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Necessity is not always the motive behind the commission of a crime. This idea evolved with the criminologist and sociologist Edwin H. Sutherland, in the year 1939, who popularized the term ‘White-collar Crime’ by defining such a crime as one ‘committed by a person of respectability and high social status in the course of his occupation’. The factors catalyzing such crimes in modern times are technological and scientific development, a large rank and file and small controlling elite, encouraging the growth of monopolies, the rise of a managerial class and intricate institutional mechanisms. These crimes are usually violations of trust, either ‘duplicities’ or ‘misrepresentations,’ placed in the person (or the corporation) by virtue of his occupational norms and high position in the society. Advancement in commerce and technology has invited unprecedented growth in one of the types of white-collar crimes, known as cybercrime. Cybercrimes are increasing because there is only a little risk of being caught or apprehended.
Sutherland’s study of White Collar Crime was prompted by the view that criminology had incorrectly focused on social and economic determinants of crime, such as family background and level of wealth. Sutherland was of a view that crime is committed at every level of society and by a person of widely divergent socio-economic backgrounds. In particular, according to Sutherland, crime is often committed by persons operating through large and powerful organizations. White-Collar Crime, as Sutherland concluded, has a greatly underestimated impact on our society.
Examples of White Collar Crime include embezzlement, securities fraud, tax evasion, Ponzi schemes, insider trading, cybercrime, racketing, identity theft, forgery, money laundering, misrepresentation through fraudulent advertisements, infringement of trademark copyright or intellectual property by the industrialist, hoarding, black – marketing, food adulteration, etc. White-Collar offences can be committed by individuals or corporations.
Defining White Collar Crime:
White-Collar Crime is difficult to define because it can be committed by anyone with money and apply to many different activities. Prof. Hugh Barlow on White-Collar crime was of the opinion that White Collar crime is not only committed by the people of high social status in their occupational capacity but also is committed by the people of lower strata.
Sutherland defines white-collar crime as: “a crime committed by a person of respectability and high social status in the course of his occupation”. He defines white-collar criminal as: “the white-collar criminal is defined as a person with high socio-economic status who violates the laws designed to regulate his occupational activities.” He excluded many crimes of the upper class, such as murder, adultery, and intoxication, because these are not customarily part of the occupation procedures. Likewise, he excluded con games operated by “wealthy members of the underworld, since they are not persons of respectability and high social status. The main deficiency in Sutherland’s definition is that it could not withstand the evolution of time. It is too broad and ambiguous to be considered the most universal definition of white-collar crime.
In 1970 Herbert Edelhertz, the chief of the fraud section of the Federal Department of Justice defined white-collar crime. He defined white-collar crime as “an illegal act or series of illegal acts committed by non-physical means and by concealment or guile to obtain money or property to avoid the payment or loss of money or property or to obtain business or personal advantage.” Edelhertz laid emphasis on the nature of offence rather than on the characteristics of the offender. The definition given by Edelhertz is democratic as the same crime could be committed by a bank clerk as well as the head of his institution.
In India, white-collar crimes were first discussed by the Santhanam Committee which was appointed by the government in 1962. This committee was appointed to review the problem of corruption and to make suggestions to ensure speedy trial in cases of bribery, corruption, and misconduct. In the report, the committee attached great importance to the emergence of the concept of white-collar crime.
Later on, the Law Commission of India in its twenty-ninth report on the proposal to include certain social and economic offences in the Indian Penal Code used the term white-collar crimes. The Commission did not go into the detail of the definition of white-collar crime and stated that “White-collar crime may be defined approximately as a crime committed by a person of respectability and high social status in the course of his occupation.” This definition has some ambiguity. The term ‘high social status’ as used in the definition also leads to the discrepancy, since the term is a relative one and therefore not specific. The ‘occupation’ term used in the definition leads to ambiguity as it does not categorize what occupation should come within its ambit. The word approximately means the definition is not exhaustive.
The National Crime Record Bureau of India in its glossary defines white-collar crime as including criminal breach of trust, cheating, counterfeiting, corruption, and all other organized\economic crimes.
National White Collar Crime Centre which is a non-profit organization of the United States defines white-collar job as: “Illegal or unethical acts that violate fiduciary responsibility or public trust, committed by an individual or organization, usually during the course of legitimate occupational activity, by persons of high or respectable social status for personal or organizational gain.”
Characteristics of White Collar Crime:
- White-collar crimes differ primarily from other types of crime in that they are non-violent offenses.
- They use deception to obtain money, property or some other advantage or to cover up other criminal activity.
- Both mens rea and intention in the crime are to obtain money, property or some other advantage or to cover up other criminal activity.
- In most white-collar crimes multiple actors are involved who conspire together to commit fraud.
