The FBI defines white-collar crimes as “characterized by deceit, concealment or violation of trust and are not dependent on the application or threat of physical force of violence. The motivation behind these crimes is financial.” Essentially, white-collar crime is any non-violent crime committed for the purpose of financial gain.
“These are not victimless crimes,” wrote the FBI. In fact, many individuals have been financially destroyed by white-collar crime, losing their life savings, their companies and their homes.
The term “white-collar crime” came from sociologist Edwin Sutherland in 1949, who defined white-collar crime as “crime committed by a person of respectability and high social status in the course of his occupation.” For this reason, white-collar crime is typically associated with the very wealthy and influential — in contrast to the “blue-collar” worker.
3 Types of White-Collar Crime
There are numerous categories and types of white-collar crime, some more publicized in the media than others.
1. Corporate Fraud
Corporate fraud is one of the FBI’s “highest criminal priorities,” not only because it creates financial loss for investors, but also because it can damage the U.S. economy. The Bureau focuses primarily on cases involving accounting schemes, “self-dealing by corporate executives,” and obstruction of justice. The types of investigations that the FBI focuses on include the following:
- Falsification of financial information
- Self-dealing by corporate insiders (this includes insider trading, kickbacks, misuse of corporate property for personal gain, and tax violations)
- Fraud in connections with a legitimately operated mutual hedge fund
To investigate corporate fraud, the FBI works closely with the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Industry Regulatory Authority, the Internal Revenue Service (IRS), the Department of Labor, the Federal Energy Regulatory Commission, and the U.S. Postal Inspection Service.
2. Money Laundering
Money laundering is the act of concealing illegal profits and making them appear to come from legitimate businesses. Through money laundering, criminals can accumulate and hide wealth and further fund illegal enterprises.
To put it simply, the FBI wrote that money laundering “can be defined … as turning ‘dirty’ money into ‘clean’ money.” This type of white-collar crime, said the FBI, “can undermine the integrity and stability of financial institutions and systems, discourage foreign investment, and distort international capital flows.”
Some avenues of money laundering crimes include health care fraud, human trafficking, wire fraud, Ponzi schemes, narcotics trafficking, and even terrorism. Criminals sometimes launder their illegal money through mediums like financial institutions, international trade, precious metals, commercial real estate and more.
3. Securities and Commodities Fraud
In recent years, there has been a rise in Americans choosing to invest in the U.S. securities and commodities market, which includes brokerage accounts, college savings plans, and retirement accounts. This rise in investment naturally leads to a rise in fraud within these markets, according to the FBI. The most common types of securities and commodities frauds are investment fraud, promissory note fraud, commodities fraud, broker embezzlement and market manipulation.
Investment fraud includes things like Ponzi schemes, pyramid schemes, prime bank investment fraud/trading program fraud, and advance fee fraud. Generally, investment fraud, according to the FBI, is “characterized by offers of low- or no-risk investments, guaranteed returns, overly-consistent returns, complex strategies, or unregistered securities.”
A promissory note is a signed document with the promise to pay a specific amount of money to a specified person by a specified date. Promissory note fraud, then, is a short-term debt strategy “issued by little-known or non-existent companies,” according to the FBI. These often-fake companies will promise a high rate of return with little to no risk.
Commodities fraud, as defined by the FBI, is the “illegal sale or purported sale of raw materials or semi-finished goods that are relatively uniform in nature and are sold on an exchange.” Some examples of these goods are gold, pork bellies, orange juice and coffee.
Broker embezzlement is an unauthorized action by a broker to steal from clients. Brokers do this through forged or doctored documents and account statements, or unauthorized trading or funds transfer.
Finally, market manipulation is defined by the FBI as “the manipulation of lower-volume stocks on small over-the-counter markets.” The goal of market manipulation is to inflate the price of penny stocks so that investors involved in the scheme can sell their shares at a large profit. This is more commonly known as a “pump and dump” stock scheme, in which the schemers “pump” up the stocks by tricking innocent investors to buy in and then “dump” their shares leaving the innocent investors in a bad financial situation.