How Does White-Collar Crime Affect the Economy & The Victims?
White-collar crime is traditionally understood as a non-violent crime committed by professionals in both the private and public sectors who exploit their positions of power for personal or strategic corporate gain. In the private sector, it would encompass cybercrime, health care fraud, Ponzi schemes, theft of trade secrets or misappropriation of intellectual property, mortgage fraud, bank fraud, insurance fraud, and money laundering. In the public sector, it would include bribery, extortion, bribery, federal program fraud, and theft of honest services, among other charges. In practice, there is often an overlap. Often these offenses impact not only the businesses, employers, consumers, voters, and constituents that are the direct victims but also the economy, vitality of the community, and society at large.
Insurance and mortgage fraud. Some of the more-readily described white collar crimes include insurance, bank, or mortgage fraud. That generally means an allegation of lying on applications for a mortgage or other loan, health insurance, property insurance, home-owners insurance, renter’s insurance and car insurance. When fraudulent claims are made and paid or the insurance company incurs expenses in proving the claim is fraudulent, those financial losses are passed on to consumers, and the price of insurance increases.
Ponzi and pyramid schemes. These schemes are fraudulent in that investors are promised a high rate of return with little risk. To the outside observer-victim, the scheme appears to work in that returns to early investors are paid handsomely. Unbeknownst to later investors, those early investors are receiving not proceeds from the con-artist’s legitimate investments or business ventures, but from the money being sent in by new investors. Eventually, the bottom falls out. Meanwhile, the scammer lives off the money of the investors or tries to stash it away. Those who thought they were investing lose all their money. At times, in the end, they barely have money to survive, devastating themselves and undermining confidence in the economic system in general.
Bribery and extortion. This covers a wide variety of concerns. When an official accepts a bribe or favor in return for official action, such as awarding a project to a particular contractor or granting a permit, license, or approval to a person or business otherwise ineligible for the permit, license, or approval, the public not only loses but is put at risk. This can result in injuries to consumers because of unsafe products or drugs or inadequate roads and bridges. The cost overruns are passed through to the public through higher taxes and raising the public debt. Other consequences include:
- Businesses make up for the loss by raising prices on goods and services.
- Businesses find it necessary to cut back on the number of employees, contributing to the unemployment rate.
- Businesses offer less pay and fewer benefits to employees. In turn, employees struggle financially and purchase fewer goods and services.
- Businesses that have been the victim of white-collar crime may suffer losses so severe they must declare bankruptcy. Their creditors do not get paid, their employees lose their jobs, and investors lose their money. Also subject to loss are retirement funds, a loss from which some never financially or emotionally recover.
Is your Company a Victim of Fraud, Bribery, Embezzlement, or Theft of Trade Secrets?