- White-Collar offences can be committed by individuals or corporations.
- White-Collar crime is not only committed by the people of high social status in their occupational capacity but also is committed by the people of lower strata.
- It is an illegal act or series of illegal acts committed by non-physical means and by concealment or guile.
Causes for White Collar Crime:
Individuals have various degrees of tolerance toward conscientious and ethical behavior. Academic research shows that environmental signals and cues can nudge individuals to behave differently when faced with ethical choices. Most white-collar misbehaviors occur due to the perceived ambiguity in the environmental signals and cues. Work environments can elicit good or bad behavior out of individuals.
Greed:
The father of modern political philosophy, Machiavelli, strongly believed that men by nature are greedy. He said that a man can sooner and easily forget the death of his father than the loss of his inheritance. The same is true in the case of commission of white-collar crimes. Why will a man of high social status and importance, who is financially secure, commit such crimes if not out of greed?
Poorly designed job incentives:
When incentive programs are introduced hastily or without a thorough thought process, or not sufficient to suffice expectations of the employee, it may start to encourage the wrong behavior.
Easy, swift and prolong effect:
Technology has made it easier and swifter to inflict harm or cause loss to the other person. Also, the cost of such crimes is much more than other crimes like murder, robbery or burglary, and so the victim would take time to recover from it.
Management nonchalance towards ethics:
Expected managerial traits are dignity, respectfulness, helping others, compassion, serving others, justice, teamwork, and most importantly honesty. If management itself is not giving importance to honesty, then there is a possibility of wrong behavior. Many investment firms use expert networks to legitimize the use of inside information for stock trading. Such cues may lead an employee of these firms to breach securities laws.
Unethical behavior perceived as harmless:
Sometimes offender may think himself as omnipotent and he is invincible, untouchable, and hyper-capable. Similarly, the offender thinks as it is victimless crime and hence it is harmless. Excessive pride in success can lead to a feeling of invincibility and magnify the effects of decision-making biases.
Aggressive Goals / Motivational Blindness:
Aggressive goals are special characteristics of present merit-based culture but sometimes without any goal post. Sometimes the offenders are blinded by their motivation to achieve the goal and do the wrong behavior. They fail to acknowledge their failures.
Pilfering public or private entities:
Many times it is found that offenders take stealing from a large company or government alluring. They think there is a big pile of cash to steal from and no guilt of hurting “a person.” Or even pilfering from such large cash is unnoticeable.
Disregard for the law and a false belief that everyone misbehaves:
In such cases, offenders argue that there is no victim and the law is stupid. Similarly, their argument is that “I am not the only one.”
Lack of awareness:
The nature of white-collar crimes is different from the conventional nature of crimes. Most people are not aware of it and fail to understand that they are the worst victims of crime.
Lack of stringent laws:
Since most of these crimes are facilitated by the internet and digital methods of transfer payments, laws seem reluctant to pursue these cases as investigating and tracking becomes a difficult and complicated job. Why it becomes difficult to track it is because they are usually committed in the privacy of a home or office thereby providing no eyewitness for it.
Some White-Collar Crimes:
- Black Mail: The act of blackmailing someone may involve various actions by the perpetrator which could include the intimidation, embarrassment, loss, or an injury to the victim. For the matter to be considered a white-collar crime, the person initiating the illegal action usually must include someone in a position of power that generally involves a business or job-related matter.
- Money laundering: Money laundering involves filtering dirty money through various institutions to hide its origins. This can make the money ‘clean’ because its origins are untraceable. However, in reality, the funding comes from illegal sources. In this case the criminals use the form of businesses, banks, or other organizations to conceal the transfer and/or origins of illegally obtained money.
- Tax Evasion: This is when an entity evades paying their taxes by hiding, misconstruing, or lying about their revenue or some aspect of their business when paying their taxes.
- Wage Theft: This crime occurs when the employer refuses to pay wages or employee benefits that rightfully belong to their employee.
- Embezzlement: Embezzlement is the fraudulent taking of personal property by someone to whom it was entrusted. It is most often associated with the misappropriation of money. Embezzlement can occur regardless of whether the defendant keeps the personal property or transfers it to a third party.
- Ponzi Scheme: A Ponzi scheme is a type of fraud that creates a perfect environment to lure investors. It is a form of fraud in which belief in the success of a non-existent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors, in fact, capital distribution.
- Bribery: Bribery is a criminal act that offers a person product or cash in order to get them to do something in return. The object of bribery is something of value and meant to influence a person’s behavior.
- Insider Trading: Insider trading is malpractice where people trade company secrets or securities which they are not allowed to make public. This is when people who work in a corporation collude with investors, stock brokers, and others with a financial interest in a corporation to buy or sell shares before a company predicts a change in stock value. An example of this would be a CEO telling their friends to sell their shares because of a company announcement that will make the stock price drop. In other words, they used their insider knowledge to cheat.
