Study: Criminal Law and Financial Crimes

19 February 2018, Bachir El Nakib (CAMS) Senior Consultant Compliance Alert LLC 

Criminal law operates differently according to what crime the state has charged a defendant with. Each crime has its own set of elements that define it, as well as defenses that may apply and factors that influence sentencing. However, while each crime is different, there are several broad types of crimes that share features and defenses. It can be useful to examine all the crimes in a category in order to understand the laws and defenses and involved. The pages below provide links to statutes, with select overviews, penalty ranges, and resources on a number of crimes, including assault, theft, DUI, and drug crimes.

Drug Charges

Many drug cases involve either drug possession or drug trafficking charges. The difference between the two charges has much to do with the amount of the substance in question. Common controlled substances for which possession charges are brought include: prescription drugs (e.g., oxycodone and Xanax); marijuana; cocaine; heroin; methamphetamine (meth); and methylone (molly). 

Property Crimes

Property crime is a category of crime in which the person who commits the crime seeks to do damage to or derive an unlawful benefit or interest from another’s property without using force or threat of force. Property crimes are often high-volume crimes. Property crime includes burglary, theft, arson, larceny, shoplifting and vandalism. Others require the actual taking of money or property. Some, such as robbery, require a victim present at the time of the crime. Most property crimes include a spectrum of degrees depending on factors including the amount stolen and use of force or arms in theft related cases, and actual or potential bodily injury in property destruction crimes such as arson. 

Alcohol Crimes

The relationship between alcohol and crime is complex. The misuse of legal substances can be connected to crime. Alcohol, while legal for adults, may be used in a manner that constitutes a crime or status offense (i.e., while operating a vehicle (DUI) or possession by a minor). Alcohol also impacts crime indirectly via the effects they have on users’ behavior and by their association with violence and other illegal activity in connection with their manufacture, distribution, acquisition or consumption.

Sex Crimes

Sex crimes refer to criminal offenses of a sexual nature. Every state has laws against prohibiting the various types of sex crimes, such as rape and sexual assault, and each state has its own time limit (or “statute of limitations”) in which victims of sex crimes may file a lawsuit against the alleged offender.

Commonly known sex crimes include, rape, child molestation, sexual battery, lewd conduct, possession and distribution of child pornography, possession and distribution of obscene material, prostitution, solicitation of prostitution, pimping, pandering, indecent exposure, lewd act with a child, and penetration of the genital or anal region by a foreign object.

Fraud and Financial Crimes

Fraud and financial crimes are a form of theft/larceny that occur when a person or entity takes money or property, or uses them in an illicit manner, with the intent to gain a benefit from it. These crimes typically involve some form of deceit, subterfuge or the abuse of a position of trust, which distinguishes them from common theft or robbery. In today's complex economy, fraud and financial crimes can take many forms. The resources below will introduce you to the more common forms of financial crimes, such as forgery, credit card fraud, embezzlement and money laundering.


Bribery is the offer or acceptance of anything of value in exchange for influence on a government/public official or employee. In general, bribes can take the form of gifts or payments of money in exchange for favorable treatment, such as awards of government contracts. Other forms of bribes may include property, various goods, privileges, services and favors.

The following provides an overview of the crime of bribery.

Bribery: An Overview

Bribes are always intended to influence or alter the action of various individuals and go hand in hand with both political and public corruption. No written agreement is necessary to prove the crime of bribery, but a prosecutor generally must show corrupt intent. In most situations, both the person offering the bribe and the person accepting can be charged with bribery.

Another crime often associated (and sometimes confused) with bribery is extortion. The difference is that bribery offers a positive reward for compliance ("Do this for me and I'll do that for you."), whereas extortion uses threats of violence or other negative acts in exchange for compliance ("Do this for me or else I'll hurt you.").  

Elements of a Bribery Charge

At the most fundamental level, charges of bribery need only to prove that an agreement for the exchange of something of value (political influence, for example) for a sum of money or something else of value. There need not be a written agreement, but prosecutors must be able to prove that an agreement was actually made. For example, a taped phone call between a politician and the party offering the bribe may be sufficient evidence. Similarly, a police body cam video of a driver handing the officer cash before being let go would suffice.  

