Tell-tale signs your business may be target of white-collar crime

For white collar criminals, acknowledging that they are doing the wrong thing is preceded by several common justifications. Gadens explain how to be on the look-out so that it does not happen to your business.

Apr 07, 2021, updated Apr 07, 2021
White-collar criminals will have a long list of justifications for their actions (file image).

White-collar criminals will have a long list of justifications for their actions (file image).

‘The man who has a conscience suffers whilst acknowledging his sin. That is his punishment’ wrote Dostoevsky.

In our experience, understanding the common justifications for white collar crime offers an insight into how regulatory frameworks and investigations or remediation can be constructed to mitigate the opportunities for the damage to occur again.

The well-known ‘fraud triangle’ is based on: (1) opportunity; (2) incentive; and (3) rationalisation.

Focusing on the latter component, based on our experience in corporate investigations over the years, set out below are the main rationalisations we have been given by white collar criminals:

‘It was only temporary’:  here, the person plans or aspires to only engage in the conduct for a very short amount of time before it is detected. Traders covering their losses is a classic example.  Another one is solicitors who mis-use their trust account monies.

‘They had it coming’: the criminal considers their actions to be justified for some moral reason.  For example, the company has done something morally wrongful to the criminal or overlooked them in some way.  Expenses fraud is one example of this behaviour.

‘No one got hurt’: this rationalisation usually arises when the people with whom the criminal is dealing are remote to the perpetrator.  For example, the FX trader seeking to manipulate the market by undermining global benchmarks.

‘The law is wrong’: the wrongdoer thinks that the laws covering their activities do not make sense or are not applicable.  This excuse arises commonly with breaches of confidentiality.

‘I needed to do this’: the financial position of the perpetrator is so dire that they consider they need to undertake the action to survive.  For example, submitting fraudulent invoices to the Government in connection with a failing business.

‘Everyone is doing it’: the wrongful activities have become so widespread in the industry of business that they are now considered acceptable.  Bribes and ‘facilitation payments’ to move Government approvals along in certain parts of the world are a very common example here.

‘I am more important’:  ego is the enemy, as the saying goes.  Here the white-collar criminal considers themselves above the law, and able to operate outside the laws.  Examples include not seeking appropriate authorisations from other directors or executives for decisions.


What can be gleaned from understanding the mindset of the white-collar criminal based on our anecdotes?

One is that the development of risk systems to prevent this type of behaviour, whether it be bribery & corruption policies, the new Financial Accountability Regime or AML/CTF programs, need to take these driving factors into account.

Good compliance programs meet the law, great ones meet the law and these underlying drivers of poor behaviour.

The same applies when conducting white collar crime investigations, for example when conducting interviews of employees who have potentially done the wrong thing.

Without understanding the basic psychology at play, the interviewer may miss opportunities to delve into key areas to obtain evidence.

Borrowing from the great Russian again, ‘It takes something more than intelligence to act intelligently’ – in catching a white collar criminal, that something is often the melding of the intellectual with the ability to perceive the ‘why’.

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