- Racketeering: Racketeering means taking part in an illegal scheme. It could be obtaining a company via illegal activities, using a company to do illegal acts, or operating a company with illegally procured income.
- Cybercrime: Cybercrime incorporates a wide range of crimes involving a computer network and the use of a computer. Some examples include identity theft, privacy violation, stealing intellectual property online, and hacking into a computer network.
- Identity Theft: This is when someone steals the personal ids, passwords, social security number (Adhar/ PAN), banking information, passport, license, or other legal identifying information from another person to impersonate them
- Art Forgery: Forged artwork is a crime that involves the creation and selling of art that doesn’t belong to the credited owner.
- Match Fixing: In organized sports, fixing matches involves determining the outcome of a match to get the desired result. This is often committed by violating the rules, blackmail, or any other way to obtain monetary gain.
- Mail Fraud: This is when someone uses mailing communications or wire, radio, or television communications to mislead others in an attempt to take their money.
- Copyright Infringement: Copyright infringement happens when a copyrighted work is publicly displayed, distributed, or reproduced without asking for the owner’s permission.
- Credit Card Frauds: These frauds are committed when one person uses the credit card of another person unauthorizedly to obtain goods of value, he is said to have committed credit card fraud against the other person.
Methods of Curbing White Collar Crime:
- Strong ethics and corporate culture: Organizations should cultivate a culture of integrity, honesty, and good governance. Implementing a strong code of ethics and encouraging ethical behavior among employees can create a deterrent against white-collar crime.
- Effective internal controls: Organizations should establish robust internal control systems to detect and prevent fraudulent activities. This includes regular audits, segregation of duties, and a clear reporting structure. Adequate checks and balances can help identify irregularities early on.
- Employee education and training: Providing comprehensive training programs that cover ethical conduct, recognizing signs of fraudulent behavior, and understanding the legal consequences of white-collar crimes is essential. Educated employees are more likely to recognize and report questionable activities.
- Whistleblower protection: Encourage employees to report misconduct or suspicious activities by establishing a confidential reporting mechanism. Protecting whistleblowers from retaliation is crucial in maintaining a transparent environment.
- Strict enforcement of laws and regulations: Governments should enact strict legislation to punish white-collar criminals. Effective enforcement of existing laws, coupled with appropriate penalties, acts as a deterrent for potential offenders.
- Collaboration and information sharing: Encourage collaboration between law enforcement agencies, regulatory bodies, and businesses. Sharing information and intelligence can help identify patterns and trends related to white-collar crime, leading to better prevention and detection.
- Cybersecurity measures: With the rise of technology, protecting sensitive information and data from cybercriminals is vital. Organizations should invest in robust cybersecurity measures to safeguard against data breaches, identity theft, and other cybercrimes.
- Risk assessment and management: Conduct regular risk assessments to identify vulnerable areas within organizations. Implementing risk management strategies and controls can help minimize the opportunities for white-collar crime.
Prevention of white-collar crime requires a proactive approach from both organizations and regulatory bodies. By promoting a strong ethical foundation, implementing stringent controls, and fostering a culture of transparency, the risks associated with white-collar crime can be mitigated.
Difference Between White-Collar and Blue-Collar Crime:
| White-Collar Crime | Blue-Collar Crime |
| White-collar crimes are predominantly non-violent and are often called “paper crimes.” | Blue-collar crimes are crimes fuelled by emotions and passion. |
| They include embezzlement, forgery, fraud, etc. | They are calculated and are meant to injure or damage property or people. |
| White-collar crimes, on the other hand, are often done by someone in the higher social class and are well-paid. | Blue-collar crimes are often committed by individuals who live in poverty-stricken areas. |
| A white-collar crime requires financial power. | Blue collar crimes are crimes that don’t require access to large sums of money. |
| white collar crime can be equally as harmful and hurt entire groups of people. | blue collar crimes are more violent acts because they inflict bodily harm against another individual. |
| In White collar crime the damage is typically to victim’s resources/money and not physical | In blue collar crimes, damage is typically physical, and to a victim’s person |
In State of Gujarat v. Mohanlal Jitamalji Porwal, AIR 1987 SC 1321 case, Justice Thakker elucidated that one person can murder another person in the heat of the moment, but causing financial loss or say committing economic offences requires planning. It involves calculations and strategy making in order to derive personal profits.
Conclusion:
White-collar crime is present in all types of occupations, professions, industries, and companies. It varies based on styles and forms. White-collar crime encompasses the use of criminal activity to get monetary gain. Often happening among the upper societal class, this crime can be difficult to detect. The examples here can give you a general perspective of the most common white-collar cases.