E. Crime

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BASIC CONCEPT OF

ECONOMIC CRIMES

G S C HRD
BASIC CONCEPT OF
ECONOMIC CRIMES
BASIC CONCEPT OF
ECONOMIC CRIMES
BASIC CONCEPT OF
ECONOMIC CRIMES
G S C HRD
WHAT IS
ECONOMIC
CRIME? HRD
WHAT IS
● Also known as financial crime.
ECONOMIC
● Illegal acts committed by an individual

CRIME?
or a group of individuals to obtain a
financial or professional
advantage.
● The principal motive in such
crimes is economic gain.
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WHAT IS
ECONOMIC
● Usually confused with another term,
corruption.
CRIME?
● Regarded to generate a considerable social
damage. 

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TYPOLOGY OF
ECONOMIC CRIME

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● Identity Theft
● Tax Fraud
● Health Care Crimes
● Schemes and Scams
● Cybercrime
● Money Laundering

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• Identity Theft

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• Identity Theft

Identity theft happens when an individual’s


personal data is used fraudulently by
someone else for economic gain. Most often,
the thief obtains information like the victim’s
name, address, phone number and banking
information. They may have gained access
to this data online, from your discarded mail
or even from someone you’ve done business
with.

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• Tax Evasion

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• Tax Evasion
The illegal non-payment or under-payment of taxes, usually by deliberately
making a false declaration or no declaration to tax authorities – such as by
declaring less income, profits or gains than the amounts actually earned, or
by overstating deductions.

Here are the most common types of tax crimes:


 Failing to file a tax return
 Failure to report income
 Attempting to make unauthorized deductions
 Non-payment of taxes

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• Health Care Crimes

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• Health Care Crimes
This type of crime happens when an entity abuses the health care insurance system for
financial gain. This type of crime could be committed by a health care provider,
business, or individual.
Here are some examples:
 Providers who charge more than procedures are actually worth
 Providers who perform unnecessary procedures for
the insurance payout
 Falsifying a diagnosis to justify unnecessary tests
 Overbilling the insurance carrier
 Medical identity theft
 Fabricated health care claims

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• Schemes and Scams

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• Schemes and Scams
These types of deceptions include pleas to
send money either as an investment into a
business, product, or relationship. The
victim sends the money, and suddenly,
you’ve been ghosted. The other person or
business disappears, and so do your
chances at ever seeing your money again.
These types of scams have become even
more common in the Internet era.

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• Cybercrime

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• Cybercrime

Any criminal activity that involves a


computer, networked device or a
network. While most cybercrimes are
carried out in order to generate profit for
the cybercriminals, some cybercrimes
are carried out against computers or
devices directly to damage or disable
them.

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• Cybercrime

 Email and internet fraud.


 Identity fraud (where personal information is stolen and used).
 Theft of financial or card payment data.
 Theft and sale of corporate data.
 Cyber extortion (demanding money to prevent a threatened attack).
 Ransomware attacks (a type of cyber extortion).

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• Cybercrime
 Crypto jacking (where hackers mine cryptocurrency using resources they
do not own).
 Cyberespionage (where hackers access government or company data).
 Interfering with systems in a way that compromises a network.
 Infringing copyright.
 Illegal gambling.
 Selling illegal items online.
 Soliciting, producing, or possessing child pornography.

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• Corruption

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• Corruption
Corruption erodes trust, weakens democracy, hampers economic
development and further exacerbates inequality, poverty, social
division and the environmental crisis.
 bribery,
 embezzlement ,
 trading in influence,
 abuse of function,
 illicit enrichment;

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• Money Laundering

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• Money Laundering
concealing or disguising the origins of illegally obtained proceeds
so that they appear to have originated from legitimate sources

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Historical Background

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Historical Background

● Graeco-Roman Period
 The Romans took banking out
of religious temples and
formalized it in distinct
buildings.