The federal government, however, has very specific elements that it uses to prosecute vases of bribery against federal employees. These include the following:  

  1. The individual being bribed is a "public official," which includes rank-and-file federal employees on up to elected officials;
  2. A "thing of value" has been offered, whether it's tangible (such as cash) or intangible (such as the promise of influence or official support);
  3. There is an "official act" that may be influenced by a bribe (such as pending legislation that may have a direct impact on the party offering the bribe);
  4. The public official has the authority or power to commit the official act (for instance, the official is a senator who is voting on a particular piece of legislation);
  5. There must be the establishment of intent on the part of the bribing party to get a desired result (the intent to sway the vote by handing over an envelope full of cash); and
  6. The prosecution must establish a causal connection between the payment and the act. In other words, there must be more than just a suspicious coincidence. Did the payment influence the act? Prosectors will have to prove this.

Examples of Bribery

Bribery can happen in many different spheres of influence. In the sporting world, for example, one boxer might offer another a payoff to "throw" (deliberately lose) an important fight. Or a gambler may offer to pay a basketball player to “shave” points off the score so a team loses by more points. If a referee or other sporting official is convicted or bribery, the punishment can consist of a fine and imprisonment of up to five years.

In the corporate arena, a company could bribe employees of a rival company for recruitment services. Even when public officials are involved, a bribe does not need to be harmful to the public interest in order to be illegal.

 The Foreign Corrupt Practices Act in 1977 makes it unlawful for a United States citizen, as well as certain foreign issuers of securities, to pay a foreign official in order to obtain business with any person. In 1998 a provision to the Act was added which applies to any foreign firms or foreign-born persons who take any act in furtherance of a corrupt payment while in the United States.


Thousands of people each year fall victim to fraudulent acts -- often unknowingly. While many instances of fraud go undetected, learning how to spot the warning signs early on may help save you time and money in the long run.

Fraud is a broad term that refers to a variety of offenses involving dishonesty or "fraudulent acts". In essence, fraud is the intentional deception of a person or entity by another made for monetary or personal gain.

Fraud offenses always include some sort of false statement, misrepresentation, or deceitful conduct. The main purpose of fraud is to gain something of value (usually money or property) by misleading or deceiving someone into thinking something which the fraud perpetrator knows to be false. While not every instance of dishonesty is fraud, knowing the warning signs may help stop someone from gaining any unfair advantage over your personal, financial, or business affairs.

What the US Law Says About Fraud

Laws against fraud vary from state to state, and can be criminal or civil in nature. Criminal fraud requires criminal intent on the part of the perpetrator, and is punishable by fines or imprisonment. Civil fraud, on the other hand, applies more broadly to circumstances where bad-faith is usually involved, and where the penalties are meant to punish the perpetrator and put the victim back in the same position before the fraud took place.

While the exact wording of fraud charges varies among state and federal laws. the essential elements needed to prove a fraud claim in general include: (1) a misrepresentation of a material fact; (2) by a person or entity who knows or believes it to be false; (3) to a person or entity who justifiably relies on the misrepresentation; and (4) actual injury or loss resulting from his or her reliance.

Most states require that each element be proven with "particularity" -- meaning that each and every element must be separately proven for a fraud charge to stand.

Types of Fraud

There are many types of fraud offenses, several of which occur through the mail, internet, phone, or by wire. Common types include:

  • bankruptcy fraud
  • tax fraud (a.k.a. tax evasion)
  • Identity theft
  • Insurance fraud
  • mail fraud
  • debit/credit card fraud
  • securities fraud
  • telemarketing fraud
  • wire fraud

Warnings Signs of Fraud -- What to Look Out For

The warning signs vary depending on the type of attempted fraud. For example, a warning sign for telemarketing fraud may include a phone call by an unknown caller asking you to "send money now" to receive an offer. Similarly, a warning sign for identity theft might be a call from someone asking for the digits of your social security number or last known address.

