Types of White Collar Crimes
Money Laundering and Tax Evasion Are Punishable by Federal Law
Jun 21, 2009
The sociologist Edwin Sutherland coined the term white collar crime in 1939. The underlying motive of these crimes is personal financial gain. Often originating within legitimate businesses such as banking, stock trading and investment/insurance companies, crimes of this nature are non-violent and can be perpetrated by one individual or several participants. The victims can also be just one person or a group of people like customers of a brokerage firm, a bank or those who put lots of money into an investment opportunity.
This article takes a closer look at some of these crimes that are investigated and prosecuted by the Federal Bureau of Investigation and the U.S. Department of Justice.
What is Money Laundering?
This is performed to make it look like illegally obtained funds from drug trafficking, corruption, gun smuggling or theft come from a legitimate source. The process has three steps.
- Placement – In the beginning the criminal inserts the money into a financial institution, usually in the form of cash deposits. This is the toughest part of the process because large amounts of cash can raise lots of eyebrows at a bank and they are required by law to report unusually large transactions.
- Layering – This is done to make the money hard to follow. It's deposited in many different accounts in countries around the world and the frequency of the withdrawals/deposits is often changed to throw the police off the track. Expensive items like cars, homes and diamonds are bought to make it even more difficult to determine exactly where the money came from in the first place.
- Integration – The money re-enters the mainstream economy and it appears as though it came from a legal business. For example, ordinary goods may be sold at a particular price but the invoice will value them much higher. The money obtained from that sale would be put into an account with the dirty money and the fake invoice would account for both the legal and illegal funds.
What is Embezzlement?
This is the act of wrongly appropriating funds or property that has been entrusted into the care of person A but which belongs to person B. This crime should not be confused with skimming, which is under-reporting income then pocketing the difference.
Some methods of embezzlement include the following:
- Creating phantom employees who are then paid with company checks.
- Creating a fake vendor account and supplying false bills to the company being embezzled so the checks that are paid appear to be perfectly legal.
- Taking out a loan for a business and not telling the owner about it. When it comes time for the loan to be paid back the embezzler will have already disappeared.
Red flags that would arouse suspicion would include unexplained gaps in accounting records, an unusual spike in business with a particular customer and when an employee is suddenly able to afford luxurious goods on a fixed salary.
Tax Evasion
Filing inaccurate IRS returns, not reporting income on tax returns or not filing an income tax return at all can put somebody in some pretty hot water if he/she is randomly audited. Another form of this type of crime is an abusive trust scheme, the intention of which is to transfer money into another's possession but fails to do so. A complex ladder system results in which one transfer after another is made without the owner ever losing control of the money. The transfers negate the taxes on the individual's income.
Business tax evasion occurs in a variety of ways. Employers can file false tax returns or lease employment to a second company, which can be used to hide income. The consequences of tax evasion could be anything from paying fines, asset forfeiture, disgorgement or imprisonment.
Some recent high profile white collar cases investigated by the FBI have included the Enron scandal, Qwest Communications and Riggs Bank.
Sources:
- fbi.gov
- National White Collar Crime Centre
- crimereport.org