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Historical Background

● 300 CE
 Hegestratos, a Greek Merchant, took out a
loan using his ship full of corn as collateral.
 This sort of loan/insurance policy was called
“bottomry,” referring to a ship’s keel or its
bottom.
 He planned to sink an empty boat, keep the
loan, and sell the corn, his plan failed.

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Historical Background

● Victorian Era
 Embezzlement.
 1473 Carrier's case.
 Flemish merchant hired an English
carrier to carry bales of wool to
Southampton. However, the English
carrier instead took the bales of wool
for himself.

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Historical Background

● Across the Pond, Financial Crime in Early


America & “Ye Olde Sopranos”

 Wherever there’s gambling, there’s sure to be an element of financial crime. It


may have been in the form of illicit pawn-brokering with a market for stolen
goods or a steep vig — the interest charged by a “bookie” who hasn’t received
funds owed. We’re confident that petty financial crimes were rampant. But
what about the big crimes?

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Historical Background

● “Pump and Dump” Investment Scam 1792,


America experienced its first fraud.
 William Duer, a friend of George Washington and assistant secretary of the
Treasury, was in the perfect spot to profit from insider information. 
 He would tip off his friends and make trades before leaking information to the
public that he knew would drive up prices. Then, he’d sell for an easy profit. 

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Historical Background

● “Pump and Dump” Investment Scam 1792,


America experienced its first fraud.

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Historical Background

● Organized Crime
 provide a range of illegal services and
goods, victimizes businesses through
the use of extortion or theft and fraud
activities defraud national, state, or
local governments
by manipulating public projects,
counterfeiting money, smuggling, etc.
 Organized crime include loansharking
of money at very high interest rates.

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Historical Background

● Financial Crime in the Information Age


 Modern financial crimes are happening right now in the forms of:

 Fraud
 Embezzlement
 Illicit loan-sharking
 Money-laundering
 Identity theft and benefit theft
 Senior citizen extortion

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Economic Crime: Theories

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Economic Crime: Theories

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Rational Model of Crime

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Rational Model of Crime

 The profit of the crime is the force which urges man to


delinquency: the pain of the punishment is the force employed to
restrain him from it. If the first of these forces be the greater, the
crime will be committed; if the second, the crime will not be
committed. (Eide, 2000, p. 346)

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Rational Model of Crime

1. Static model of crime - Gary Becker, 1968


 The profit of the crime is the force which urges man to
delinquency: the pain of the punishment is the force employed to
restrain him from it. If the first of these forces be the greater, the
crime will be committed; if the second, the crime will not be
committed. (Eide, 2000, p. 346)
 Stable preferences

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Rational Model of Crime

● Extensions to the static model


 theory of supply and theory of behavior toward risk.
 similar to portfolio models, wherein an individual allocates
assets or resources among different risky and non-risky options.

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Rational Model of Crime

● Extensions to the static model


 Ehrlich (1973)
 In a given time period, a criminal faces only one of two
possibilities: The individual is caught and punished, or the
individual is not caught and, therefore, not punished (Pyle,
1983).

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Rational Model of Crime

● Extensions to the static model


 Block and Heineke (1975)
 The decision to commit an offense cannot be studied only with
regard to how it affects an individual’s level of monetary wealth.
 the psychic costs of crime and employment must be specified
explicitly.

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Rational Model of Crime

1. Dynamic models of crime


 Integrate past experience with forward-looking behavior
 Examines how decisions made in the present affect future
consequences related to employment and expected benefits.

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Rational Model of Crime

● Imai & Krishna, 2004


 one would expect higher crime rates among youth younger than
age 18
• Levitt (1997)
 finds that there is a clear drop-off in the age of arrest after 18 in
states wherein juvenile courts issue milder sanctions compared to
adult courts than in states wherein juvenile sanctions are more
severe.
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Rational Model of Crime

● Flinn (1986)
 Human capital is accumulated at work. As a result, if time spent
on crime lowers time spent at work, the amount of human capital
accumulated by an individual is reduced one would expect higher
crime rates among youth younger than age 18

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Rational Model of Crime

● Williams and Sickles (2000)


 extend Ehrlich’s (1973) model by including social capital to
measure the effect of social norms on an individual’s decision to
engage in crime
 participation in crime decreases the value of an individual’s stock
of social capital, namely, marriage and employability.

