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The Many Different Types of White Collar Crime: An Overview

What are the Different Types of White Collar Crime?

White-collar crime was a term that appeared in 1939 that describes financially motivated crimes and characterized as deceitful. Essentially, white-collar crimes have to do with the illegal act of retaining or gaining money in deceitful and fraudulent ways. Depending on the severity, these money-motivated crimes can land people in prison from anywhere between a few months to over one hundred years. The Federal Bureau of Investigation (FBI) monitors and tracks down high-profile white-collared criminals to prevent major damage to the U.S. economy and financial institutions. Have you ever wondered though, what are the different types of white collar crimes? 

To answer that question in short, there’s a lot. Take a look below at the many different types of white-collar crimes someone can be charged with for trying to make a buck to billions through scams and fraudulence.

  • Money laundering
  • Tax evasion
  • Bankruptcy fraud
  • Embezzlement
  • Corporate fraud
  • Phone and telemarketing fraud
  • Counterfeiting
  • Bribery
  • Insurance fraud
  • Government fraud
  • Healthcare fraud
  • Securities fraud
  • Public corruption
  • Intellectual property theft/piracy
  • Insider trading
  • Mail fraud
  • Antitrust violations
  • Credit card fraud

A portion of these crimes are highly prioritized by the FBI as they could negatively affect the financial systems of the nation and potentially cause the U.S. economy to be gravely impacted. Let’s take a closer look at some of the most common types of white-collar crimes and how someone can find themselves serving time for trying to make a profit off of illegal proceeds.

Related: Why is Cybercrime Law Important?

Corporate Fraud

In terms of the types of white collar crime, this is at the top of the list for the FBI. Corporate fraud entails the potential to do severe damage to investors and the U.S. economy by causing significant losses to investors. The reason the FBI pursues a majority of corporate fraud crimes is because this white-collar crime could cost people or corporations hundreds of thousands to billions of dollars. Corporate fraud crimes include various things such as manipulating financial data and share prices. 

Consisting of complex schemes, corporate fraud is difficult to track down and much of the money that is gained from the company or persons committing fraud cannot be recovered due to the intricacy of the scheme. The Enron scandal was one of the most infamous corporate fraud schemes in history. The FBI created an entire task force to investigate the unique matter involving accounting schemes and asset overvaluation with thousands of boxes kept in evidence and over 100 million dollars seized. The Enron scandal is one of the best examples of how corporate fraud could have a severe impact on the financial systems of the U.S. and can be a death wish for corporations.

Related: 19 Different Types of Business Fraud

Money Laundering

Money laundering is a white-collar crime in which criminals take illegal profits and disguise and filter proceeds in order to make them seem like they are from a legitimate source. In simple terms, if you’ve ever heard of the phrase ‘dirty money’ this refers to money that is not legally obtained and the goal of a money launderer is to make the money ‘clean’ or legal through a complex process of financial transactions. Some examples of crime that involve money laundering include:

  • Narcotics trafficking
  • Human trafficking
  • Health care fraud
  • Terrorist funding
  • International and public corruption
  • Complex financial crimes

Possible effects of money laundering include the distortion of international capital flows and discouraging foreign investments. In order to launder money, perpetrators usually have a business or company such as in real estate, international trade, or precious metals to disguise their illegal proceeds and must go through a 3-step process in order to make it seem legitimate. 

The first step is called ‘placement’. Placement refers to entering the illegal funds into the financial system. The second step is ‘layering’ which is the separation of the funds from its original source to create a complicated trail of financial transactions that cannot be followed easily. The last step is called ‘integration’. Integration returns the illegal proceeds to the criminal through seemingly legitimate sources so they don’t get caught using dirty money. In 1970, the Bank Secrecy Act was created as one of the first steps taken in order to identify and record the volume and movement of currency and monetary instruments. Sixteen years later, the Money Laundering Control Act of 1986 would establish money laundering as a federal crime.

Related: Why Do Criminals Commit Crimes?

Phone and Telemarketing Fraud

Phone and telemarketing fraud is a very common scam that targets millions of people annually. This crime refers to schemes where a criminal contacts victims via telephone and attempts to steal sensitive information, such as one’s identity or credit card information. Many of these schemes contact vulnerable individuals, such as the elderly or the poor, to trick them into giving them money or information for financial gains. 

Common telemarketing schemes involve criminals identifying themselves as a legitimate business seeking personal information. A common example of this, especially during tax time, is criminals will pose as the IRS in an attempt to get the victim to release sensitive information such as their social security number to commit tax-related identity theft. The IRS provides a taxpayer guide to identity theft to help individuals who may suspect that they are being targeted by a fraudulent scheme. This is labeled as a white-collar crime because it involves criminals being deceitful and committing fraud to make money.