Other, more general, warning signs may include, receiving unsolicited mail requesting you to send money to a bogus account, losing your credit card or driver's license, and promises made by an individual or company that seem "too good to be true".

The practice of fraud is not always geared toward individuals. Business owners also need to look out for fraud perpetrators. Landlords, loan agents, and other small business owners should also be aware of potential warning signs, such as phony references, wrong phone numbers or address on applications, large purchases on bank card without regard to price, style of item, and so on. The golden rule in preventing potential fraud offenses is to be vigilant in handling your business and personal affairs.

Penalties for Fraud Offenses

Penalties for fraud offenses may include criminal penalties, civil penalties, or both. Most criminal fraud offenses are considered felony crimes and are punishable by jail, fines, probation, or all of the above. Civil penalties may include restitution (paying the person back) or payment of substantial fines (geared to punish the behavior). The penalties for your offense will depend on the nature, type, scope, and severity of the action and whether it was committed by an individual or an entity, such as a business, corporation or group.

What to Do If You Believe You Are a Victim of Fraud

Fraud does not discriminate. Any person, group, business, government, or entity can fall victim to fraud offenses. Oftentimes, fraud victims face a range of emotions, including anger and betrayal toward the perpetrator, shame or guilt, and/or fear and frustration over the loss of money or something of value. If you believe you are a victim of fraud, there are several national and local fraud victims' assistance organizations that may help you.

In many cases, fraud victims do not recover the actual money or property that was lost. However, if you would like to prevent identity theft, and other common fraud violations, you may need to hire a lawyer who knows about the nuances of the laws concerning fraud in your state.


Embezzlement is defined in most states as theft/larceny of assets (money or property) by a person in a position of trust or responsibility over those assets. Embezzlement typically occurs in the employment and corporate settings.

Accounting embezzlement, a common form of the crime, is the manipulation of accounting records to hide theft of funds. Offenders are given lawful possession of the property, and then are accused of converting the property to their personal use. A person is often given access to someone else’s property or money for the purposes of managing, monitoring, and/or using the assets for the owner’s best interests, but then covertly misappropriates the assets for his/her own personal gain and use, this is an example of embezzlement.

Common examples include bank tellers or store clerks who are given lawful possession of money, which is the property of the bank or business owner, during regular business transactions. Other examples include employees who are given lawful possession of company property such as laptop computers or company vehicles.  This type of crime is most common in the employment and corporate fields. Some embezzlers simply take a large amount of money at once, while others misappropriate small amounts over a long period of time. The methods used to embezzle can vary greatly and are often surprisingly creative. They can include fraudulent billing, payroll checks to fabricated employees, records falsification, “Ponzi” financial schemes and more.

In order for a charge of embezzlement to be supported, four factors must be present: 

• There must be a fiduciary relationship between the two parties; that is, there must be a reliance by one party on the other

• The defendant must have acquired the property through the relationship (rather than in some other manner)

• The defendant must have taken ownership of the property or transferred the property to someone else

• The defendant's actions were intentional.  

Charged With Embezzlement? Protect Your Interests and Call an Attorney

As you can see, the common elements to prove a charge of embezzlement leave a lot of room open for your defense. The government has the burden to prove all the elements of this crime under the laws of your state. However, it doesn't hurt to have a proactive defense that establishes facts disproving the elements. 

Identity theft and identity fraud are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception, typically for economic gain.

Identity Theft Laws

Identity theft laws in most states make it a crime to misuse another person's identifying information -- whether personal or financial. Such data (including social security numbers, credit history, and PIN numbers) is often acquired through:

  1. The offender's unlawful access to information from government and financial entities or
  2. Lost or stolen mail, wallets and purses, identification, and credit or debit cards.

Identity theft is one of the fastest-growing crimes in the nation, robbing its victims of time, money and peace of mind. Identity thieves often use the Internet but also can obtain sensitive personal data from trash cans and other unsecured locations.

