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White Collar Crime

White-collar crime takes many forms. People who commit fraud against their employers are not career criminals.  The vast majority are trusted employees who have no criminal history and who do not consider themselves to be lawbreakers.  So the question is, what factors cause these otherwise normal, law abiding people to commit fraud?

The risk of internal misdeeds occurring in an organization is contingent upon a combination of factors: pressure, rationalization, and opportunity.

Pressure can be imposed due to:

  • personal financial problems.
  • personal vices such as gambling, drugs, extensive debt, etc.
  • desire for status symbols such as a bigger house, nice car, etc.

Rationalization occurs when the individual develops a justification for their fraudulent activities.  The rationalization varies by case and individual.  Some examples include:

  • "I really need this money and I'll put it back when I get my paycheck."
  • "I'd rather have the company on my back than the IRS."
  • "I just can't afford to lose everything -- my home, car, everything."

Opportunity is generally provided through weaknesses in internal controls.  Some examples include inadequate or no:

  • supervision and review of transactions.
  • separation of duties for processing and reconciling transactions.
  • management approval over expenditures.
  • access controls over financial data.