White collar crimes are essentially crimes with a non violent nature which is carried out purely for financial gain by employing moral character vices such as deceit, concealment, and violation of trust among others. One common feature of criminals in this category is the fact that they usually occupy positions which gives them a certain level of power and prestige. The term was invented and used to describe these kinds of crimes by Edwin Sutherland, and before this time, the persons in this category were seen to be immaculate and unable to commit any crime. Despite the fact that these crimes are non-violent, it doesn’t reduce their impact on the society and on the individual. In the United States, White collar crimes have been said to have cost the government at least, a whopping $300 Billion on a yearly basis. This seemingly non-victimous crime is not victimless, especially when the evils of ponzi-schemes and troubled mortgage securities have been done to citizens of the United States.
Due to the advancement in technology, White-Collar crimes have witnessed an unfortunate rise leading to more and more victims. Some foremost examples of white collar crimes include: fraud, embezzlement, money laundering amongst others. We will be taking a cursory look at these white collar crimes.
Types of White Collar Crimes
There are numerous types of White Collar crimes, however this article would be focusing on the major kinds that permeate the heart of the United States. From the FBI information, the following are examples of White Collar Crimes that should be taken notice of:
Corporate Fraud: The FBI has regarded this as one of the most disturbing white collar criminal activity, this is majorly because this activity is not only detrimental to investors in the United states, it carries in it the capacity to extensively damage the economy of the United States. The FBI has been given the front role in leading the charge against Corporate fraud, and in doing so, they have kept their attention steadfastly on accounting schemes, self-dealing by corporate executives, and obstruction of justice, especially schemes that have been created to manipulate the investor into investing without the true knowledge of the financial status of the corporation through fictitious performance indicators. The following activities are give attention under this category:
Falsification of financial information: where there is the act of making false accounting entries and a misrepresentation of the true financial state of the company, or the introduction of false trades created to tell a different story of the profit and loss situation as well transactions that are meant to escape the supervision of regulatory agencies.
Self Dealing by corporate insiders: These include trades that are conducted by persons with information that are non-public and that are material, or the inappropriate use of corporate property for material and physical gain and individual violation of taxes as it relates to self-dealing.
Fraud in connection with an otherwise legitimately operated mutual hedge fund: these are the corporate frauds activities that involve: Late trading, falsifying net asset values, particular market timing schemes.
In addition, any act considered to be an obstructive act in hiding any of the above activities especially when it relates to inquiries by regulatory and law enforcement bodies may attract the attention of the FBI and such act may be regarded as a white collar criminal activity.
To attack this issue of corporate fraud, the FBI has created working relationships with other agencies such as SEC, CFTC, labor department, among others.
This act is used by white collar criminals to hide their funds and present them as legitimate earnings. Criminals use this method to conceal and stowaway their wealth, they also through this means avoid the payment of taxes, increase their profitability and fund their criminal actions all the while avoiding prosecution. This seemingly unharmful activity has the capacity to destabilize financial institutions and take the rug of the feet of the integrity of a country’s financial systems, it could very well reduce the inflow of foreign investments. The FBI is aware of this and they have placed priority on targeting the professionals in these illicit activities, the gatekeepers, and the institutions who are willing participants. Persons involved in this act commit crimes ranging from financial crimes all the way to human trafficking and even terrorism, and these funds are laundered through businesses such as international trade, precious metals, real estate, cryptocurrencies amongst others. Money laundering requires three steps namely:
In a bellicose approach, the FBI has joined forces with both local and international law enforcement agencies as well as financial institutions to detect, deter, and unravel the sophistication that goes into this activity.
Securities and Commodities Fraud
There has been a significant rise in the amount of involvement and investments in Securities in the United States, especially due to the integration of the global capital market. However, as is usual this rise has been accompanied by an increase in illicit activities within this sphere by specialized white-collar criminals. Some of the prominent securities fraud include:
Investment Fraud: This category often involves the sale of financial instruments however such sales are either illegal or non-existent. They make the offer so enticing, for example, they portray them as no risk or low risk investment with a very high and promising returns which are consistent despite the market changes. These securities are often unregistered, however they are able to bypass this by utilizing the virtue of trust to carry out their wicked activities. Investors should beware of such promising investments that do not portend any risk for the investor. Some subgroups of this category include investments such as: ponzi schemes, pyramid schemes, advance fee fraud and prime bank investing.
Promissory Note Fraud: Under this category, the fraudsters issue short term debt instruments, through unknown and unregistered companies promising high yield rate and little risk. This may be an attempt to escape scrutiny, however investors should take note that promissory note is always required to be registered in the state where it is being issued and with the SEC.
Commodities Fraud: This involves the sale of raw materials and commodities that are usually placed and sold on the exchange. The difference is that this sale is illegal and sometimes a farce, however buyers are lured in using the tactics pressure and presenting false claims, often creating fake reviews of past sales. The major type of commodities commonly used to perpetuate this fraud are Forex and precious stones.
Broker Embezzlement: In these situations the brokers themselves steal from their client by creating and forging documents purported to emanate from their clients, editing account statements and other activities that are in gross violation of their fiduciary duties to their clients.
Market Manipulation: Fraudsters use this method to enrich themselves by creating an untrue but seemingly increase in the price of the penny stocks so that investors may buy and then thereafter when the prices have gone higher, the shares would be sold at ridiculous prices bringing in huge profits but the investors would then be made to bear the losses.
How to Avoid Falling a Victim of White Collar Crimes
It goes without saying that to escape being a victim of a white collar crime, investors are advised to conduct due diligence before making any investment, to be careful about who they give out their information to, to report any suspicious activity, and to not make any dealings with unregistered corporations. More importantly, the investor should beware of investments that promise high returns with low risk