White-Collar Crime: Definition, Types, Comparison

  • White-collar crimes are generally non-violent crimes committed for financial gain.
  • White-collar crimes often employ complicated tactics that either obscure operations entirely or make them appear legal.
  • The FBI estimates that white-collar crimes cost its victims $ 300 billion each year.

TO low-ball estimate of the impact of white-collar crime on its victims places damages at $ 300 billion annually, compared to the $ 16 billion that street crime costs. With technological advancements in the finance world, such as decentralized finance (DeFi) and the adoption of cryptocurrencyfighting white-collar crime becomes increasingly difficult.

What is white-collar crime?

White-collar crime describes crimes that relate to money. White-collar crimes are generally non-violent, committed for financial gain or to retain money already owned in the case of money laundering or tax evasion. These crimes are usually investigated and prosecuted on a federal level since most white-collar crime operations cross state lines.

These types of crimes are often committed with elaborate, sophisticated plans that are designed to avoid detection. “By the time a lot of white collar crimes are discovered by the prosecution, they’re years old,” says Rachel Fiseta false claims attorney and co-founder of Zweiback, Fiset & Coleman LLP.

This makes prosecution difficult because “you have to go back in time and identify the witnesses from multiple years back, many of whom have left the company. They’re difficult to find and memories fade,” Fiset says. Additionally, these criminal operations also have strategies to feign legality.

Certain contracts might be drawn up by a white-collar criminal that are legitimate to blur the line between their criminal and legal activity. “The prosecutor has to determine beyond a reasonable doubt, they have to show that it was for a criminal purpose, and not for a legitimate purpose,” Fiset says.

Oftentimes, the identification of white-collar criminal activity comes down to a whistleblower reporting the crime. “Somebody comes forward that was defrauded. Maybe it’s a disgruntled employee,” Fiset says.

White-collar crime and decentralized finance

The rise in DeFi and cryptocurrencies have triggered concerns among regulatory agencies. The FDIC published a letter in April of 2022 warning that “there are significant anti-money laundering / countering the financing of terrorism implications and concerns related to crypto assets.”

While whistleblowers are an integral part of identifying white-collar crime, the US Securities and Exchange Commission (SEC), a civil enforcement agency, can also identify criminal activity and refer it up to criminal enforcement agencies such as the US Attorney’s office. “So making it harder for the FEC to identify crimes or identify violations will definitely cause the prosecutors to be less able to identify [white-collar crime]”Fiset says.

Types of white-collar crime

White-collar crime describes a broad range of criminal activity, though some are more widely encompassing than others.

Fraud: Many white-collar crimes fall into a general category of fraud, since they rely on deceit for financial gain. This is where securities fall, crimes involving theft from investors such as Ponzi schemes or embezzlement. Tax evasion also falls under this category as perpetrators are defrauding the government.

Mail fraud and wire fraud are often seen tagged onto other white-collar criminal charges. These crimes involve using wire services or the mail system to transfer materials connected to fraudulent activities. Since many white-collar crimes use these services, these are frequent additions to court cases.

Money laundering: A term that is anecdotally connected to Al Capone’s use of laundromats to make his criminal proceeds appear legally obtained, money laundering involves obscuring the origins of money obtained through criminal activity, anything from drug money to bribery. Though a white-collar crime on its own, money laundering is almost always born of another crime. In other words, there is no money laundering if there is no dirty money to clean.

Money laundering strategies range from bouncing dirty money across various financial institutions to make the paper trail hard to follow, a practice known as layering. Money launderers can also layer their money by buying a business to funnel their money through. The dirty money funds the business, which generates taxable, legitimate income.

Identity theft: Although white-collar crimes often involve siphoning funds from investors, corporations, or even government agencies, they often target individuals to a devastating degree. In identity theft cases, the offender uses a victim’s personal information – usually a birthday and a Social Security number – to gain access to new lines of credit under the victim’s name. A new form of identity theft, known as synthetic identity theft, allows the perpetrator to create a new identity by combining bits and pieces from multiple people.

If a victim reports fraud within 60 to 90 days depending on which state they live in, they usually aren’t held responsible for activity on their credit report as a result of the theft.

Criminal corporate negligence: The intention of most white-collar criminals is financial gain. Yet, this instance of white-collar crime is unintentional. For corporate negligence to be considered a crime, it must involve gross negligence, when “there’s so much knowledge of violations of safety protocol that it resulted in foreseeable injury to somebody within your care,” says Fiset.

Individual managers can be held responsible for corporate negligence under the “Responsible Corporate Officer” (RCO) doctrine, which presumes that high-level corporate administrators are aware of a company’s operations, and their wrongdoings. Thus, even if someone working in a corporation has no actual knowledge of wrongdoings, they can be charged with criminal negligence.

White-collar crime vs blue-collar crime

The term white-collar crime is generally used to describe the type of people committing these crimes, often working in positions that require business attire – hence the name. However, Fiset says “there is no average criminal.” The people committing these crimes are as wide-ranging as the crimes themselves. That being said, certain white-collar crimes such as money laundering or tax evasion require knowledge about financial institutions and tax codes that not everyone possesses.

White-collar criminal prosecutions can also get complicated as prosecutors piece together a paper trail to prove guilt. “They’re pretty labor intensive,” Fiset says. Whereas, in a blue-collar case, she says “you’re not necessarily going through thousands and thousands of documents to put somebody on the scene.”

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