Economic crime: Blown out of proportion or a real threat?

There is ambiguity in defining economic crime or sometimes referred to as white collar crime or finance crime. The general notion refers to economic crimes as illegal acts in which offenders’ principal motivation appears to be economic gain. However, is it possible to conclude on the offenders’ motivations merely by observing the criminal act?

Another school of thought claims that economic crimes are illegal acts that successfully provide offenders with an economic return or for which victims incur an economic cost. Although the classification of economic crimes differ from one country to another, the general presumption is that it involves key areas such as banking, credit card, health care, insurance, securities, telecommunications, intellectual property and computer crime, and identity theft.

The pernicious effects of these economic crimes do not only affect the nations’ economy but on a broader basis, it has far deeper impact on the quality of life of the people. Personal and proprietary securities are at stake and in need of serious protection. Taking into consideration all the above, and the fact that economic crimes are emerging as a utmost priority in policy agendas globally, it is sad to note that very limited knowledge is found regarding the economic, social and institutional variables that results in some countries having  higher economic crimes rates comparatively. The difference in the dynamism of economic crime or the changes is also quite puzzling.

The matter of fact is that the public had become used to economic crime as a fact of life, even though that it is a dilemma for the legislators to act on the fear of economic crime, a problem that is separable from the reduction of economic crime itself. The assumption of this approach is that the fear of economic crimes are disproportionate to the realistic threat that economic crimes poses. On this view, at any given level of actual economic crimes, the fear of both can be and ought to be reduced by government measures. The fact that all layers of society and governments are deeply concerned with the rising statistics of criminal activities and it is made worse by the media exposure, highlighting it on a daily basis.

It cannot be argued that the process of estimating the amount of economic crimes actually being committed is indeed an arduous task. The figures do not necessarily provide an accurate picture because they are influenced by variable factors. Examples of these factors include the unwillingness of victims to report actual happenings of economic crimes. The media’s sensationalisation of certain types of economic crimes also seriously distorts the public’s view. The better option would be to rely on the compilation and publication of detailed statistics of economic crimes by the respective government agencies. The incidence of economic crime is evergreen, it has been niggling the society consistently over time. However it is important to note that sometimes it shows a consistent and persistent trend and pattern in certain time and place.

While economic crimes rarely cause physical injury or death, its severe impact on the economy coupled with the traumatic effect on the people could not be denied. The cost of these economic crimes have ballooned in recent times. In the US, it is estimated that the cost of economic crimes topped US$500 billion annually in 2010, a huge jump from a mere US$5 billion in 1970. The trend is almost similar in Malaysia; the latest estimated cost of economic crimes is RM1.62 billion, rising steadily from RM1.2 billion in 2011 (Royal Malaysian Police Commercial Crime Annual Report 2012).

While Malaysia has been making steady strides in going up the ladder towards transforming the economy and the country to become a high income nation by 2020, the level of economic crime could derail the ambition. According to the findings of the 2014 Global Economic Crime Survey conducted by PwC, a staggering 47% (37% globally) of their respondents said they either have not undertaken a fraud risk assessment in the last two years, or did not know if they have. Worse, 38% (30% globally) of those who hadn’t taken an assessment said they were unsure what a fraud risk assessment involves. Yet, of those that have experienced some form of economic crime, 58% said the number of occurrences and size of crimes have increased. This shows that despite growing awareness of economic crime, organisations may need to do more to protect themselves.

*This article first appeared in the July 2015 issue of Asian Legal Business magazine.

By Assoc. Prof. Dr. Baharom Abdul Hamid, Director, Research Management Centre

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