infringement involves using copyrighted or patented material to make a profit without the permission of the copyright owner. In these instances, the copyright holder may enlist the help of an attorney and seek compensatory damages to get some or all of the money that the infringer made.
- Tax evasion involves hiding money so that you do not have to pay taxes on it. For example, a company may temporarily transfer assets to someone outside of the company, so that it is not part of a tax assessment or not listed as official income.
- Cybercrimes involve using computers and technology to steal information or sabotage the online operations of a company or organization. Cybercrime may include other white-collar crimes, such as identity theft. Identity theft involves taking someone else’s identifying information, such as a social security number or passport, and giving it to someone else to use for identification purposes.
- Money laundering involves using a legitimate business to legitimize money earned from illegal activity. For example, a company could receive money from a criminal who earned that money from the narcotics trade during regular operations. The business would then list this illegal income as a legitimate profit so that it is no longer connected to narcotics.
- There are many different types of fraud. In general, fraud is an intentional deception that leads to an unlawful gain of money or assets. The most common form of fraud involves promising something over the radio, TV, or internet, and then not delivering as promised. Meanwhile, insurance fraud involves submitting false insurance claims or causing damage to your own property to get insurance payouts.
- Illegal pyramid schemes involve getting individuals to recruit other individuals to sell products or services on behalf of a company. Multi-level marketing (MLM) businesses are legal. However, if the company does not sell legitimate products or does not pay according to predetermined agreements, the scheme could be illegal, and those who participate could be victims of fraud.
Economic Impact of White-Collar Crime
White-collar crime can impact both individuals and businesses, but it can also harm the overall economy.
Estimates for the economic impact of white-collar crime vary. Fraud and other crimes can cost companies and individuals between $250 billion and $1 trillion each year.
The economic impact for individuals who are victims of white-collar crime is easy to see. In addition to losing money and assets, individuals may have to pay legal fees or lose income as they seek to recover the assets they lost to white-collar criminals.
If authorities prosecute white-collar crimes, they may use punishments such as forfeiture in addition to prison sentences to help repay some losses. If the prosecution is successful, the guilty party may have to compensate the people who they defrauded.
However, the legal process may take a long time, and full restitution is not a guarantee. It could take years and cost the government and individuals lots of money in legal fees before they get compensated.
Even in the case of misdemeanor white-collar crimes, which are not as severe as felony-level crimes, a company or business person may have to pay fines to authorities.
Because of the potential impact on their bottom line, businesses need to be aware of the possible implications of white-collar crimes, and they need to be mindful of business laws on both the federal and state level. Being aware of these laws could protect against some forms of white-collar crime.
Social Impact of White-Collar Crime
In addition to measuring the impact of white-collar crime in terms of dollars and cents, one can also look at the social impact of these crimes. The government needs to spend time and resources investigating white-collar crimes. These resources could be used for different issues, such as social programs, crime reduction efforts, or investigating violent crimes.
In many cases, the impact on society is more direct, such as when a criminal uses a charity to solicit donations fraudulently.
Even if they are not directly affected by white-collar crimes, people change their habits to protect against white-collar crime. For example, someone may be wary of giving their Social Security number, even if the business who is requesting it does so for legitimate purposes.
Finally, society, in general, seems to accept white-collar criminals more than street criminals. Sentences are comparatively light for white-collar criminals. They may get certain benefits, such as unsupervised probation and imprisonment in minimum-security facilities, even if they get found guilty of a crime.
The Cost of White-Collar Crime
But the impact goes beyond individuals. On average, white-collar crimes cost the United States $300 billion per year.
Compared to street crime, white-collar crime has a more significant financial impact on victims. A paper from Eastern Michigan University cited studies that showed that the average street crime cost $35, while white-collar crimes, because they involved more people or more substantial amounts of money, resulted in losses of more than $600,000.
In addition to losses, victims need to consider potential legal costs and the cost of not having access to assets or money while authorities investigate and prosecute a case.
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