White-collar crimes are non-violent offences committed by individuals or organisations for financial gain, according to a report filed on the subject by the Federal Investigation Agency’s (FIA) former director general Dr Sanaullah Abbasi.
Dr Abbasi, who has also served as the Khyber Pakhtunkhwa police’s inspector general, said that these crimes, including fraud, embezzlement and insider trading, cause widespread harm by undermining public trust and destabilising economies.
His report also explores the types, causes and societal impacts of white-collar crimes, supported by real-world case studies such as the Enron scandal, the FTX scandal, the Carillion collapse, the Wells Fargo fake accounts, the HSBC money laundering case, the Volkswagen emissions scandal, and Diddy’s investor fraud.
He said the term “white-collar crime” was first coined by sociologist Edwin Sutherland in 1939, referring to crimes committed by individuals in positions of trust and authority, typically within business or government contexts. These crimes are non-violent but financially damaging, often involving deceit, fraud, embezzlement and corruption.
White-collar crimes are distinct from blue-collar crimes because they typically involve financial manipulation rather than physical violence, and the perpetrators are often individuals of higher socio-economic status.
White-collar crimes are typically characterised by deceit, theft and violation of trust, often involving large sums of money or damage to reputations. They are often seen as victimless or less severe than violent crimes, despite their significant financial and social consequences.
Fraud is one of the most common white-collar crimes, involving deception for financial gain. A typical example is securities fraud, in which individuals manipulate or misrepresent financial information to deceive investors. This includes insider trading, in which those with access to non-public information about a company use it to make financial gains.
Abbasi said that this typically occurs in three stages: placement, in which illicit money is introduced into the financial system, such as by depositing large sums of cash into banks; layering, in which funds are moved between different accounts and jurisdictions to obscure their origins; and integration, in which the laundered money is used to purchase assets or invest in legitimate businesses.
For example, drug traffickers might use these methods to “clean” drug money, eventually purchasing real estate or luxury items. The Panama Papers leak in 2016 exposed how high-profile individuals and organisations used offshore accounts and shell companies in places like Panama to launder money and evade taxes.
The broader impact of money laundering is profound, as it enables organised crime, corruption and terrorism by providing financial support and undermining the legitimacy of the global financial system.
Abbasi said tax evasion is the illegal act of avoiding taxes by under-reporting income or inflating expenses. Individuals and businesses who engage in tax evasion often conceal their income, assets or financial transactions to reduce their tax liability.
A common example is under-reporting income, in which a person or business omits certain earnings from their tax returns to lower their taxable income. Offshore tax evasion is another form, in which wealthy individuals hide assets in foreign countries to avoid paying taxes to their home country.
Well-known cases, such as those involving Panama Papers and Swiss bank accounts, reveal how the rich and corporations exploit tax havens to avoid paying their fair share of taxes.
This has serious implications on government revenues, often shifting the tax burden to regular citizens and creating inequality within the tax system. Tax evasion also undermines public trust in the fairness of tax systems, ultimately leading to increased scrutiny and complex regulations.
Abbasi said insider trading involves trading stocks or securities based on non-public, material information. Those with access to confidential information about a company, such as executives, employees or even those close to them, may use that information for personal financial gain.
He said bribery and corruption involve offering, receiving or soliciting something of value to influence the actions of others. This crime can occur at any level, but is especially prevalent in government and corporate settings.
Kickbacks are a form of bribery, in which individuals receive payments for awarding business contracts or other benefits. For example, a government official might accept bribes from a contractor in exchange for securing a public works project.
Corruption can extend to higher levels, such as political leaders or top corporate executives engaging in bribery to secure favourable legislation, contracts or government benefits.
White-collar crimes are complex, multifactorial phenomena, and understanding their causes requires a deeper examination of the interrelated factors that influence individuals, organisations and societies.
Individuals in managerial or executive positions have access to vast resources, including company funds, sensitive data and high-level information. This access gives them the opportunity to manipulate financial records, embezzle money or steal proprietary data without immediate detection.
Weaknesses in organisational controls, such as ineffective internal auditing systems, lack of monitoring of financial transactions or insufficient checks on employee behaviour, make it easier for individuals to exploit opportunities for fraud. In organisations with ineffective oversight, there is often a lack of accountability, which emboldens individuals to engage in illegal activities.
Many white-collar criminals commit crimes due to personal financial pressures, such as significant debt, the desire for a luxurious lifestyle or the need to maintain social status. This financial strain can push individuals to engage in embezzlement, insider trading or other forms of fraud as a means of escaping their financial difficulties.
Employees or executives may feel intense pressure to meet corporate goals, such as sales targets, performance metrics or stock market expectations. In these environments, there may be a temptation to manipulate data, falsify reports or inflate profits to appear more successful than they actually are.
In some organisations, unethical behaviour is normalised or even encouraged. Corporate cultures that prioritise profits over ethical behaviour or where competition is fierce may implicitly condone unethical practices.
For example, if other colleagues or superiors are engaging in fraudulent activities, an individual may rationalise their own criminal behaviour by seeing it as acceptable or even expected.
Abbasi said that white-collar criminals often view their actions as less risky than other types of crime. Because white-collar crimes are typically non-violent and involve financial transactions, individuals may believe that the chances of getting caught are low.
They may also perceive the legal consequences to be less severe, as white-collar crime offenders are often given lighter sentences than those convicted of violent crimes.
Law enforcement agencies (LEAs) may lack the resources or expertise to investigate white-collar crimes thoroughly. For example, financial crimes like fraud or embezzlement require specialised knowledge of accounting, finance and forensic auditing.
Inadequate enforcement can embolden white-collar criminals, as the risks of being caught are perceived as low. The punishment for white-collar crime is often less severe than for violent crimes.
Abbasi said that the leniency of the legal system, combined with the complexity of proving white-collar crimes, may lead individuals to believe that they can commit such crimes with minimal risk of punishment. White-collar criminals can exploit legal loopholes or ambiguities in the law to carry out their crimes.
The advent of digital technology and the internet has made it easier for individuals to commit white-collar crimes, particularly in areas like cyber fraud, hacking, identity theft and financial manipulation.
The ability to manipulate digital financial records, access confidential data or engage in online scams has opened up new avenues for white-collar criminals. Technology also allows for greater anonymity, making it more difficult for LEAs to track down offenders.
In an increasingly globalised world, financial systems are interconnected across borders, which can make it easier for individuals to commit crimes like money laundering, tax evasion or international fraud.
The anonymity of global transactions and the lack of universal regulatory standards also make it harder for authorities to track and prosecute these crimes. Regulatory bodies that fail to enforce strict compliance standards contribute to this problem by creating opportunities for criminals to exploit gaps in oversight.
