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Red-Flagging the White Collar Criminal

NCJ Number
Management Accounting Dated: (March 1980) Pages: 51-54,57
M B Romney; W S Albrecht; D J Cherrington
Date Published
5 pages
A profile of the white collar criminal is presented, and 'red flags' that warn of a fraud-conducive environment in a company are reviewed.
In an empirical investigation, 49 white collar criminals were compared to prisoners incarcerated for other property offenses and to a noncriminal sample of college students. When compared to other criminals, white collar criminals were less likely to be caught, turned in, arrested, convicted, incarcerated, or to serve long sentences. White collar criminals were older; more often married; better educated; more religious; less likely to use alcohol and drugs; in better psychological health with more optimism, self-esteem, self-sufficiency, achievement, and motivation; and were better socially adjusted. While only 2 percent of the property offenders were female, 30 percent of the white collar criminals were women. When compared with the sample of college students, white collar criminals differed only slightly: white collar criminals suffered more psychic pain; they were more dishonest, independent, sexually mature, socially deviant, and empathetic. In almost all cases, the white collar criminals either had many criminal traits and an extensive criminal background or had virtually no criminal background. An extensive review of fraud-related literature indicated that white collar crime is the result of an interaction of variables from three categories: situational pressures, opportunities to commit fraud, and personal characteristics. Examples of personal red flags include rationalization of contradictory behavior, lack of a strong code of personal ethics, a 'wheeler dealer' personality, and a strong desire to beat the system. Situational pressures include high personal debts or financial losses, inadequate income for lifestyle, peer group pressures, resentment of superiors, and job frustration. Opportunity red flags include familiarity with operations; a position of trust; rapid personnel turnover; no mandatory vacations, periodic rotations, or transfers of key employees; absence of explicit and uniform personnel policies; and a lack of internal security. The complete lists of red flags were tested against 73 cases of white collar crime with successful results. The lists can be beneficial in that a knowledge of them should increase the probability of detection and the company's awareness of its vulnerability. The lists are divided into red flags for crimes against the company as well as on its behalf. Study data are not fully presented. Footnotes with references are included.