White collar crime prosecution has become a focus on many law enforcement agencies recently, especially since the recession and housing market collapse highlighted how pervasive and damaging this problem can be. White collar crime refers to any type of nonviolent and financially motivated crime, often committed by government and business professionals. These crimes can have a widespread impact, affecting more than just the perpetrators. Here’s a look at how much further the damage of white-collar crimes can spread.
Higher Prices for Consumers
When a business suffers fraud of any kind, it makes up for this loss by increasing costs. This means higher prices for consumers. Consumers may pay higher prices in many ways, including higher government taxes, consumer goods prices, and insurance costs.
The FBI estimates that property crimes — including burglary, arson, car theft, and larceny theft, result in $14 billion in loses each year. White collar crime, on the other hand, costs between $300 and $600 billion per year, according to the American Association of Certified Fraud Examiners and the FBI.
Because white collar crime can affect everything from security and commodities to insurance, the impact on society and consumers is great. Financial fraud is responsible for higher insurance premiums and substantial law enforcement and prosecution costs across the country.
Financial Crimes Can Devastate a Business
All it takes is a single bad employee or associate to devastate a business. Business owners can struggle to overcome a single instance of white collar crime and face loss of profits, potential legal issues and fines, as well as a destroyed reputation.
Criminals don’t just target large corporations, small businesses can be targeted and even brought under. Even the most profitable businesses have been brought down due to a reckless employee or financial advisor.
Investors Are Affected by White Collar Crime
Sometimes investors are targeted directly for white collar crime. The most common form of this is high yield investment fraud, which advertises a low-risk investment with guaranteed high returns. The Ponzi scheme and Pyramid scheme are two common examples of investor fraud, but other examples include commodities fraud, hedge fund fraud, broker embezzlement, late-day trading, and foreign exchange fraud. At the end of 2008, the FBI was investigating more than 1,200 cases of securities and commodities fraud, with 296 recorded convictions.
Investors are also affected by white collar crime in a broader sense. Financial crimes can cause investors to lose confidence in the market or specific sectors. Investors who back companies may find themselves unable to pay off loans. Institutional investors can be successful after working with a financial fraud attorney and seeking prosecution, but small investors are also hurt by crime and may not have the same advantage.
It’s difficult to quantify the many ways in which consumers, business owners, and investors are impacted by white collar crime but one thing is certain: white collar crime isn’t victimless. Everyone suffers when criminals commit financial crimes against businesses and the government.
Author: Eileen O’Shanassy is a freelance writer and blogger based out of Flagstaff, AZ. She writes on a variety of topics and loves to research and write. She enjoys baking, biking, and kayaking. Check out her Twitter @eileenoshanassy.