While the recession has taken its toll in numerous business spheres, one of the less obvious consequences is that it is driving an increase in organised and white collar crime within a diversity of organisations across the globe.
This increase in white collar crime is reaching such proportions that Werksmans Incorporating Jan S. de Villiers has introduced a specialised forensics practice area dedicated to dealing with these cases.
This new practice area is headed by Dave Loxton, who confirms that tight economic times have driven a spike in illegal activity.
“All too often people under financial pressure turn to supplementing their income, and unfortunately this can include fraud and theft. In some instances employees who have been with a company for years are suddenly involving themselves in illegal activity,” he says.
“White collar crime has become endemic in modern corporate life and South African business confronts significant challenges in preventing and countering fraud, corruption and dishonest misconduct, particularly when employees are involved,” adds Loxton. “The problem is being exacerbated by trends such as the weak economy and rising personal debt, along with the increasingly sophisticated tactics being employed by perpetrators.”
Loxton makes a sound case for hands-on management. “We’ve even seen wholesale theft of companies, especially where international entities have established a local operation. Employees ingratiate themselves with the overseas principals, establishing trust. Before the company directors know it, the local operation is either sold piecemeal or completely cleared out, leaving only an empty building – while the person or persons they entrusted to run the operation have set up shop elsewhere.”
This form of exploitation, according to Loxton, gives a new meaning to the term ‘corporate raider’.
There is also an increase in the activities of syndicates and organised crime where several individuals across the work chain are involved. This could include taking advantage of weak systems and corruption in government departments to commit fraud.
A recent example arose when members of a syndicate influenced CIPRO staff to register false entities with names very similar to those of the existing companies. “The CIPRO documentation is then used to open a bank account and syndicate members ensure that tax refunds or other monies owing to the genuine company are paid into this account,” Loxton explains.
These incidences of white collar crime could also be on the rise as they tend to be more complex crimes which are difficult to prosecute. “The fact of the matter is that some individuals are willing to take the chance,” he adds. “Typically, the motivation is driven by sheer greed and it is seldom the needy who are committing these types of crimes.”
This is not only a South African phenomenon. “Other countries are also struggling with the challenges posed by an underpaid and under-resourced police service and ineffective prosecution. The one area that we have been spared thus far is arson. In the US, for example, not only is there a rise in the types of crimes we’ve discussed, but there is also a marked increase in incidences where people are burning their houses or stock which they can’t move, and then submitting fraudulent insurance claims,” Loxton says.
This is not to say that business is helpless in the face of escalating corporate crime. Loxton has assisted public and private sector employers with numerous matters in which white collar crimes such as fraud and corruption have been successfully prevented, detected or investigated, and the proceeds of criminal activity recovered.