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Rational Model of Crime

● Imai and Krishna (2004)


 the incentives to commit crime are reduced when the risks of
apprehension can jeopardize future employment.

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Myopic Model of Crime

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Myopic Model of Crime

 The desire for immediate gratification may, however, lead an


individual to commit a crime that has negative expected returns
in the long-term (Kleiman, 2005)
 When the costs of crime are delayed, the immediate benefits
support the offender’s impulsiveness, resulting in more crime
(McAdams & Ulen, 2008)

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Myopic Model of Crime

• Nagin and Paternoster (1994)


 individuals who are more present-oriented invest less in social
bonds. As such, they are less deterred by the prospects of
breaking those bonds and committing a crime. The astonishing
degree to which youths commit crimes for not only profit but
status, image, and even fun has yet to be fully considered by
economists

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Radical Political

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Radical Political

 Focus on key political and socioeconomic factors that


sustain crime. The key factors in this model are relative
deprivation, poverty and inequality, unemployment, and
class.

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Radical Political

• Relative deprivation
 The degree of deprivation is defined as the distance
between the particular group’s experiences compared with
that of the larger society, which is regarded as a proxy for
what the group is entitled to.

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Radical Political

• Poverty and inequality


 Differences in poverty rates and wealth are commonly viewed as
factors influencing variations in crime rates.
 Crime is an outcome of the poor’s trying to create a better
existence for themselves.

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Radical Political

• Unemployment
 The resulting deprivation then lowers the costs of criminal
activities and punishment. The indirect result is that conflict
increases (Nickerson, 1983).

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Radical Political

• Class
 Marxian analysis.
 Class bias is revealed in the attention that crimes, such as burglary or theft,
receive in comparison with white collar crime, although the latter type of
crimes represent a larger proportion of monetary losses than the former type
(Simon & Witte, 1982).
 Gordon (1973) contrasts white-collar crimes typically committed by the richer
classes of society with those committed by the poor.

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Economic Causation

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CAUSATION
● Expected gains from crime when compared with legal works
● Chance of being caught and convicted
● Extend of punishment
● Opportunities in legal activities.
● High cost of education is the prime reason for illiteracy, lack of
institution and access, corruption and income inequality also
the main determinants of crimes.

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● The development of a global, networked economy opened up
many avenues for such activities as asset misappropriation,
bribery, false accounting, insider trading and money
laundering. Particularly as some countries have immature
controls, checks and penalties for illegal financial activities.

● Organized criminals are highly sophisticated and determined


in the way they misuse their technical abilities.

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Importance of Studies

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Importance of Studies
It has been observed that the impact of economic crime manifests itself in
the phenomena of inflation, poverty, commercial crime, development, and
corruption. In each of the stipulated sectors, a key objective of the inquiry will
determine the causal connection with criminal business. Among its many
deleterious effects on social well-being, violent conflict—including widespread
criminal violence—can undermine economies by reducing investment, output,
and growth. Improvements in economic conditions, such as lower
unemployment and higher wages, play an important role in reducing crime.
So, the changes in the relationship between supply and demand causes crime
as they are inextricably linked.

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REFERENCES
● Economic Crime
https://www.europol.europa.eu/crime-areas-and-statistics/crime-areas/economic-
crime
● What is economic crime? http://www.cipce.org.ar/en/what-is-economic-crime
● The History of Financial Crime: Exploring Examples of Modern Money
Crimes Team BusinessForensics Jan 27, 2021
https://businessforensics.nl/financial-crime-history/
● Economic Crime: Theory
https://www.encyclopedia.com/law/legal-and-political-magazines/econo
mic-crime-theory

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Question, Discussion,
and Open Forum.

G S C HRD
THANK YOU!

G S C HRD

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