What is a White Collar Crime? A Full Guide

White-collar offenses are nonviolent crimes that involve concealment or deceit of some sort with a financial goal. The phrase white collar crime was originated by Edwin Sutherland, a criminologist that defined it as an offense that is committed by a person of high social status. Since then, it has been linked to organization misconduct and wealthy individuals that have perpetrated fraud against their clients. White-collar crimes can take various forms, each attracting a unique sentence depending on the judicial jurisdiction. Organizations may also consider a person’s white-collar crime history by looking into their criminal records before hiring them.

7 Different Types of White Collar Crime

1. Money Laundering

Money laundering is a crime where a person or group takes money obtained illegally and cleans it through a series of transactions. The goal is to make it appear as if the money was earned through legal channels. For example, a criminal organization may channel its illegal proceeds to a cash-heavy business such as a laundromat, restaurant, or car wash, and the returns from this business will be the cleaned money that can be validly used in the market.

2. Fraud

Fraud is an intentional deception that is committed by an individual or organization in an attempt to gain from them illegally. It is a misrepresentation of facts either by withholding important information or giving a false statement with the objective of gaining from it. Victims of these crimes are allowed by law to sue the perpetrators to have their funds recovered. Even in a case where there was no revenue loss, they can still sue to reestablish the rights of the victim.

3. Counterfeit

 Counterfeiting refers to the use of falsified documentation or falsely marketed products. The worst cases of counterfeiting involve money where criminal organizations make fake money and infuse them into the market. Similarly, they can create fake passports to facilitate the travel of fugitives and dangerous individuals. These crimes are typically investigated by federal agencies, and the penalty of conviction is quite severe in many cases.

4. Mortgage Fraud

Mortgage fraud refers to the falsification of loan documentation with the objective of illegally profiting from the loan process. It can result in prosecution if the offender is caught. Should the fraud be identified before the closing date, the lender may cancel the loan, which means the buyer cannot secure the property. In that case, the seller may sue the perpetrator, and the buyer will lose their deposit.

5. Identity Theft

Identity theft or fraud is when a person steals another’s personal information, like their social security, driver’s license, or credit card. The goal is to benefit from their identity as cover or financially. For example, criminals may steal a driving license or vehicle registration documents and commit crimes to throw off law enforcement personnel. Alternatively, a person’s credit information may be stolen, and purchases run up, resulting in financial or criminal liability. Unfortunately, once identities have been stolen, it is not easy to track down the perpetrator.

6. Cybercrime

Cybercrime refers to any criminal activity which either targets or utilizes computing devices and networks. The majority of these crimes are committed with a financial goal in mind and are done by offenders well-versed in coding, hacking, and malware. Cybercrimes may be done to extort governments, organizations, and individuals of money. For example, ransomware which is sent to an individual’s device, can effectively lock them out of using their computer. The hackers will then send a message indicating they will send a key to unlock it if they are given compensation.

7. Insider Trading

Insider trading is the purchasing or disposing of publicly traded stock by an individual that has confidential information concerning the same organization. It is designated illegal when the company information is still unavailable to the public during the trade. This information can be any which affects the stock price of the company.

Most Famous White Collar Crime Case

The Bernie Madoff case was the most famous fraud case in modern history. Bernie Madoff was one of the most prominent money managers before the housing crisis in 2007. Unfortunately, his business was essentially a Ponzi scheme rather than actual trading. A Ponzi scheme is a fraudulent type of investment where the new investors of a business endeavor are paid with money that was obtained from the initial investing parties. This arrangement may continue for some time, but it is not sustainable, and some investors may lose all of their input. In Madoff’s case, it was exposed during the extreme market situation that led to the 2008 recession. He ultimately defrauded investors of tens of billions of dollars. The Ponzi scheme resulted in $20 billion in cash losses, more than three times that of paper loss. He was eventually sentenced to 150 years in federal prison, and his case is typically referred to in most fraud or white-collar crime discussions.

How are White Collar Criminals Punished

The penalties for white-collar crimes depend on the offense which was committed. For some incidents, the offender may be sentenced to several years in prison, while in other cases, they would only incur a fine type of punishment from the authorities. It may be difficult to prosecute white-collar crimes because the alleged criminals involved have hidden their activities in deep and convoluted transactions that are hard to work out. They may also be hidden in tax havens that do not consider some of the activities illegal. Some tax holes also have confidentiality clauses for the clients, so the information may not be surrendered to the authorities as evidence. In cases where it is significant, the offender may be sentenced to several years

Conclusion

Though white-collar crime is not violent by nature, it can still devastate the victims of the offense just as much, if not to a higher degree. For example, the case involving Bernie Madoff led to billions of dollars in losses. Some investors lost their entire savings and have never recovered. However, white-collar offenses involve misrepresentation, extortion, fraud, and theft, often resulting in financial or non-financial losses. The victims of these crimes can file lawsuits against the offenders demanding compensation or their restoration of rights. Typically, the sentences issued by the courts for convicted white-collar offenders may vary from fines to several years in prison. Both criminal and arrest records should indicate if a person has been involved in white-collar crime.