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Financial Crime and Fraud Investigation: Theories of Motivation.

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1 Financial Crime and Fraud Investigation: Theories of Motivation

2 2 Learning outcomes Understand how white collar crime is defined and the problems arising from that definition Appreciate the dynamic nature of the changing definitions Understand the variety and number of the motivational theories propounded in this area and their genesis

3 3 Defining white collar crime Different to street crime as it is obscured and innocuous. Street crimes are committed by confronting victims or entering their homes White collar crimes are committed by guile, deceit, or misrepresentation

4 4 Defining white collar crime Began to be differentiated in the early 1900’s For example Ross (1907) “criminaloids”  The villain most in need of curbing is the respectable exemplary trusted personage who... is able from his office chair to pick a thousand pockets, poison a thousand sick, pollute a thousand minds, or imperil a thousand lives

5 5 Defining white collar crime Not to do with poverty Not to do with social pathology Not to do with physical or psychological pathology ‘crime committed by a person of high status and respectability in the course of his occupation’ (Sutherland 1949)

6 6 Defining white-collar crime White-collar crime may be defined approximately as a crime committed by a person of respectability and high status in the course of his occupation... the financial cost of white-collar crime is probably several times as great as the financial cost of all the crimes which are customarily regarded as the crime problem. (Sutherland)

7 7 Problems with defining white- collar crime High-status offender? Definitional ambiguity Little distinction between crimes committed by businesses and crimes carried out against an organisation ‘crime committed in the course of legitimate employment involving the abuse of an occupational role’ (Croall 1992)

8 8 ‘if it can be shown that white collar crimes are frequent, a general theory that crime is to do with poverty and its related pathologies is shown to be invalid’ (Sutherland 1949)

9 9 Definitional Because of this definitional difficulty Clinard and Quinney (1967) suggested replacing the term white collar crime with two constitutive terms “corporate” and “occupational” crime “Crimes of the middle classes” Weisburd et al (1991)

10 10 Occupational crime For personal gain: Employee theft/computer time, telephone embezzlement etc. Fraud with customers (charging for work not done) Fiddling expenses, embezzlement, tax evasion.

11 11 Corporate crime Offences against employees Offences against investors Offences against consumers Offences against the public Offences against the state

12 12 Understanding corporate crime Organisational goals:  profit, growth, market control Individual characteristics:  anomie of success = unlimited ambition, shrewdness and moral flexibility (anomie is the lack of usual social or ethical standards)

13 13 Understanding corporate crime The motive:  a rational solution to the corporate problem The means:  ideology – structured immoralities of irresponsibility + a lack of law enforcement The opportunity:  low surveillance

14 14 Why are corporate crimes different ? Offences tend to be invisible The acts/offences tend to be very complex There often is no one offender May be no victim or many victims Ambiguous criminal status e.g proof of intent

15 15 Criminology of White Collar Crime No general theory of crime exists  Such a theory would be able to explain not only different crimes but provide similar reasons why males, females, minorities and non-minorities commit crime. Number of master concepts around disciplinary schools: Biology, psychology, sociology

16 16 Criminology of White Collar Crime Biology discredited e.g. physical manifestations such as facial appearance Psychological theories for general crime;  Childhood trauma  Personality traits most studied: risk taking, recklessness. Characterised by Gottfredson and Hirschi (1990) – Low Self Control theory: argued as first six years of life which matter  Punch (2000) argues egocentricity is best explanation, within WCC this is over the top bordering on paranoid meglomania

17 17 Criminology of White Collar Crime Sociological approaches centre around idea of relative deprivation  Sense of envy or jealousy about what other people have Different to absolute deprivation instead of deep anger, produces brooding “get even” type of resentment  Another area is the idea of deviant organisational culture and networks

18 18 Criminology of White Collar Crime Traditional criminological theories applied to WCC  Routine activities theory: absence of guardians and pool of victims

19 19 Shover and Hochstetler (2006) Concept of rational choice  Believed to explain significant variation in all crimes across time, space, populations and individuals  Assumes that “when punishment is not only uncertain but altogether improbable, crime rises precipitously”

20 20 Criminology of White Collar Crime Traditional criminological theories applied to WCC  Social control theory: assumes pre-motivated offenders but based upon weakness in social bonds.  Learning theory

21 21 Edwin Sutherland Theory of differential association: Criminal behaviour is learned not inherited Learned in interaction with other persons Carried out within intimate personal groups (ie not from impersonal activities such as films or TV) Not just techniques that are learned but motivations and rationalisations

22 22 Edwin Sutherland Direction of motives and drives is learned from definition of legal codes as favourable or unfavourable Person becomes delinquent when has an excess of definitions favourable to law violation contrasted with definitions unfavourable to violation

23 23 Criminology of White Collar Crime Traditional criminological theories applied to WCC  Strain theory: holds that even good people commit crime when they become confused about the goals and means of material success  Labelling theory: sensitising concepts/symbolic meanings/identity processes

24 24 Interactionist theory Focus on the way in which individuals (or “social actors”) act rather than react to social stimulation The way “social actors” interpret behaviour is significant as a means of understanding the way the world is socially constructed This construction focuses upon meanings people give to behaviour Example of traffic lights social construct  Go through red wrong/illegal unless… If this is so then concept of crime is socially constructed

25 25 Interactionist theory The ability to develop shared meanings is the key to understanding human interaction. Our ability to think means what we effectively do, according to Interactionists, is to create a sense of society and culture in our minds. We behave "as if" these things physically exist. Thus, the world humans inhabit is a social construction. This involves the idea that society is a product of our ability to think and express our thoughts symbolically. The things that we recognise as being "part of our society" or "part of our culture" are simply products of our mind.

