White-Collar Crimes in Small Businesses: What You Need to Know

Most entrepreneurs and startup dreamers do not even consider the existence of white-collar crimes in the environment of small businesses. After all, as movies and T.V. shows taught us, the majority of such felonies occur in the world of prominent corporations, hedge funds, and brokering firms. What crimes could take place in small companies focused on web design, online commerce, or wedding planning? More than you might think! Let’s see today the most common types of white-collar crimes that could plague your S.M.E.!

What is White Collar Crime?

The term “white-collar crime” encompasses quite a bevy of non-violent criminal offenses, from theft and embezzlement to insider trading and antitrust violations. You may also hear of it as corporate crime and results in economic losses for individuals, businesses, investors, and all other parties affected directly or indirectly by the acts of the perpetrator.

According to the Georgia criminal defense attorneys whom we spoke with about white-collar crimes, the most common offenses plaguing small businesses are theft, fraud, property crimes, and more. However, as we live in a time of technological and economic growth, white-collar criminals find plenty of other ways to hurt your business for their profit. More modern business crimes these days also include environmental schemes (such as a carbon credit fraud) or sophisticated forms of bribery (such as kickbacks) that can destroy not only your small enterprise but the lives of everyone connected to it.

Proving and prosecuting such criminal offenses is hard, and it can take years. Most are violations of states’ laws, and quite a few fall under the jurisdiction of federal law. According to the F.B.I., the number and complexity of such crimes grow exponentially. We had Ponzi schemes before, but now the federal investigators have to deal with identity theft, healthcare fraud, money laundering, investment fraud, and more.

Of course, your small business is not likely to fall victim of perpetrators committing falsification of financial information behind your back – although it is possible. However, as an entrepreneur, you have to be aware of the most common business crimes that can occur in your company because some of your employees or collaborators think they deserve more than they would typically gain by doing their jobs well.

Most Common Types of White-Collar Crimes That Can Jeopardize Small Businesses

Now, let’s see in short a few common business criminal offenses that can happen in your firm. Of course, knowing about them also prepares you for taking the necessary means of precaution to prevent them from happening in the first place.

1. Larceny

Larceny means “taking and carrying away of the personal property of another with intent to steal the same.” In other words, if an employee leaves at the end of the week with all the laptops in the office, never to return on Monday, he committed larceny. The same things happen when your accountant empties your business bank account, and so on.

2. Embezzlement

Embezzlement gave legislators quite some headaches back in the day. It is also a form of stealing, but with a couple of twists. Embezzlement is the criminal offense committed by someone who has the possession of the property temporarily and does not return the item or refuses to do so when the time comes.

In small business environments, embezzlement is rarer in comparison to corporations, banks, and brokering agencies, but it still occurs, even at a smaller level. Most cases of embezzlement revolve around millions and tens of millions. However, a smart employee with a clean record can embezzle an enterprise for years without no one even noticing it.

Concretely, let’s say you empowered your firm accountant to deposit the cash the firm made in the bank at the end of each day. If that person purposefully takes some of the money for personal benefits, then he or she embezzles your company.

Another example is to offer a company car to your sales representative for business trips. If your employee refuses to return the vehicle at the end of your agreement, it is embezzlement. Such conversion of property (different from stealing money or items) is a statutory offense in all states.

3. Bribery and Kickbacks

There is little to discuss when it comes to bribery. It is illegal in the United States and almost all over the world. It does not mean it does not exist and spreads across all hierarchy levels. We are not talking about some of the most resounding cases of corruption that made headlines in the media. However, we are talking about day-to-day activities conducted by small, medium, and big companies to grow faster, make more money, and have their foot in the door.

Most business owners would do anything to see their companies grow or obtain once-in-a-lifetime contracts. For this reason, many try to bribe state or federal officials to win favors. It is a crime, and most likely, you will go to jail.

Nevertheless, bribery can take many other forms. For instance, many pharmaceutical companies offer benefits and discounts to doctors who are willing to prescribe their medication. It is difficult for a sole employee in a small business to organize a bribery scheme behind your back. But, a kickback scheme is not entirely out of the question.

A kickback is a white-collar crime somewhere between bribery and fraud. It is a friendly agreement negotiated between two parties, in which one person accepts payment for a service based on a quid pro quo. In short, a kickback occurs you pay money to another person for helping you make money.

In small business environments, kickbacks can be more frequent than you can imagine. Your accountant approves an invoice from one of your suppliers, knowing that the supplier inflated the bill. As a company, you pay for those materials. Unknowingly to you, the accountant takes some money from the supplier as a reward.

It can also happen when one of your employees hooks the company with the best supplier of all times, even if the prices are a bit higher than the market average. He knows and trusts that person to deliver quality, so you should do the same. At first glance, you do not find anything wrong with this. After all, you pay for quality. At a second, you might find that your employee took a hefty kickback from that supplier to make you one of their clients.

Bottom Line

As we said, Ponzi schemes and insider trading may not apply to your small digital marketing agency or flower shop. But fraud, larceny, embezzlement, and kickbacks are quite common white-collar crimes, even in small enterprises. The sums may be small and incomparable to the millions of dollars exchanging owners in the big corporate world; however, you should always keep your eyes open and check your papers and your finances frequently.