Several government agencies are not involved in investigating and prosecuting identity theft crimes including the:

  • Federal Bureau of Investigation
  • Federal Trade Commission
  • Secret Service
  • Postal Inspection Service

Clueless Identity Theft

Unlike a robbery or burglary, identity theft often occurs without the victim's knowledge. Most identity theft victims only find out after they see strange charges on their credit card statements or apply for a loan. While prevention always the best policy, sometimes personal information is exposed through security breaches at banks or companies with which you do business. Thus, identity theft can happen to even well-prepared consumers.

While your fingerprints are unique to you and cannot be given to someone else for their use, your personal data can be used, if it falls into the wrong hands, to personally profit at your expense.

In one notorious case of identity theft, the criminal, a convicted felon, incurred more than $100,000 of credit card debt, obtained a federal home loan, and bought homes, motorcycles, and handguns in the victim's name. He even called his victim to taunt him. The criminal served a brief sentence for making a false statement to procure a firearm, but made no restitution to his victim for any of the harm he had caused. Cases like this one are what ultimately prompted Congress to make identity theft a federal crime.

Money laundering

Money laundering statutes make it a crime to transfer money derived from almost any criminal activity (including organized crime, white-collar offenses, terrorist activities, and drug transactions) into seemingly legitimate channels, in an attempt to disguise the origin of the funds.

Anti-Money Laundering Laws

A number of laws have been passed intending to prevent and punish money laundering activities. These laws were initially intended for use in combating the Mafia and organized crime, though the focus subsequently shifted to the war on drugs, and later to anti-terrorist activity.

The first anti-money laundering laws arose in the 1970s. The Bank Secrecy Act [BSA] refers to a series of laws that require financial institutions to report certain transactions to the U.S. Department of Treasury. These laws require that financial institutions report large cash transactions, initially those in excess of $5,000, later increased to $10,000. Financial institutions are also required to report suspicious transactions, either those they have reason to believe are related to criminal activity or those that appear intended to avoid triggering the Bank Secrecy Act reporting requirements.

Money laundering was criminalized with the Money Laundering Control Act of 1986. This law prohibited individuals from engaging in financial transactions with the proceeds of certain crimes. In this context "financial transaction" was defined very broadly, including transferring money from one private individual to another. The penalties were strengthened with the Annunzio-Wylie Anti-Money Laundering Act of 1992. The Money Laundering Suppression Act of 1994 increased review, training, and examination procedures, as did the Money Laundering and Financial Crimes Strategy Act of 1998. 

Following the attacks of September 11, 2001 Congress passed the USA Patriot Act, which included provisions that strengthened and expanded the regulation of financial transactions. Title II of the Patriot Act is known as the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 and dealt almost entirely with money-laundering issues. The Patriot Act's provisions expanded upon the BSA's applicability and introduced new requirements. It has required the creation and implementation of new anti-money laundering programs and creates potential criminal liability for institutions that are "willfully blind" to money-laundering taking place within their institutions. The law also produced the requirement that companies designate a compliance officer, implement training programs, and conduct independent audits.

The US Patriot Act also requires that financial institutions implement procedures to verify the identity of their customers and check their identities against lists of known or suspected terrorists. These requirements are known as the "forthcoming requirements." These requirements strengthened the BSA "Know Your Customer" requirements.

Among other outcomes, these laws can trigger an investigation of a suspect financial institution by the Federal Reserve and the Office of the Comptroller of Currency, who may impose civil fines or refer matters for criminal prosecution.

Who Is Regulated?

Not all institutions or individuals that deal with capital are regulated by these laws. The BSA's definition of "financial institution" was fairly broad. It included banks, credit card companies, insurance companies, and broker-dealers in securities, but "covered financial institutions" was defined differently. Under both the BSA and the Patriot Act the definition does not include investment advisors or transfer agents. Investment companies straddle the line. It is generally understood that only companies required to be registered under the Investment Company Act of 1940 are covered by either of these laws.’

Mortgage Fraud 

What we collectively refer to as mortgage fraud includes various illegal schemes involving some type of misrepresentation or misstatement on mortgage documents. For example, a home buyer, mortgage broker and/or other real estate professional who submits fake W-2 forms or procures an inflated property appraisal has engaged in mortgage fraud.

