Investigating White-Collar Crime - The Human Element

By Janette Minnaar

Despite all our endeavours as employers to secure our company’s assets, internal crime is unfortunately one of the most serious threats to the stability of our company. Many employers have experienced the reality of white-collar crime in the office. Others may have been subject only to the consequences of minor acts of disloyalty or dishonesty in the workplace. Most of us know the feeling of fear, uncertainty and doubt when faced with dishonesty – can you continue to trust the person? Not only are we disappointed by the dishonest employee, but we also start doubting our own ability as successful managers. Although we would like to trust people and allow them freedom, we tend to become rigid in our enforcement of rules and policies once a crime has been exposed.

We first have to understand the reasons for and the complexity of white-collar crime. Once we have a better sense of its scope and the measures that protect us, it is easier to find ways of investigating crime and ultimately combating it.


White-collar crime is the unlawful, intentional committing of deceit, deception, concealment, manipulation, breach of trust, subterfuge, or any other similar trickery by an individual, syndicate or organisation, normally after meticulous planning and usually without the use of physical violence, that causes actual economic prejudice or potential economic prejudice to another.

White-collar crime is normally planned with precision and, generally, occurs without physical violence. White-collar crime often involves a complicated scheme. The offender may be a rather sophisticated person, and the crime may continue for years without being detected. The offender may furthermore reason that there is no human victim and tends to tell himself or herself that it is ‘only the company’ that loses money.

Although honesty is non-negotiable for most people, there are many around us who would easily bend the rules when the opportunity presents itself. Everyone, therefore, does not have the same frame of reference when it comes to what is wrong and what is right. A fraudster may rationalise the offence by saying ‘everybody does this, or I deserve the same material possessions as my neighbour’ – a term referred to as relative deprivation.

There are many misconceptions about the profile of a typical white-collar criminal. Contrary to popular belief, the white-collar criminal may come from any social standing. It is not only the rich and highly qualified person who may succeed in deceiving a company through crimes such as corruption, forgery and theft

These days, the percentage of women committing white-collar crime is as high as the percentage of men. Thirty years ago, working women were in the minority. Today, women have as many opportunities as men to commit internal crime, which is sometimes even (prejudicially) referred to as pink-collar crime.

In summary, we may conclude that white-collar crime can be distinguished from other conventional crimes, such as robbery, by the following general characteristics:

• Unlike robbery which involves the use of force, white-collar offences are characterised by careful planning and deception, usually without the use of violence.
• Some form of premeditation and careful planning are typical.
• Criminals abuse their knowledge of an organisation and their skills to gain unlawful access to money, goods or services.
• There is usually an element of concealed misappropriation, or deception.
• The white-collar offence is often complicated in nature, making it difficult to prosecute.
• The crime normally has low visibility in order to obscure its existence.
• There is usually a diffusion of responsibility for the crime (no offender, or many offenders).
• Diffusion of victimisation is also a characteristic of these types of crime – there does not seem to be a true “victim” when a person defrauds the company he works for;
• These crimes are repetitive in nature and if left to continue may have a very high impact on profitability and reputation.


An understanding of the motives for a white-collar crime will help to create a better awareness of how to investigate and prevent it. In addition to being aware of these motives, one also has to recognise the circumstances that may enable white-collar criminals to commit an offence. One has to bear in mind that fraud and corruption are intentional crimes, as opposed to crimes of negligence. The prosecutor has to prove that the accused had the necessary intent to defraud another person or a company.

• The criminal may suffer from financial pressure, or low self esteem because of social pressure. During this very period of suffering, an opportunity may present itself. An example of such an opportunity is uncontrolled access to the Internet, together with the kind of knowledge that enables the criminal to commit identity fraud. Some examples are the following:

• A person’s occupation or working conditions often provide opportunities that he or she may exploit. When there are inadequate control measures in the working environment, employees may feel more tempted to commit some form of dishonesty. This is also the case when employees know that there is no mechanism in place to enable colleagues to report suspected criminal behaviour anonymously and safely.

• When employees feel disgruntled because of unfair treatment, such as perceived unfair remuneration or lack of promotion (after being promised a promotion), or when they experience an absence of general gratefulness for hard work, they may also become tempted to enrich themselves. Lack of stimulation and boredom may aggravate this problem.

• Factors also contributing to the temptation to commit a crime may be the lack of sufficient sanctions provided by legislation, a lack of enforcement thereof, or a belief that legislation is inefficient, and the conviction that the employer would not confront the offender. In other words the offender has no real fear of retribution.

• Unfair competition in the market as a result of corruption is a major incentive for management to start bribing officials, etc. to gain market share. There is ‘discrimination’ against honest companies.

• Unethical behaviour by management itself, or tolerance of crime by management, may also motivate potentially dishonest employees to use a gap. A culture of dishonesty may soon prevail.

