The Punishment of White-Collar Crime in Different Countries

White-collar crime is a term that was first coined in 1939 by Edwin Sutherland, an American sociologist regarded as one of the most significant criminologists of the 20th century. It refers to a variety of crimes that are nonviolent in nature and primarily motivated by financial gain. These crimes are usually committed by business or government officials and can include an array of things like money laundering, commodities fraud, corporate fraud, band fraud and embezzlement, health care fraud, insurance fraud, and tax evasion. In general, the crimes are branded by deception, concealment or violation of trust.

White-collar crime is one of the FBI’s highest priorities, as the effects can be astounding. At a base level, these crimes can cause substantial losses to investors, but the effects can cause damage to the country’s economy as well. In the United States, white-collar crime costs the economy between 300 and 600 billion dollars a year (Stewart, 2015). Ponzi schemes, wherein companies pay clients not with profits, but with investments from future clients, can affect ordinary citizens that fall victim to them. Businesses effected by fraud can lose almost 5% of their revenue per year. This causes even more problems as the company must then make up for their losses by raising their costs. This can result in higher prices for consumers, pay cuts for employees, or even job cuts. If the investors and employees lose enough money to affect their ability to repay loans, it can become harder for everyone to obtain credit.

It is hard to pinpoint the exact effects of white-collar crime, because it so often goes unnoticed or unpunished. There is a common belief that people convicted of white-collar crime are given more leniency because of their station, but Edwin Sutherland accused law enforcement of overlooking crimes committed by the elite, and since then, judges have had to be stricter in these situations. Someone sentenced for a white-collar crime will often have a sentence as long or longer than that of someone convicted of a violent crime. White-collar criminals can typically lessen their liability or have charges dropped altogether though, because they tend to find out they are being investigated long before they are arrested. This allows them to employ the assistance of a criminal defense attorney to help their situation. In some cases, this attorney can talk to the prosecuting attorneys and work out a negotiation before the case even goes to trial.

While the crimes now termed “white-collar” have probably always existed in society, there weren’t always specific laws or systems in place to stop them or to punish offenders. The Racketeer Influence and Corrupt Organizations Act or RICO, was passed by Congress in the 70’s and 80’s to decrease mafia-related organized crime but was soon expanded to include white collar crimes as well. After the Enron scandal in the early 2000’s, Congress passed the Sarbanes-Oxley Act, or SOX to improve the accountability between corporations and their stakeholders. Western European nations also began instituting laws to limit corporate corruption, which lead to Eastern European countries following suit.

Even with other countries passing their own white-collar laws, international business continued to be difficult for businesses looking to keep a clean record. In some societies, the things we considered crimes were just a part of business. For example, Western Africa worked on a dash system, in which officials could work on tips, which were essentially what we would view as bribes. Differing opinions on what is considered corrupt resulted in some Western companies struggling to conduct business in other areas. The group known as Transparency International was created to help create a more unified idea of what is ethical in business. The group monitors corruption in different countries and makes sure the public is aware of it, encouraging the governments of those countries to institute their own restrictions so that their business won’t be hindered. Another part of the fight against international corruption is the UN Convention against Corruption which began in 2003. This is a multination treaty formed to identify and stop white-collar crime in the United Nations.

One of the countries that is party of this treaty is Pakistan. This means that Pakistan must, in accordance with the Convention, enact laws and policies to identify and prevent white-collar crime in the country. Pakistan had already created the National Accountability Bureau Ordinance of 1999 to set up a bureau to eliminate corruption and to hold those accused responsible. The Ehtesab Act of 1997 also catered to white-collar laws by attempting to remove corrupt practices from public offices and provide measures for prosecution. The National Accountability Bureau Ordinance removed the presumption of innocence from white-collar crime and placed the responsibility of proof of innocence on the defendant.

On a smaller scale, like in South Carolina, white-collar crime is less likely to be the grand scale scandal that you might find with bigger, nationwide or international businesses. We do still have our share of it, though. In 2015 there was the Matter of the State vs. Jonathan W. Brooks, in which Jonathan Brooks, an Aiken County investment advisor and broker-dealer, pleaded guilty to three felony counts of securities fraud and two felony counts of forgery. These charges stated that from 2010 to 2013, Brooks was making money from willful fraud, such as selling investments to fictional entities, diverting investor funds, and forging signatures for money transfers. Among other things, Brooks forged the signatures of Scott L. Schrader and Elizabeth Schrader to wire transfer around $80,000 from their fund and into an account for Compass Academy. He was sentenced to 14 years in prison followed by 5 years of probation and had to pay $6,403,321/07 in restitution (SEC, 2016, p. 2).

It seems that people still do not agree on how to punish offenders of these crimes. Sutherland’s accusation that law enforcement is too lenient with the elite has caused some to believe that we punish white-collar criminals too harshly, because judges fear being accused of going easy on them. Other countries, like Pakistan, have many people who believe their country actually is too lenient, with many white-collar criminals getting away with just paying a fine. Regardless of the degree of punishment, it seems white-collar crime is on the rise, especially with the advancements in technology that make it easier to commit fraudulent acts without a paper trail. While there are ways to limit the risks of white-collar crime, like a strong set of checks and balances in your business, no business or person is 100% safe.