What’s the difference between White Collar Crime and Corporate Crime? Does your control environment account for both?

It is a common misconception that White Collar Crime and Corporate Crime are the same, but the element that distinguishes the two is who the benefits relate to. Although both forms of crimes are technically carried out by individuals, the intentions are starkly different. With a better understanding of the difference between the two, corporations can be better equipped to minimise or prevent the negative consequences associated with these crimes.

Here’s the difference:

The following are two real-world examples of how a White Collar Crime / Corporate Crime can be perpetrated:
 
1.White Collar Crime – Rajina Subramaniam.1 In 2013, Ms Subramaniam stole approximately AUD 45.3 million from her employer, ING Insurance, over five years and used the monies to purchase luxury goods and property – including AUD 16 million worth of jewellery and eight waterfront apartments. Her method of siphoning money was not particularly sophisticated: she transferred the monies into accounts under her maiden name or directly into the accounts of the shops. She eventually got caught when a jewellery shop called ING to check whether it had authorised an AUD 2.5 million payment for a diamond she ordered. She was sentenced to seven years in jail for committing fraud against her employer.

2.Corporate Crime – Deepwater Horizon oil spill. In 2010, an explosion on an oil rig created a significant oil spill at the Gulf of Mexico. Investigative reports have concluded that BP, along with their working partners, had made “cost-cutting decisions” (mainly due to not having effective controls in place to ensure that the following of procedures for testing the stability of the cementing) that eventually contributed to the oil spill.2  The damages from the blow out resulted in loss of life and significant pollution to the Gulf of Mexico. As a result of this mishap, BP suffered a loss of USD 4 billion, and pleaded guilty to 14 criminal charges.3
 
The two crimes are contrastingly different. Most corporations focus on policies and procedures for preventing White Collar Crime.  However, given the detrimental financial (and reputational) effects, it’s clear that policies, procedures and detection systems need to be able to cope with potential Corporate Crime as well. 

For example, does your company have sufficient policies and the right mix of professionals to oversee that decisions made by management comply with the laws and regulations of the country in which it operates?

Further reading:

In November 2014, we also published a Forensic Matters article on fraud risk management and how corporations can use their own staff to help identify weaknesses.  Click here to read the article. 

1. Further information: http://www.abc.net.au/news/2013-07-03/accountant27s-sentence-cut-over-2443m-theft/4796528

2. http://www.reuters.com/article/2011/01/05/us-oilspill-bp-causes-idUSTRE7045SX20110105

3. http://www.nytimes.com/2012/11/16/business/global/16iht-bp16.html?_r=0