In general, fraud involves two parties: the party providing false information and the party that relies on that information to complete a transaction. Such crimes commonly are prosecuted as wire fraud, bank fraud and conspiracy (federal statutes do not directly reference "mortgage fraud").

FERA and the Prosecution of Mortgage Fraud

The Fraud Enforcement and Recovery Act (FERA) enacted in 2009 expanded the reach of federal law enforcement officials in enforcing mortgage fraud laws. Sentences under FERA can include $1 million fines and 30-year prison sentences. Some states also have laws that address crimes related to mortgage fraud.

An investigation may also lead to additional charges of bankruptcy fraud or tax fraud. Although unscrupulous mortgage brokers, appraisers, real estate attorneys and other real estate professionals tend to be the ones targeted by investigations, home buyers are sometimes arrested for providing inaccurate information.

Law enforcement officials recognize two main categories of mortgage fraud:  

  1. Fraud for Housing: A situation where a borrower submits false, incomplete or inaccurate information in order to qualify for a loan or to obtain more favorable terms when buying home.
  2. Fraud for Profit: A situation where a real estate professional (appraiser, mortgage broker, etc.) commits fraud in order to extract money from a property or transaction.

Common Types of Mortgage Fraud

Mortgage transactions, which involve multiple parties and large sums of money, provide ample opportunities for fraud. Some such schemes are extremely sophisticated and unique, but the following types of mortgage fraud are the most common: 

  • Fraudulent Supporting Loan Documentation: Loan applicant submits forged or altered paycheck stubs, or otherwise fraudulent documentation.
  • Property Flipping: A piece of real estate is purchased, promptly appraised at a falsely inflated value, and then quickly resold. The fraudulent appraisal is what makes this practice illegal, as "flipping" during a housing boom is not necessarily illegal.
  • Straw Buyers: Borrower's identity is hidden through the use of a nominee, in whose name and credit history the loan application is made.
  • Silent Second: Buyer takes out a second mortgage to cover the down payment on the initial loan. It is illegal because the second, smaller loan is taken out without the initial lender's knowledge.
  • Stolen Identity: Mortgage loan applicant uses a fictitious or stolen identity. If stolen, the true person's name, personal information and credit history is used without their knowledge.
  • Equity Skimming: An investor uses a straw buyer, false credit reports and false income documents to obtain a mortgage in the straw buyer's name. Straw buyer signs property over to investor after closing, relinquishing all property rights. Investor makes no payments but rents the property until it is foreclosed.
  • Inflated Appraisal: Appraiser, colluding with the mortgage broker and/or loan officer, provides unrealistically high appraisal value in order to match the buyer's offer and complete the deal.

State Mortgage Fraud Laws

More than one-third of U.S. states, including California, Florida and New York, have laws prohibiting at least one form of mortgage fraud. The New York Penal Code, article 187, for example, defines "residential mortgage fraud" as an intentional act that involves statements that contain materially false information or that conceal information for purposes of misleading another party. The crime is prosecuted as a class A misdemeanour all the way up to a class B felony, depending on the severity of the offense.

Federal sentences tend to be more severe than state sentences for equivalent mortgage fraud convictions. Talk to a local attorney to find out more details about the laws in your state.

Civil Liability for Mortgage Fraud

Those accused of committing mortgage fraud may also be held liable for monetary damages incurred by the lender. Civil claims may be based on contractual theories, misrepresentation and/or deceit, conspiracy to defraud the lender or breach of trust. Third parties involved in the fraudulent transaction, such as mortgage brokers or appraisers, may also be liable for damages.


Racketeering is when organized groups run illegal businesses, known as “rackets,” or when an organized crime ring uses legitimate organizations to embezzle funds. Such activities can have devastating consequences for both public and private institutions. Consequently, the federal government and numerous state governments have created systems of laws designed to prosecute these criminals.