Securities and Commodities Fraud

This type of white-collar crime is committed by falsifying information for financial gain. There are different types of securities and commodities fraud, such as investment fraud, Ponzi schemes, pyramid schemes, prime bank investment fraud, and trading program fraud. These crimes, especially in Ponzi and pyramid schemes, typically involve the recruitment of customers or clients that need to invest money into a business or corporation and such payment is then used to pay already existing investors.

One of the most notorious securities and commodities fraud cases was committed by Charles Ponzi, who was a conman that made upwards of $200,000 a day through a mail coupon investment scam in the 1920’s. When new investors stop coming in, these types of schemes fall apart because of the lack of money flowing into the company. Many securities and commodities fraud crimes include a ‘low-risk high-reward’ strategy to entice clients into investing with companies that are profiting off of illegal proceeds.

Tax Evasion

Tax Evasion - Types of White Collar Crime

Tax evasion is a white-collar crime where an individual or company misrepresents their income to the Internal Revenue Service (IRS) for financial gain. To put it simply, tax evasion is illegally misrepresenting information to avoid paying taxes or to get a higher tax return. This includes actions such as willfully concealing sources of income or purposefully making altered entries on tax forms. The reason tax evasion is a white-collar crime is because it is defrauding money from the government for the financial gain of a company or individual.

The IRS provides a tax crimes handbook that states the two different kinds of tax evasion. In section 7201 of the handbook, one offense of tax evasion is the willful attempt to evade or defeat the assessment of a tax and the other being the willful attempt to evade or defeat the payment of taxes. Perpetrators are heavily fined and have the potential to face years of jail time depending on the severity of the crime.

Public Corruption

Along with Corporate Fraud, Public Corruption is at the top of the list for FBI’s most prioritized criminal investigations. Public corruption crimes are of high importance because it is a severe threat to national security; so important that it costs the public and the United States government billions annually. This white-collar crime deals largely with unlawful actions of local, state, and federal officials.

Public corruption can be seen in various forms such as election fraud, environmental crime, and matters that concern programs funded by the government and federal procurement. The International Corruption Unit (ICU) was created by the FBI to manage matters that relate to public corruption. In short, The FBI protects the public and the nation’s government through a number of programs that monitor and combat illegal or fraudulent actions that are made against the United States.

Here is a list of 3 infamous white-collar crimes committed that made major headlines:

  • Bernie Madoff: A conman who ran a Ponzi scheme that cost thousands of investors billions of dollars
  • Tyco International: A large electronic component corporation that committed fraud and gained millions in illegal proceeds.
  • InStock Trading Scandal: Involved individuals, including the famous Martha Stewart, selling large amounts of the company’s stock just a day prior to the FDA disapproving of a cancer drug.

Final Thoughts – Types of White Collar Crime

‘White-collar’ refers to workers in professional office settings such as government officials, businesses, and corporations. The term was coined by American writer Upton Sinclair because businessmen in the 1930’s were usually required to wear white-collared shirts to their jobs. The term still lives on to this day and due to the nature of businesses and corporations handling large sums of money, white-collar crimes are marked high on the FBI’s radar for criminal investigations in order to protect the public’s monetary assets, the U.S. economy, and national security.

Sources:

Arthur, A. (2008, February 13). Upton Sinclair. The New York Times. Retrieved January 21, 2022, from https://archive.nytimes.com/www.nytimes.com/ref/timestopics/topics_uptonsinclair.html?scp=1&sq=the%2520jungle&st=cse 

Cornell Law School. (n.d.). Phone and Telemarketing Fraud. Legal Information Institute. Retrieved January 21, 2022, from https://www.law.cornell.edu/wex/phone_and_telemarketing_fraud

Cornell Law School. (n.d.). Tax Evasion. Legal Information Institute. Retrieved January 21, 2022, from https://www.law.cornell.edu/wex/tax_evasion

Cronin, E. F. (2009). Tax Crimes Handbook. Internal Revenue Service. Retrieved January 21, 2022, from https://www.irs.gov/pub/irs-utl/tax_crimes_handbook.pdf 

FBI. (2016, May 18). Enron. FBI. Retrieved January 21, 2022, from https://www.fbi.gov/history/famous-cases/enron 

FBI. (2016, May 3). Public Corruption. FBI. Retrieved January 21, 2022, from https://www.fbi.gov/investigate/public-corruption 

FBI. (2016, May 3). White-Collar Crime. FBI. Retrieved January 21, 2022, from https://www.fbi.gov/investigate/white-collar-crime 

5 Most Common White Collar Crimes. Northcentral University. (2018, October 22). Retrieved January 21, 2022, from https://www.ncu.edu/blog/5-most-common-white-collar-crimes#gref 

Taxpayer Guide to Identity Theft. Internal Revenue Service. (n.d.). Retrieved January 21, 2022, from https://www.irs.gov/newsroom/taxpayer-guide-to-identity-theft

U.S. Treasury FinCEN. (n.d.). History of Anti-Money Laundering Laws. Financial Crimes Enforcement Network. Retrieved January 21, 2022, from https://www.fincen.gov/history-anti-money-laundering-laws 

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