According to the FBI, white-collar crime is any form of fraud, theft, or money laundering performed by government officials and business professionals. White-collar crime is a non-violent crime committed by employees who have access to business and financial records. Here is a look at some of the white-collar crimes you should avoid and how to prevent these crimes as a business owner.
1. Tax Evasion
One of the most serious white-collar crimes you should avoid as a business owner is tax evasion. This crime involves failing to pay taxes. Many entrepreneurs avoid paying taxes to save for their operational costs. Some will either try to pay fewer taxes or find ways of hiding from the taxman altogether. Federal and state tax laws require businesses to pay taxes regardless of their business operations.
Tax evasion involves filing returns incorrectly or failing to declare your property and income. Anyone found liable for tax evasion is subjected to high fines. In severe cases, a person accused of tax evasion may be imprisoned.
Fraud is a white-collar crime that involves using deception for financial gain. You can become a victim of fraud voluntarily or involuntarily. For example, misinterpretation of facts when marketing stock to potential investors amounts to security fraud.
Another way that fraud manifests itself is if an employee uses your business name to deceive people. This form of fraud could ruin your company’s reputation and cost you important clients and potential investors. In most cases, it takes some time before the real perpetrators of fraud are tracked down and punished.
Embezzlement arises when an employee uses an organization’s fund for their personal use. In many embezzlement scenarios, the employee withholds insignificant amounts of money from different sources to avoid being caught. Embezzlement is often executed by people who are responsible for investment accounts.
In some cases, the perpetrators of embezzlement falsify accounts to hide their tracks. Embezzlement could easily bankrupt your business, especially if discovered when it is too late. Failing to vet employees involved with handling payment and investment accounts can be a huge liability to your business.
4. Money Laundering
Another serious white-collar crime you should avoid is money laundering. This crime often leads to imprisonment. A case of money laundering can also discredit your business and cost you clients and investors.
Money laundering is when a person manipulates money obtained illegally from activities like gambling, drug sales, and theft sales. The perpetrator of this crime makes it look like money was acquired from legal transactions. The criminal usually passes money through different transactions, so the document trail appears legit.
Another common white-collar crime is bribery. As a business owner, you should not resort to corruption to have an edge over your competitors. Bribery is a double-edged sword; it can be used for your benefit or to your detriment.
For example, bribing a government official to allow you to market a substandard product may work in your favor. However, bribery will be a disadvantage to you if, for example, an employee receives a bribe to reveal company secrets. It is crucial to discourage the culture of bribery in your organization.
Strategies For Avoiding White Collar Crime
1. Zero Tolerance Policy
One of the most important defenses against white-collar crime is implementing a zero-tolerance policy. It is crucial to impress upon your employees the need to avoid white-collar crimes. Furthermore, you need to explain to them the consequences of engaging in white-collar criminal activity.
It is vital to engage an employment lawyer from the HKM law firm for advice on the policies that will best work to prevent white-collar crime. An employment attorney will advise you on employment contracts, breach of contracts, data breaches, and other issues that can help you avoid white-collar crime. Your lawyer will also instruct you on how to enforce a policy that lays out the consequences of being involved in these crimes.
2. Anonymous Reporting
It isn’t easy to trust an employee if you know anything about them. The best way to determine the credibility of your employees is by performing a background check on them. Vetting your employees will help you discover any questionable incidences in their life history.
You need to create a way for employees to report anonymously if they detect any criminal or ethical conduct. Another alternative is to engage a third-party reporting agency. You will then instruct your employees to call the agency to express their concerns. The agency will forward the notification to the appropriate authorities in the company for further investigation.
3. Routine Audits
Another smart way of avoiding white-collar crimes is through performing routine audits. Implement regular audits in your organization to prevent a single group or person from having excess control over your finances. Try to use both internal and third-party auditors for accurate reports.
The best way to detect white-collar crimes in time is by conducting random audits. These audits should be done randomly at different times throughout the year. Routine audits are a smart way of discouraging employees from engaging in criminal activity.1