Typical Rackets and Their Consequences

Most older forms of rackets dealt in industries that were clearly illegal, such as prostitution or sex trafficking, drug trafficking, illegal weapons trafficking, and counterfeiting. These “businesses” organized large groups of people to help keep the racket profitable and covert, allowing them to make illegal products available to the public quickly and in such large amounts that authorities couldn’t make all the necessary arrests and prosecutions.

Over time, organized crime gradually entered other kinds of businesses. Mob bosses used labor unions to steal funds from workers' pension plans and other benefits accounts. When organized crime operatives rise up the corporate ranks, they can rob corporations through various white collar criminal methods, potentially ruining the companies along with the shareholders and employees who depend on them.

Using RICO to Prosecute Racketeers

Before the US Congress enacted laws that specifically combat organized crime, prosecutors found it very difficult to end these rackets. Prosecutors could often convict the lower ranked members of the organizations, because they were the ones who actually performed the illegal activities. However, the masterminds behind the organized crime rings were often much harder to prosecute because they couldn’t be directly connected to any of the crimes.

In 1978, the US Congress enacted the Racketeer Influenced and Corrupt Organization Act, or RICO, providing prosecutors with the tool they needed to fight organized crime. Many states have enacted similar laws. In order to convict someone under RICO or a state equivalent, it’s no longer necessary to prove the suspect personally committed an illegal activity. Instead, prosecutors must prove: 

·         The defendant owns and/or manages an organization;

·         The organization regularly performs one or more specific illegal activity.

Although RICO was initially enacted to prosecute famous crime rings it has also been used in many other scenarios. For example, RICO charges were brought against pro-life activists for illegally blocking the entrance to abortion clinics.  In another instance, members of the Catholic Church sued several clergy men under RICO for reportedly allowing priests to molest children. Since it has such far-reaching implications, RICO remains a controversial law even as it continues to aid in prosecutions across the US.

Securities fraud

Generally, securities fraud occurs when someone makes a false statement about a company or the value of its stock, and others makes financial decisions based on the false information. Although the crime itself isn’t complicated, securities fraud can be particularly difficult to grasp if you lack an understanding of securities regulation. Below, you’ll find information on common forms of securities fraud and how to protect your assets.

Securities Fraud by the Company Itself

The first type of securities fraud occurs when an officer or director of a corporation doesn’t accurately report the company's financial information to its shareholders. This can artificially raise the worth of the company’s stock and encourage investors to buy shares of an unhealthy company. If the company subsequently goes bankrupt, the people who bought shares based on false information lose their investment completely. One famous example of this type of securities fraud was the Enron scandal, in which corporate officers failed to report the company's expenses, causing profits to appear larger than they were in reality.

Insider Trading

Insider trading is another type of securities fraud. It occurs when someone with confidential information about a company's financial state uses that information to make decisions about whether to buy or sell the stock before that information is disclosed to the public. For example, a corporate accountant could notice that the company is losing money fast and heading towards bankruptcy. If the accountant places an order to sell his stock before notifying the board, he’s arguably guilty of insider trading.

Third Party Misrepresentation

The last type of securities fraud occurs when a third party gives out false information about the stock market or a particular company or industry. “Pump and dump” schemes are a prevalent type of third party misrepresentations. In a pump and dump scheme, a person will find a small, unknown company with cheap stock and buy large amounts of its shares. The perpetrator will then send out false information about the company to encourage others to buy the stock, driving up the price. Once the price of the stock is high enough, the perpetrator sells his or her shares for a profit.

Tax evasion/Fraud

Tax evasion is when a person or a company purposefully underpays its taxes. This article provides an overview of tax evasion and examples of ways people evade taxes to help you avoid them in the future.

Mistakes Are Not Considered Tax Fraud

Tax forms are long, the Internal Revenue Code is complicated, and unless you’re an accountant or other tax professional, you are bound to make some mistakes that may result in underpaying taxes. Although you should always try to fill out your tax forms correctly, there’s no need to worry about being convicted for tax evasion over a simple error. In order to be convicted of tax evasion, the IRS must show that you deliberately tried to underpay your taxes. If you simply made an error, you’ll still have to pay what you should have paid, and possibly an additional fine, but you’ll avoid the time, expense, and penalties of a criminal law.

