White-Collar Crime Flashcards
What is white collar crime?
White-collar crime violations are those violations of law to which penalties are attached that involve the use of a violator’s position of economic power, influence, or trust in the legitimate economic or political institutional order for the purpose of illegal gain, or to commit an illegal act for personal or organizational gain
What is criminogenic and what does this mean?
Sociologist Edward Gross has asserted that all organizations are inherently “criminogenic” (i.e., prone to committing crime), but they are not necessarily criminal. Gross makes this assertion because of the reliance on “the bottom line.” Without necessarily meaning to, organizations can invite fraud as a means of obtaining goals.
Who commits the most occupational fraud?
The majority of operational frauds are committed by employees
Median losses are highest in frauds committed by owners/executives.
What does Dr Steve Albrechts research indicate?
Personal characteristics most common among fraud perpetrators are a tendency to live beyond their means, an overwhelming desire for personal gain and high personal debt.
Who is the criminologist responsible for the well-known hypothesis of the Fraud Triangle?
Donald R. Cressey
focused his research on embezzlers.
His findings resulted in a hypothesis that, over the years, has become known as the Fraud Triangle.
One leg of the triangle represents a perceived non-shareable financial need.
The second leg is for perceived opportunity, and
the final leg is for rationalization.
What did Albrecht develop?
Fraud Scale
included the components
situational pressures
perceived opportunities, and
personal integrity.
The Fraud Scale shows that when situational pressures and perceived opportunities are high and personal integrity is low, occupational fraud is much more likely to occur than when the opposite is true.
What are the two enforcement strategies/strategies to control corporate criminal behavior?
1 - compliance theory:
designed to achieve conformity to the law without having to detect, process, or penalize violations.
Compliance systems provide economic incentives for voluntary compliance to the laws and use admin efforts to control violations before they occur
2 - deterence theory:
designed to detect law violations, determine who is responsible, and penalize offenders to deter future violations.
They try to control the immediate behavior of individuals, not he long-term
According to a study by Dr. Albrecht, who committed larger frauds?
perpetrators who were interested primarily in “beating the system” committed larger frauds.
perpetrators who believed their pay was not adequate committed primarily small frauds.
Lack of segregation of responsibilities, placing undeserved trust in key employees, imposing unrealistic goals, and operating on a crisis basis were all pressures or weaknesses associated with large frauds.
College graduates were less likely to spend their illegal income on extravagant vacations, recreational property, extramarital relationships, and expensive automobiles.
Finally, those with lower salaries were more likely to have a prior criminal record.
What are the three occupational frauds?
Asset misappropriation
corruption
fianancial statement fraud
Which of the three occupational frauds has the highest median loss?
Financial Statement Fraud
asset misappropriation is by far the most common and also the least costly, causing a median loss of USD 114,000.
Corruption schemes are the next most common form of occupational fraud; median loss to the victim organizations of USD 250,000.
The least common and most costly form of occupational fraud is financial statement fraud and caused a median loss of USD 800,000.
What is the difference between organisational crime and occupational crime?
Organizational crime is that which is committed by businesses, particularly corporations, and the government.
In contrast, occupational crime involves legal offenses committed by individuals in the course of their occupation.
For example, an accounting clerk stealing incoming customer payments would be considered an occupational crime. An antitrust offense, such as bid rigging or price fixing, would be an organizational crime.
What are the reasons that organisations can be criminogenic because they encourage loyalty per Diane Vaughan?
The organization tends to recruit and attract similar individuals.
Rewards are given out to those who display characteristics of the “company man.”
Long-term loyalty is encouraged through company retirement and benefits.
Loyalty is encouraged through social interaction, such as company parties and social functions.
Frequent transfers and long working hours encourage isolation from other groups.
Specialized job skills can discourage personnel from seeking employment elsewhere.
In addition, organizations are more inherently prone to committing crime when management links employees’ needs and goals to the company’s success through the use of formal and informal rewards and punishments, plus social activities and pressures to participate. When a company achieves its goals, its employees prosper. In short, the interests of an organization and its employees coincide, and that situation might set the stage for unlawful conduct by individuals on the organization’s behalf.
What are the two components according to Cressey that are essential to commission of fraud?
In Cressey’s view, there were two components of the perceived opportunity to commit a trust violation: general information and technical skill.
General information is simply the knowledge that the employee’s position of trust could be violated. This knowledge might come from hearing of other embezzlements, from seeing dishonest behavior by other employees, or just from generally being aware of the fact that the employee is in a position where he could take advantage of his employer’s faith in him.
Technical skill refers to the abilities needed to commit the violation. These are usually the same abilities that the employee needs to obtain and keep his position in the first place.
What are the four categories of occupational crime?
Crimes for the benefit of an employing organization (organizational occupational crime)
Crimes by officials through exercise of their government-based authority (government authority occupational crime)
Crimes by professionals in their capacity as professionals (professional occupational crime)
Crimes by individuals as individuals
According to Dr. Albrecht, what are the two categories that focus on fraud-related red flags and the resulting 10 factors??
1 - perpetrator characteristics
2 - organisational environment
The ten most highly ranked factors from the list dealing with organizational environment were:
Placing too much trust in key employees
Lack of proper procedures for authorization of transactions
Inadequate disclosures of personal investments and incomes
No separation of authorization of transactions from the custody of related assets
Lack of independent checks on performance
Inadequate attention to details
No separation of custody of assets from the accounting for those assets
No separation of duties between accounting functions
Lack of clear lines of authority and responsibility
Department that is not frequently reviewed by internal auditors
