Running a big corporation comes with several legal and financial challenges. You’re responsible for a vast group of employees, and not all of them will be law-abiding citizens. Your company’s funds may be mismanaged without your knowledge, but the onus of the wrongdoing will still be on you.
As the news will tell you, financial crimes (or white-collar crimes) are a growing problem in organizations. These encompass any criminal activity through which one illegally obtains another person’s property.
Since technology has revolutionized criminal practices like everything else, an organization’s risk of financial crimes has never been higher. Consequently, an entire niche has emerged dedicated to providing solutions to such problems; for example, you can benefit from outsourced financial crime risk management for advisory consulting and technology services.
You can only choose a solution if you’re aware of the risks you face. Keep on reading to find out the three basic types of financial crimes your organization may be exposed to:
1. Fraud
Fraud happens when the perpetrator intentionally deceives the victim for financial benefit. This is one of the biggest white-collar crimes and affects individuals, organizations, and governments. The crime is so common that consumers lost $5.8 billion to fraud in 2021 alone. Let’s go through some common types of this crime.
- A Ponzi scheme is a type of investment fraud where earlier investors are paid with the money obtained from new investors. Existing investors are encouraged to bring more people to the scam to get a payout. Once the fraudster obtains enough money, they usually disappear with all the capital.
- Charity frauds include getting donations on behalf of a fake charity and then running away with those donations.
- Cashier’s check fraud makes use of the fact that it takes banks weeks to verify a cashier’s check. The fraudster uses a forged cashier’s check to steal your hard-earned dollars, and by the time the scam is revealed, they are gone with your money.
2. Bribery
Bribery is an all-too-common financial crime. It refers to soliciting illegal favors from a person in power in exchange for monetary benefits. Bribery differs from lobbying, which is legal, as bribery involves paying money in exchange for a guaranteed result. In contrast, lobbying involves using your soft power to influence the people in power. However, the lines may be blurred, so you must be cautious when developing your lobbying strategies and ensure they do not break any law.
3. Money Laundering
Money laundering involves hiding the source of illegally obtained funds. The perpetrator does so, giving their funds a cover of legitimacy. Money laundering is done by governments, corrupt public officials, and shady tycoons alike. In money laundering, the perpetrator first places the ill-obtained money in a legitimate economic environment. They then layer it with several covers of legitimacy, such as using shell companies as a cover or moving funds through various banks. Once the origins of the wealth are sufficiently hidden, the perpetrator freely uses the money.
Endnote
Financial crimes put your hard earned money at risk and can cause several reputational harms to your organization. Scammers may try to make use of the sheer size of the organization to get away with their crimes, but preventative measures can prevent the worst. Enlisting the help of consultancy services to outsource your financial crime risk management can help fight financial crimes in your organization. Stay proactive.