• The disintegration of values in social structures - starting as small as the family - has led to a lapse of morality in general.  The boundaries between right and wrong have become blurred.

• Although many offenders are genuinely needy, many others are just greedy or crave the feeling of power. Many offenders become hooked on money. Richard Nixon’s involvement in the Watergate scandal is an example of greed for political power. Greg Blank, who was convicted in 1994 for the embezzlement of his clients’ money by means of a complicated investment scheme, admitted to the pleasure he felt in having power over his clients in this way.


On the whole, it may be said that white-collar crime has increased over the past number of decades and that it is still increasing. And billions of rand are involved. One estimate is that the South African economy loses more or less R100 billion (R1 000 million) to white-collar crime per year. An example of the magnitude of white-collar crime is the recently exposed case of Fidentia. The Chief Executive Officer, J Arthur Brown, has been accused of fraudulently mismanaging the affairs of various the companies, including a trust for widows and orphans, leading to an estimated loss of almost R 1 billion.

White-collar crime and dishonesty impact on all stakeholders of an organisation. In the worst cases, companies have been brought down, causing loss of thousands of jobs. One such an example is the collapse of the 300-year old Barings Bank in the United Kingdom in the late 1990s, when one person (Nick Leeson) increasingly took unauthorised chances with clients’ money. In that case, it also meant the end of large contributions to charity. More recently, Société Générale almost suffered the same fate when a fairly junior trader had access to millions of euros, in which he fraudulently traded. The bank reported a loss of €4,9 billion, the largest loss in European history.

As mentioned earlier, employers need to be aware of all possibilities of internal crime in the working environment. Instead of employers feeling powerless and threatened by the magnitude of crime, they could be empowered by learning how to apply effective preventative measures. Just as every person is different from the next, so every company has a unique culture, with unique needs.

In the fight against crime, employers can turn to legislation, regulatory bodies (such as the Asset Forfeiture Unit), corporate-governance principles, strict employment-screening procedures, codes of conduct, ethics officers, effective training programmes, specialist consultants, forensic accountants, a whistle blower’s line and many more measures.

Employers need to:

Communicate the effects of crime
The white-collar criminal often reasons that no-one is really hurt by his or her offence. Employees need to learn that it is NOT ‘only the company’ that loses when a clerk embezzles money from the till, or when a dishonest director accepts a bribe. Once all employees are convinced of the chain effect of small dishonesties, the field is set for a culture of honesty. As soon as employees realise that the so-called faceless victim really does have a face, they become more inclined to listen to their conscience, follow the company code of ethics and report suspected criminal behaviour.

Create awareness by training all personnel
I regard employee training (from the top down and including all directors, managers and employees) as one of the most important steps in the proactive prevention of white-collar crime. Employees need to know that if the company loses, they also lose. They need to understand how they, individually and collectively, can contribute to a culture of honesty and that there are significant benefits (directly related to salaries and bonuses) to complying with legislation, organisational rules and universal values. Right and wrong behaviour should be clearly communicated. Employees should be taught what the early warning signs of crime are and where to report wrongdoing without fear or retribution. When the rules and the values of the organisation are compromised, there should be a strict disciplinary code in place, which allows steps to be taken against perpetrators.

Enforce a code of ethics
Because all employees do not have the same understanding of what is acceptable and responsible behaviour, a detailed code of ethics is essential. Companies are advised to ensure that all employees have a full understanding of this code. The code of ethics should guide every decision made and action taken by the organisation. The values included in the code of ethics should form an integral part of the strategy and daily operations of the company.

Set an example
Directors and managers need to be seen to be honest themselves, always acting in the best interest of the company and the stakeholders. Employers must be fair and consistent in the action taken against offenders, even if the disciplinary action is taken against a senior manager. Employers should try to hide a white-collar crime, but rather discuss what went wrong and take corrective action. Employers should also openly announce that dishonesty will not be tolerated.

Follow the principles of good corporate governance
The King II report on corporate governance chose seven primary principles of corporate governance, namely, discipline, transparency, independence, accountability, responsibility, fairness and social responsibility. The King III report (to be published in 2009) will focus on responsibility, accountability, fairness and transparency as the foundation of good governance. The importance of integrated risk management to protect the assets of a company and ensure long-term financial success is obvious. I also believe in the significance of an ethics office and an ethics committee – in the case of a big company. A legal due-diligence audit, combined with a review of internal control measures, should be performed regularly.


Employers need to be empowered by knowledge of their rights and the legislation that can protect them, as well as to whom to report, which internal control measures to implement and to whom they should go for specialist assistance. Employers also need to train their employees to make them realise the adverse effect of crime. Furthermore, employers need to set an example of high integrity themselves and be committed to the principles of good corporate governance.

If all the above-mentioned aspects are in place, employers will have comfort that their company is not as prone to internal crime as other companies may be and that their company is more likely to achieve the ultimate objective of good corporate governance, namely sustained financial success.

August 2008
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