How can criminology help us understand white collar crime?

What is White Collar Crime?

WCC can refer to a multitude of crime, namely: wage theft, fraud, bribery, Ponzi schemes, insider trading, embezzlement, money laundering and usually overlaps with corporate crime, which is a crime committed by a corporation or employees acting on behalf of the corporation. To illustrate this article, we will focus on the latter.

For instance, Politically Exposed Persons (PEPs) are influential figures with a public mandate. They may misuse their power and participate in corruption and financial crimes, making them white-collar criminals, due to their privileged situation.

Sutherland later published a book titled White Collar Crime, in which he studied the trials of 70 American companies who have been prosecuted for financial related crimes. He put a light on the fact that the bigger companies are usually less sanctioned than the smaller ones, and even if they do get sanctioned, they are not under criminal law but under civil law. At the time of the release, the book gets censored to avoid controversies.

Is “White-Collar Crime” crime?

A common saying is that the perfect crime is the one that you do not even know about. In one of his papers, Sutherland underscores the harmful impact of white-collar crimes on society. Despite this, even if legally reprehensible, public opinion remains divided on whether these offenses are considered serious.

While some advocate for severe penalties, others minimize their significance compared to street crimes. Unlike physically violent crimes, white-collar offenses often receive less media attention, with cases typically relegated to the economy section rather than crime or general news.

White Collar Crime: A victimless crime?

When it comes to reportability, it needs an identifiable victim, someone who will report it. For the Enron scandal, thousands of employees lost their jobs and saw their retirement savings disappear as Enron’s stock plummeted in value. but usually, WCC is said to be a “victimless crime”, which compromises its reportability. But is it really a victimless crime? Experts and scholars report that it involves indirect victimization with repercussions on health, environment, and education. It disrupts the economy and can have devastating effects on society, with loss of jobs and lower income. Moreover, prosecution of those crimes is quite difficult. White-collar criminals often use highly advanced technological methods to obscure their intricate activities.

Why do “good people” do dirty work?

While older theories would suggest that poverty is what mainly causes crime, why do higher-class individuals commit economic crime? Many theories can be rallied to explain.

• 1

  The identity: One of the popular theories in criminology is labeling theory. Developed by Howard Becker, this theory suggests that society will put the label of delinquents on a certain person or group, and later they will interiorize such label and adopt deviant behaviors. White-collar criminals do not consider themselves to be “real criminals”, because most people do not realize that they have been victims of such acts.

• 2

  A common tactic: Sykes and Matza’s neutralization theory is a tactic used among elite delinquent and white-collar criminals. The neutralization goes through five stages:

  1. Denial of responsability: "I had to do it because the company was at risk of bankruptcy"

  2. Denial of injury: "I was going to pay it back"

  3. Denial of victim: "It's their fault, if they didn't act like that, I wouldn't have had to do it"

  4. Condamnation of the condenmers: "Police is corrupt"

  5. Appeal to higher loyalties: "I did it for the good of my company"

  
  

  For instance, Nicolas Sarkozy, former French president, employed these strategies during his appearances on French news after being accused of corruption. His presence as a figure of privilege illustrates the blurred distinction between acceptable behavior and criminality. Similar dynamics were observed in the Enron scandal, where the company's CEOs denied any wrongdoing, often deflecting blame onto external factors. These tactics commonly shield the perpetrator from guilt, shifting responsibility onto larger forces beyond their control.

• 3

  Goals, needs, and means: The general strain theory, popularized by Robert Merton, suggests that societal goals can lead to tension and transgressive behaviors for those lacking legitimate means to achieve them, offering insights into motivations behind white-collar crime. Recent theories emphasize the insatiable nature of greed particularly within profit-maximizing companies, driving employees towards transgressive behaviors to meet organizational goals.
  

• 4

  A learned behavior: Sutherland's theory of differential association suggests that crime is a profession like any other and that individuals learn delinquent behavior through socialization. In the context of WCC, individuals may become deviant when their peers perceive committing offenses more positively than adhering to legal standards. As a result, some firms are fostering a culture of rule-breaking, which is acquired in the same manner as any other business practice.
  
  In this aspect, Enron had an extremely strong performance culture, which encourages employees to behave aggressively. This is illustrated by the creation of the Performance Review Commission (PRC), which fosters the notion of a delinquent work subculture. If an employee fails to meet the targets set by the company, he will be fired. To reach such a level, transgression becomes the most legitimate means of access.

• 5

  Organizational culture: Sellin's cultural conflict theory proposes that clashes between cultural norms and societal laws can lead to deviant behavior. This is evident in white-collar crime, where employees may internalize their organization's deviant values, leading to behavior that contradicts society’s standards. What may be considered acceptable conduct for them could be viewed as transgressive by others.
  
  At Enron, most brokers knew that their actions were illegal but did not report them to the legal authorities. Jeffrey Skilling, the ex-CEO, even urged them to continue bringing in millions.

"In our society, extreme wealth often confers tremendous power. So just as power tends to corrupt, so does excessive wealth."~ Jennifer Taub

How does white-collar crime impact financial institutions?

What are the White-Collar-Crime red flags?

Corporate crime red flags include financial irregularities, transparency deficiencies, insider trading, conflicts of interest, whistleblower complaints, regulatory breaches, unusual practices, high turnover rates, complex, and weak controls. Promptly addressing these is crucial to mitigate misconduct and uphold integrity and it is important to identify an effective model of employee rule adherence.

How to spot said red flags and mitigate risks?

Enhancing WCC surveillance requires advanced analysis, proactive monitoring, stronger controls, collaboration, training, whistleblower programs, audits, and refinement. These measures bolster detection and prevention. A risk-based approach is an appropriate strategy as it focuses surveillance on high-risk areas, aiding resource allocation, vulnerability reduction, and proactive management.


Furthermore, acknowledging the involvement of PEPs in facilitating white collar crimes emphasizes the necessity of enforcing rigorous regulatory standards and fostering international collaboration to address corruption, bribery, and money laundering worldwide. Achieving a fairer and more transparent society requires interdisciplinary cooperation and a thorough grasp of the intricacies of white-collar crime activities.

Moreover, this subject shows us how important it is for companies to implement a correct compliance culture to improve ethical standards.