“A fraudster does not have to fool everyone; he just needs to fool enough people to get his money.”
Dan Davies, “How to Get Away with Financial Fraud”
That’s the estimated amount lost annually in the United States to business crimes.
Or maybe it’s $426 Billion. Or $1.7 Trillion. The details get murky.
But let’s consider the low estimate. $300 billion is the equivalent of white collar criminals taking $37.50 from each and every human being on Earth, each and every year. $37.50 may not seem like much, but when you multiply it billions of times, it adds up.
Because of the nature of business crimes, the money is taken surreptitiously, right under the nose of the victims, without their even being aware that it’s happening. If and when the crime is eventually discovered, the criminal may be long gone, and the stolen money may be impossible to trace. It comes close to being the perfect crime.
It’s not even clear exactly what types of crime should be categorized as “white collar crime.” The original definition of white collar crime was “a crime committed by a person of respectability and high social status in the course of his occupation,” but today, there is considerable debate about how to define and classify white collar crime.
However, the FBI currently defines white collar crimes as “those illegal acts which are characterized by deceit, concealment, or violation of trust and which are not dependent upon the application or threat of physical force or violence. Individuals and organizations commit these acts to obtain money, property, or services; to avoid the payment or loss of money or services; or to secure personal or business advantage.”
Because the FBI is the main federal law enforcement agency that investigates white collar crime, that definition is a good place to start. According to the FBI, white collar crimes “are not violent, but they are not victimless. White-collar crimes can destroy a company, wipe out a person's life savings, cost investors billions of dollars, and erode the public's trust in institutions.”
The FBI is not the only federal agency that investigates white collar crimes; any federal agency can investigate crimes that fall within the agency’s regulatory scope. States, too, have their own enforcement authority to investigate and prosecute white collar crimes that violate state law.
In California, white collar crimes are investigated by the White Collar Investigation Team Program at the California Department of Justice.
The criminal acts that may be categorized as “white collar crimes” seem almost infinite in variety, and are often shockingly ingenious, limited only by the imagination, abilities, and sophistication of the criminals perpetrating these crimes. Nevertheless, some of the more frequently encountered crimes include:
BUSINESS AND INVESTMENT FRAUD
Business and Investment Fraud includes Securities and Commodities Fraud, which typically is a form of corporate fraud. Other variations of Business and Investment fraud include Ponzi Schemes, and Pyramid Schemes. The common thread in these schemes is that the victim is presented with a tempting but fraudulent investment opportunity.
Business and Investment Fraud can also target potential victims as one type of Telemarketing Fraud. Another type of Business and Investment Fraud that sometimes takes the form of an investment opportunity is Advance Fee Fraud, which requires the payment of a fee in advance of the promised (fraudulent) opportunity. Finally, Nigerian 419 Schemes, which promise to give the victims of the scam a large fee for helping to transfer money out of the scammer’s country, are offered as a “business opportunity” for the scam’s victims, which makes it another variant of Business and Investment Fraud.
Corporate fraud involves corporate insiders who use their positions to commit criminal acts, including the falsification of corporate financial information and self-dealing.
By falsifying corporate financial information, corporate insiders who engage in white collar crime make it possible to present false accounting records or to make fraudulent and deceitful misrepresentations about corporate financial conditions. This type of fraud enables the white collar criminal to defraud investors, potential buyers, and government tax agencies. Falsification of financial information can also enable fraudulent trades based on inflated profits or hidden losses, as well as hide illegal transactions from regulatory agencies.
Self-dealing by corporate insiders includes insider trading of securities, kickbacks, the misappropriation of corporate property for personal gain, and individual tax violations related to self-dealing.
The FBI defines embezzlement as “The unlawful misappropriation or misapplication by an offender to his/her own use or purpose of money, property, or some other thing of value entrusted to his/her care, custody, or control.”
Common types of embezzlement include Corporate Fraud and Financial Institution Fraud. Anybody who has access to funds that are not their personal funds can embezzle, from bank employees, to accounts clerks, to accountants, all the way up to corporate executives and company partners. In one case, an FBI agent was convicted of embezzling government funds while on undercover assignment.
The United States Treasury defines Money Laundering as “financial transactions in which criminals, including terrorist organizations, attempt to disguise the proceeds, sources or nature of their illicit activities. Money laundering facilitates a broad range of serious underlying criminal offenses and ultimately threatens the integrity of the financial system.”
The basic techniques of money laundering are simple: (1) “Placement” by the criminal of the proceeds of a crime into the financial system; (2) “Layering,” which involves moving the money away from its original source, through financial transactions which create a complex audit trail. These layers of transactions make it difficult-to-impossible to prove that the money is from the illicit proceeds of a crime; and (3) “Integration” of the proceeds of the crime back to the criminal, from what appear to be legitimate sources of funds.
While the basic method is simple in concept, the techniques themselves can be quite complex, and employ a variety of techniques, ranging from the tried-and-true technique of laundering of money through real estate, to cutting edge layering of illicit funds in cryptocurrency. Lest we be tempted to imagine that money launderers are all shadowy criminals lurking in hidden dens of crime, the white collar realities of the crime often suggest otherwise.
The breadth, depth, and scale of white collar crimes can seem almost limitless in variety and ingenuity, affecting individuals, businesses, and public institutions alike. While the shadowy international criminal networks that profit from fraud are often out of reach of their victims, white collar crimes can happen anywhere, at any time, in business with people and businesses that we know and trust.
While white collar crimes are always a criminal matter, subject to criminal investigation—and potentially prosecution—they can also sometimes surface as an issue in business disputes, with complex civil and criminal matters resulting from the allegations of fraud. In some cases, suspicions of fraud will uncover egregious abuses of trust, while in other cases, allegations of fraud may be unfounded.
Thus, it is vitally important for business owners, corporate directors and officers, investors, and consumers to understand and recognize the signs of financial fraud and white collar crime and their implications, so they will know what resources and options are available to them.
Representing Businesses, Corporate Officers, Corporate Directors, Shareholders, and Individuals in:
Business and Investment Fraud
Business Email Compromise
Real Estate Wire Fraud
Securities and Commodities Fraud
Tech Support Scams
NICHANI LAW FIRM
Nichani Law Firm is a boutique Silicon Valley business and commercial litigation law firm, providing legal representation with a commitment to exceptional service, high-caliber solutions, and a deep focus on Business and Commercial Litigation, and Bankruptcy and Creditor Rights. In every dispute, whether large or small, simple or complex, we will provide representation custom-tailored to meet your objectives. As your representative, we will zealously advocate your position, whether in an Alternative Dispute Resolution process, or at trial. Nichani Law Firm has successfully represented a variety of businesses throughout Silicon Valley and the Greater San Francisco Bay Area. We also serve as local counsel in Silicon Valley and the Greater San Francisco Bay Area for out-of-state attorneys and out-of-area companies, whether based in another region of California, another state, or another country—with business interests in Silicon Valley and the Greater San Francisco Bay Area.
For a consultation, contact Nichani Law Firm.