26 26 Interactionist theory Society is an elaborate fiction we create to help us make sense of our relationships and impose some sort of order on them. We create this fictional universe to make social life possible, since without a sense of shared meanings about what we see and do, interaction would, at best, be very difficult and, at worst, impossible. Cultures, therefore, represent the general store of shared meanings that people create to give them a feeling of having things in common and as the basis for constructive social interaction.

27 27 Interactionist theory For example, think of any dealings you have had with people who do not behave in ways that conform to your cultural expectations. People who are drunk, for example, frequently fail to observe expected cultural norms and this makes it very difficult for us to interact with them on anything but a very basic level of understanding.

28 28 Interactionist theory In simple terms, therefore, we have to consider the process whereby individuals "agree to agree" about what they are doing (the purpose of interaction) and why they are doing it (the meaning of interaction). Interactionists generally start to explain this process by referring to the concept of a definition of the situation. How we define a situation affects how we behave when we are in that situation.

29 29 Interactionist theory Thus, when someone we meet reveals one of their social labels to us ("I'm an accountant", for example) we mentally "open the box" that contains our store of knowledge about “accountants".

30 30 Interactionist Theory of Motivation Interactionist theory seems well suited to white collar crime Interactionists see motivation as a symbolic construct ie. the meaning that individuals attribute to a particular situation

31 31 Interactionist Theory of Motivation This meaning of their social reality in general structures their experience. It makes certain courses of action seem appropriate while others are excluded. Cressey (1953) found that embezzlers “adjust” the symbolic construction of their behaviour to fit societal expectations

32 32 Rationalisations Rationalisations are not after the fact but an integral part of an “actor’s” motivation (most common are) 1. Just borrowing the money 2. Denial of harm ie. No-one gets hurt 3. Unjust laws ie. Government interference 4. Act necessary to achieve economic goal or to survive ie. therefore must comply especially in work environment 5. Transfer of responsibility ie everyone is doing it 6. Deserve the money

33 33 Coleman Interactionists argue that symbolic constructs are learned from association with others ie back to Sutherland’s differential association theory Coleman argues that the interactionist theory does not explain the motivations of white collar crime Looks to modern industrial capitalism as a factor

34 34 Culture of Competition The idea that wealth and success are central goals of human endeavour is part of a larger complex of beliefs that may be termed the “culture of competition” The pursuit of economic self interest and the effort to surpass their fellows in the accumulation of wealth and status are of critical importance to these … actors (Coleman, ibid)

35 35 Culture of Competition Creates a pervasive sense of insecurity as an undercurrent in industrial capitalism This fear of failure permeates every stratum of contemporary society. It is a corollary of the demand for success. These factors have grown in the 21 st century

36 36 Culture of Competition Some crimes result from the efforts of individuals trying to live up to expectations of associates and friends. When viewed at group level the culture of competition still appears.

37 37 Culture of Competition Anthropological studies of hunting and gathering societies find little of this acquisitive materialism we see in society First such individualism noted in early days of the modern capitalist society Previously little surplus wealth existed

38 38 Normative Boundaries Ethical standards for economic behaviour are easily combined at a theoretical level. However public see the contradiction between the two i.e. “nice guys finish last” Major conflict in society Link to relative deprivation idea and anomie

39 39 Subcultures Given this societal conflict there are in addition occupational subcultures present Each complex organisation has an “ethical tone” that either reinforces or opposes the normative standards for economic behaviour Industry subcultures Occupational subcultures which cut across industries and organisations

40 40 Subcultures Because of this isolation, work related subcultures are able to maintain certain criminal activities as acceptable or recognised behaviour.  GE price fixing example – they had forgotten it was illegal Subcultures can also work to positive effect

41 41 Punishment The severity of punishment for white-collar crime varies inversely with the power and influence of the typical offender Studies show that street crimes are punished more severely than occupational crimes. Stay in nicer prisons Same inverse relationship also applies to likelihood of prosecution

42 42 Some key texts Sutherland, E. (1949) White Collar Crime, Dryden. Clinard, M. and Quinney, R. (1967) Criminal Behavior Systems: A Typology, Holt Rhinhart & Winston. Coleman, J. (1987) Toward and Integrated Theory of White Collar Crime, The American Journal of Sociology, 93, (2). Gottfredson, M. and Hirschi, T. (1990) A General Theory of Crime, Stanford University Press Croall H. (1992) White Collar Crime,OUP. Punch, M. (2000). Suite violence: Why managers murder and corporations kill. Crime Law & Social Control. 33: Shover, N and Hochstetler, A. (2006) Choosing White- Collar Crime, CUP.


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