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White-collar crime can be difficult to detect. Petty employee theft, such as stealing inventory from the register, is fairly straightforward. But is fraud or insider trading? That's a bit trickier to deal with.
The FBI considers white-collar criminals to be highly destructive. White-collar crime can affect a specific organization and an entire market or economy. Before we dig into the numbers, let's look at what counts as white-collar crime.
What is White-Collar Crime?
White-collar crime is a non-violent crime committed by an individual or organized crime group. This crime is committed against corporations, institutions, or high-net-worth individuals. The Federal Bureau of Investigation provides several examples of white-collar crime, including:
- Falsifying financial documents
- Corporate fraud
- Insider trading
- Money laundering
- Securities and commodities fraud
- Embezzlement and misappropriation of funds
- Mortgage fraud
- Intellectual property theft
- Identity theft
White-collar crime cases generally result in substantial financial loss to corporations and individuals. It also reduces public trust in key institutions, such as government agencies and banks.
Since the scale of white-collar crimes is so extensive, many resources exist to reduce its damage. For example, insurance policies, such as third-party crime insurance or fidelity bonds, protect businesses from loss.
But how big is the risk for small businesses?
Let's take a look at the numbers.
General White-Collar Crime Statistics
- When looking at white-collar crime, only 7% of participants are women.
- 94% of white-collar offenders are the only criminal in their families.
- The average white-collar criminal is 41 years old, but the general range is 31-45.
- Florida has the highest number of convicted criminals for money laundering.
- $52 billion was stolen from Americans in 2021 using identify theft.
- 42% of fraud offenders were living beyond their means.
- Only one in three cases of occupational fraud is detected.
- 90% of white-collar crime goes unreported.
- Organizations with a fraud hotline detect a fraud case 33% faster than those without one.
- Only 39% of embezzled funds are recovered.
- Embezzlement cases result in employee layoffs, increased spending on auditing, and lost customers.
Average Sentences for White-Collar Crimes
- The maximum prison sentence for insider trading is 20 years. The largest criminal fine for it is $5 million for individuals and $25 million for organizations.
- The average insider trading sentence is 17.3 months.
- Money laundering offenders spend approximately 67 months in jail on average.
- Securities fraud can lead to five-year sentences per offense.
White-Collar Crime Statistics by Cost
- Asset misappropriation is the most common type of fraud case. It makes up 86% of cases and costs organizations $100,000.
- Financial statement fraud is rare but can result in $954,000 on average in losses.
- The average embezzlement case results in $350,000 in losses.
- The global cost of fraud was more than $3.6 billion in 2020.
- The median loss for securities fraud is over $2 million, but 18.2% of cases involved losses greater than $9.5 million.
White-Collar Crime Trends and Projections
- There has been a 25% drop in white-collar crime case prosecution over the last five years.
- Fraud makes up 63% of white-collar crimes.
- 1 in every 4 households will be a victim of white-collar crime.
- Most white-collar criminal activity still goes unreported.
- Wire fraud continues to be one of the most common types of fraud.
White-Collar Crime FAQ
What percent of crime is white-collar?
In 2021, 9.8% of the United States Sentencing Commission's caseload dealt with white-collar crime. In particular, it was linked to embezzlement, fraud, and money laundering. However, federal prosecution of white-collar criminals was 3%.
Who commits the most white-collar crime?
According to the 2020 Report To The Nation study on fraud, employees are most likely to commit occupational fraud. They make up 41% of cases in this category. At the same time, while executives only make up 20% of crimes, they tend to do the most damage. In fact, executives and upper management fraud resulted in a $600,000 median loss, compared to a $60,000 loss from employees. The most significant risk for fraud and white-collar crime comes from companies’ Boards of Directors and Executive management.
The same report also says that:
- 70% of perpetrators are male
- 54% are between 31 and 45
- 49% have a university degree
- 51% of fraud cases were committed by more than one person
- 86% had never been terminated in a previous position for fraud-related charges
- 80-90% of offenders, depending on the specific crime, are white
However, there is one exception. Over 50% of embezzlers are women.
What is the most common white-collar crime?
Based on the Sentencing Commission's 2021 report, embezzlement and fraud are the most common types of white-collar crime. They composed 8.0% of the 2021 caseload.
What is the most significant white-collar crime in U.S. history?
While Bernie Madoff's Ponzi scheme is one of the largest and most well-known white-collar crimes in history, the Enron scandal takes the lead.
Shortly after Enron filed for bankruptcy in 2001, the FBI created a specialized task force for the company's nonsensical paperwork. This task force incorporated many federal agencies, including the FBI, the Internal Revenue Service-Criminal Investigation Division, the Securities and Exchange Commission, and prosecutors from the Department of Justice.
The task force traced the problem to top management with over 3,000 boxes of evidence, 1,800 interviews, and additional reports. Enron's board of directors hid the organization's debt under layers of partnerships and dishonest profits. The board also committed insider trading, overvalued its assets, and frauded its investors. The government seized more than $168 million in assets.
Is white-collar crime on the rise?
Yes, white-collar crime is on the rise. It is also a larger financial burden than other types of crime. Organizations lose around 5% of their revenue annually due to white-collar crime, and the average loss is $1.5 million per case. To make matters worse, nearly 90% of white-collar crime goes unreported.
However, there has been a 25% drop in prosecution over the last five years.
Blue-collar crime is devastating for the individual, but white-collar crime can not only affect a corporation but also its customers and even the local or national economy. Fraud, identity theft, money laundering, embezzlement, and other forms of white-collar crime have resounding effects and can be difficult to spot.
The news isn’t all bad, however. There are simple steps businesses can take to help shield themselves from these potentially crippling outcomes. Conducting background checks on employees, investing in network security, dividing financial duties and responsibilities up among multiple employees, and performing regular audits on financial accounts are all ways that small businesses can protect their hard-earned assets. Commercial crime insurance and third-party insurance can also provide a safety net for your business just in case something manages to slip through the cracks.
Of course, it helps to pinpoint your specific business risks before investing in insurance. Request a complimentary risk assessment from our experts today.
Disclaimer: The information provided herein is to provide an overview of current issues and situations and to alert our readers of potential areas of concern. The information set forth herein is not, and should not be construed as, legal advice.
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