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Corporate Fraud. Any ‘Collar’ You Like!
- Jul 24, 2024
- Latest Journal
by Ian Ross
A case for asserting that the term ‘white-collar crime’ is out of date and confusing for executives, lawyers, and managers.
Fraud: we have ‘white collar’ ‘red collar’ ‘pink collar’ ...whatever next? ‘Tartan' collar? Outdated and unnecessary criminal labels appeal to a certain audience, and for conventional reasons the 'white' label collar hangs on to buzzword popularity. But the fraud management world is awakening; not because fraud is becoming more ‘sophisticated’ as we keep hearing. It is due to the welcomed dismantling of long held assumptions based on ‘office’ and socio-political stereotyping, telling us that a fraudster in a corporate setting is identified simply by ‘corporate class’ or position, or even gender. Little is included about fresh thinking about behavioural traits and those outcomes.
The Origins
Edward Sutherland pitched the term “white-collar crime” during a lecture in 1939 (Sutherland, 1940) to focus on the assertion that members of ‘privileged’ socioeconomic classes also commit crime. Since then, researchers have constantly discussed what might be included in and what might be excluded from this concept.
A Victim of His Own Success?
It would be remiss to criticise Sutherland’s work as his term rightly widened fraud offender typology from a societal class of offender to that of status or ‘rank’ and emphasised intellect and business opportunity aligning with the corporate position of the offender. The best explanation to remedy the confusion is that scholars have claimed that Sutherland’s work around the white-collar crime concept as ‘top-down’ or position orientated has been commandeered by corporates or misguided members of the judiciary who have caused conflation of fraud typologies. That fraud offenders of a certain corporate standing should – and do get, preferential treatment. Evidence of this exists by way of the Post Office scandal, with blatant criminality in the Post Office scandal with the Post Office Executive and it’s lawyers committing prima-facie offences of perjury and perverting the course of justice. Yet law enforcement and other regulatory authorities have done nothing, and made clear they will not do so, certainly not in the near term.
More pertinently, is legislation such as Deferred Prosecution Agreements (‘DPAs’). Fines and certain ‘corrective measures’ are imposed but which do not address individuals and are arguably tantamount to making deals with criminals at senior levels. Massive fraud and corruption effectively goes unpunished. One regulator claimed that DPAs are a ‘gateway to rehabilitation’ when in all truth DPA’s are arguably a charter for the corrupt.
The UK Economic Crime and Corporate Transparency Act (2023) for some strange reason does not apply to the public sector where again, massive amounts of fraud occur, especially in procurement and managers ‘skimming’ off public funds.
Of course, the term ‘white collar crime’ is still used commonly. Entire departments are titled by the term. But there is a damaging effect when dealing in stereotypes and/ or using simplified characterisation methods which are inimical to detecting and preventing fraud - especially internal fraud. Likewise, questions are raised about policies of dealing with frauds. According to certain protocols (not definitions of fraud) a case must be over a certain financial value, or are 'officially complex' only if the suspect works in a certain profession or industry, or holds a certain position. Beyond this, it is unclear how certain law enforcement agencies inform their set-up and define their meaning of 'complex' fraud. In the majority of cases, it is anything but.
The ‘collars’
"Red collar' crime is used to describe cases when violent crime follows a 'white collar' crime against the same victims .... (if murder is committed then one would have thought that the fraud would be part and parcel of the murder case evidence - not creating a pointless type-cast or new 'niche' category of fraud offender)
'Pink collar'? There has been little recognition of women committing such crimes, with media focus mainly on 'celebrity offenders' like Martha Stewart (who received 5 years' prison, and Elizabeth Holmes, the Theranos founder, also jailed) and what kinds of frauds are they involved in, and do their methods and experiences differ from those of men? The short answer, is no.
One study by Dr Janice Goldstraw-White raised the question, why is it so difficult for us to see women as potential fraudsters? There is no female ‘frilly cuff’ to match the male ‘white collar.' Well put indeed, because there is no notable difference in behavioural traits by females in contextual financial crimes, or their modus operandi.
Moreover, studies show characteristics of fraud offenders (age, situation, no previous convictions, et al) and the proportion of female fraudsters, but these predilections to providing studies-outcomes should not confuse the behavioural theories of fraud with the means of dealing with it.
Thus, those ‘experts’ who claim that gender-based definitives are also to be found in fraud offender profiling have contributed nothing other than conjecture. They have not demonstrated in the least anything more than the fact that both females and males commit fraud.
The management quandary
Bringing these points together, where does this leave today’s manager? Moreover, a finance manager? Managers should put less emphasis on the usual ‘type of fraudster’ banally describing the perpetrator or the position or appointment - and more on the crime itself to ensure corrective management measures are put in place to prevent it fraud reoccurring: the key failing when a company or organisation is repeatedly hit by fraud, from ‘the inside’ or externally. Added to managing an excellent investigations capability within the compliance policy.
Situational opportunities and settings for fraud when dealing with crime networks or single-cause offenders ought to focus on a victim-centric typology of fraud and how the (corporate) victim was attacked. This better demonstrates the variety of 'actors' and the authentic variables we need to know. Collaboration between co-offenders is not gender-specific - nor are fraud offenders always at the same level in an organisational structure.
And so ...
The reality is that fraud criminals usually commit their crimes in touch with or in-line with their everyday business activities. But beyond that, and horizontally, so to speak, there are the employees who operationally 'within' have extensive operational connections. For example, massive losses to fraud often go to insiders who are employed in technical positions in the organization. Likewise, by employees who act either under pressure from seniors, or are self-motivated for a range of reasons. Then, the age-old issue of 'trust' when the heuristics kick in: how such a wonderful trusted accountant or whoever has been here for 20 years and would never do such a thing’. But the convictions of the likes of Stephen Day (former NHS manager jailed in 2021). But the problem is not discussing ad infinitum. What happened, but ought to be “where were the internal controls?” “Where and when did the auditing plan fall apart?” “Why is taking 20 years to discover fraud under our own roof”? “How we do or don't actually manage this entity?” Losses to trust exploiters are often the worst of all!
To qualify the point further, accounts from fraudsters of their crimes often assert a kind of normality and general acceptability of the behaviour (‘business as usual’) or portray the offence as an aberration, not representative of his /her typical behaviour patterns. The perpetrator will try to show that no matter how the offence is eventually characterized, it is not indicative of his /her true character. This further removes the fallacy of 'collars' and how fraud offenders are mundanely classified.
Finally, it raises a question of why we incessantly seek to ‘make the facts fit’ into hierarchical or ‘top down’ or strategic management boxes. One reason why occupational fraud is the second highest reported form of fraud in the world - and getting worse!
Author
Professor Ian Ross PhD, MSc, Dip Forensic Psychol (Specialist), ACFS, FCMI, PGCE
Investigative Psychologist. Professor of International Law, Financial Crimes expert
Area of work: International
Tel: +34 (0)605 097 363
Email: ian@tartanforensic.com
Ian Ross is an internationally established financial crimes expert with 40 years of experience. Professor of international law and investigative psychologist providing forensic case reviews supporting the courts precisely addressing decision-making and complex evidence analysis in fraud, corruption and money laundering investigations. Supporting regulators, law enforcement, and equally, defence lawyers.
Ian founded Tartan Forensic LLC in 2016 and undertakes cases worldwide. He prepares and submits expert court reports in complex Proceeds of Crime hearings, He also provides expert opinion on International Fraud Prevention and anti-bribery matters and, provides forensic psychology investigative reviews in all jurisdictions.