How Taxes Are Calculated

Although the tax code is complicated, general tax procedures are fairly simple at their heart. Every year, US Citizens must file a return stating how much money they made, how big their families are, and what their expenses were. The IRS then calculates each family's total income and subtracts certain expenses, called “deductions,” in order to determine their adjusted gross income, or AGI. The service then uses a chart to determine what percentage of your AGI to tax, and comes up with a number representing the taxes you should owe.

Examples of Tax Evasion

Each step of the process of taxation is vulnerable to tax fraud. If someone fails to file his or her tax return, the IRS has no way of auditing the person’s finances. One of the most common forms of tax evasion involves underreporting income. Businesses and employees who deal largely in cash, such as wait staff, hairdressers, and retail store owners, sometimes underreport income because there’s little in the way of a paper trail. Businesses sometimes inflate their expenses, and families occasionally overstate the size of the household in order to take larger deductions.

White Collar Crime(s)

"White collar crime" can describe a wide variety of crimes, but they all typically involve crime committed through deceit and motivated by financial gain. The most common white collar crimes are various types of fraud, embezzlement, tax evasion and money laundering. Many types of scams and frauds fall into the bucket of white collar crime, including Ponzi schemes and securities fraud such as insider trading. More common crimes, like insurance fraud and tax evasion, also constitute white collar crimes


Many white collar crimes are frauds. Fraud is a general type of crime which generally involves deceiving someone for monetary gain. One common type of white collar fraud is securities fraud. Securities fraud is fraud around the trading of securities (stocks, for example).

Securities Fraud

Securities fraud comes in many flavors, but one common type is "insider trading" in which someone with inside information about a company or investment trades on that information in violation of a duty or obligation. For example, an executive knows confidential information about an upcoming company earnings report decides to sell of a chunk of his stock in the company. That would be considered securities fraud, specifically, insider trading.

Another type of securities fraud occurs when someone seeks investment in a company by knowingly misstating the company's prospects, health or finances. By luring an investor to put up money based on false or misleading information, the company and individuals within it commit securities fraud. False or misleading statements in public reports from publicly traded companies also can constitute securities fraud. To commit securities fraud, those speaking on behalf of the business must make these false statements with knowledge that they are false, or at least reasonably should know them to be false.

Other White Collar Frauds

Many types of fraudulent schemes, including mortgage fraud and insurance fraud, are amongst the more common white collar crimes. These can be as common as an individual embarking on an insurance scheme to improperly collect on an insurance policy after lying in application materials. They can also extend to larger scale schemes by businesses to defraud their customers or others in the marketplace.

Ponzi schemes and other business related scams to fraudulently take money from investors have been some of the most famous white collar crimes. These can take all shapes and sizes.


Embezzlement is improperly taking money from someone to whom you owe some type of duty. The most common example is a company employee that embezzles money from his employer for example by siphoning money into a personal account.

Embezzlement can take many forms, however. Lawyers who improperly use client funds commit embezzlement. So do investment advisers who improperly use client funds they have been entrusted to protect.

Tax Evasion

Criminal tax evasion is a white collar crime through which the perpetrator attempts to avoid taxes they would otherwise owe. Tax evasion can range from simply filing tax forms with false information, to illegally transferring property so as to avoid tax obligations. Individuals, as well as businesses can commit criminal tax evasion. As with fraud, there are perhaps infinite ways to commit tax evasion.

Money Laundering

Money laundering is the criminal act of filtering illegally obtained (“dirty”) money through a series of transactions designed to make the money appear legitimate ("clean"). Money laundering often involves three steps. First, the money is deposited typically into a financial institution such as a bank or brokerage. Next, the money is separated from its illegal origin by layers of often complex transactions, making it more difficult to trace the "dirty" money. The third step is integration. This is where the freshly "cleaned" money is mixed with legally obtained money, often through the purchase or sale of assets.

Source: Find law


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