White-Collar Crime: Why Good People Do Bad Things

In this blog I will endeavour to look at an area that has received an elevated level of scrutiny of late, due in no small part to the recent, unprecedented economic environment we find ourselves in. There have been numerous reports in the media of opportunistic and downright callous behaviour by those within, and also those without, the criminal fraternity.

White-collar crime, as we know it today, came in to being in 1939 when the phrase was first coined by respected American Sociologist and Criminologist, Dr Edwin Sutherland. He defined it as “A crime committed by a person of respectability and high social status in the course of their occupation”. It has since been explained more simply as a non-violent crime for financial gain.

Clearly, instances of respectable people doing things they shouldn’t in the normal course of their business isn’t, and wasn’t then, anything new; Sutherland was just the first person to write about it in detail. In an earlier work, he suggested that “Criminal behaviour is a product of normal learning through social interaction” and this feeds interestingly in to the whole dilemma of nature vs. nurture, in that many people become a product of their environment. Don’t believe me? Just watch Eddie Murphy and Dan Aykroyd  in the motion picture Trading Places.

Challenging times often lead to challenging decisions and people being motivated either by a desire to avoid pain or to gain pleasure. But, the mere mention of such luminary names as Enron, WorldCom and Bernie Madoff paint a distorted picture of greed, possibly with some gall and stupidity mixed in for good measure. These high-profile cases don’t require further dissection here however where trust is involved, it can easily be broken, especially when the potential financial gains outweigh the possible repercussions. The law can be very slow to catch up. To many, it’s a risk worth taking. And if you get away with it once, well…

In an increasingly commercial and monetaristic world where everybody wants access to everything now, it can be easy to feel left behind, especially if one is a social climber. Often white-collar crime is perceived as victimless however, I am not certain that former shareholders in the above businesses, much less legal authorities, would agree, no doubt going on to state that whilst debts to society might have been repaid, their investments almost certainly were not.

COVID-19 Impact

Significant cases of white-collar crime are not just confined to the history books and it is worth taking a look at current incidents which are measurably increasing. Does a person who allegedly defrauds an overseas pharmaceutical company out of S$10m for the purchase of surgical masks and hand sanitisers really care about the potential losers in this deal? After the company transferred the requested payment to a local bank, the items were not delivered and the supplier became uncontactable. Now, this could be seen as a bad example as the individual in question was arrested and the majority of the funds were recovered but how often does that happen?

We have seen a sharp rise in similar reported cases of individuals looking to take advantage of the current situation, including those attempting to exploit the immediate requirement by hospitals and healthcare providers for personal protective equipment (PPE) and other essential supplies.

RDC, working with Moody’s Analytics, offers a free online Know Your Supplier (KYS) portal to help hospitals and other healthcare providers screen out vendors that have been associated with illegal or disreputable activities.

There is also evidence, albeit anecdotal, of a significant spike in malware attacks and phishing scams driven by the recent COVID-19 pandemic. Furthermore, there is an indication that at least some of this activity is occurring at a national i.e. state sponsored, level. Seemingly the turmoil created by this sudden explosion of viral infections is too good an opportunity for some to turn down. These would appear to be examples of bad (as opposed to good) people doing bad things, however if you are a furloughed individual with no immediate prospect of gainful employment, information teaching you how to set up online attacks and scams is readily available on the ‘dark web’. Or so I am reliably informed.

In another example, it has also been predicted that cases of fraudulent loan applications may emerge as some small businesses try to take advantage of the US government’s Paycheck Protection Program (PPP). Inflating payroll numbers in applications and utilising funds for reasons other than the scheme’s intended purpose are just a couple of examples of how this might occur.

Moody’s Analytics offers free online portal to help reduce potential backlog of PPP loan applications, with know your customer (KYC) functionality from RDC to help screen out fraudulent applicants.

Another reason why people commit white-collar crime is simply because they can. Desperation can lead to low risk people doing high risk things which may be completely out of character for them. I was asked by a wise and experienced, now long since retired, ex-colleague, what the difference between honesty and integrity was. In my naive and youthful state I blurted something out that didn’t make much sense and he suggested that an honest man who steals a loaf of bread to feed his family is dishonest (as he has taken something that doesn’t belong to him) however he has integrity (as he is now able to feed his family). We are not looking at people with integrity in my opinion, merely those who will exploit others, often when they find themselves in dire straits, purely for their own material gain.