RESOURCE MATERIAL SERIES No. 55

THE PREVENTION AND CONTROL OF ECONOMIC CRIMEPeter Grabosky*
I. INTRODUCTION
Economic crime, by which I refer
generally to fraud in its various
manifestations, is among the most costlyof all criminal activities. Although it would
be interesting to determine its cost withsome precision, the total impact isunquantifiable. There are a number ofreasons why attempts to estimate the costof economic crime are bound to be futile.
First, the most skilfully perpetrated
offences are not even detected by victims.
Even when an offence is detected, and thevictim knows that he or she has sustained
a loss, they may be reluctant to report it.
In the case of an individual, he or she may
simply be too embarassed, and the
expectation of recovering lost assets may
be remote or nonexistent. In the case ofan organization, they may be concerned
about possible damage to their commercial
reputation, and decide as a matter ofbusiness judgment not to disclose theirvulnerability.
Statistics aside, our reasons for being
concerned about economic crime should be
obvious to many. The essence of fraud is abreach of trust. Trust is the very
foundation of commerce, and the very basisof civil society. Economic crime thus
jeopardises basic interpersonal relations,
economic development, and in some cases,
even the stability of governments. One
wonders, for example, what the economyof the former Zaire might have become had
its corrupt leadership not plundered thenation’s wealth. The collapse of the
Albanian regime following massive losses* Director of Research, Australian Institute of
Criminology, Australia

44

sustained by thousands of citizens in an
investment fraud constitutes anotherexample. One could compile a long list ofcases, but the purpose of this paper is to
discuss the risks of economic crime, and thecountermeasures which might be put inplace to minimize them. It will place
special emphasis on computer-related
crime, because the convergence ofcomputers and communications will
become the dominant factor in commerce
as we enter the new millenium.
Crime is a changing phenomenon. Some
activities, such as criminal exploitation of
on-line commerce, which wereinconceivable less than a decade ago, now
pose significant risks to the economy andsociety of many nations. Fraud is one
general type of crime which, whilst as old
as commerce itself, may be expected to takenew forms as the 21st century progresses.
In some cases, these forms have alreadybegun to emerge. In the following pages, I
will outline a number of social,demographic and economic developments
which may be expected to influence theshape of economic crime in years to come.
One quickly notes that these trends, andthe variety of economic crime which may
be expected to accompany them, are beyond
the capacity of law enforcement agencies
alone to control.
A. The Environment of Economic
Crime
It has become trite to suggest that theworld is shrinking. The world is now
characterized by unprecedented mobility of
information, finance, goods and services,people, cultural artefacts, flora and fauna,even viruses-both those of the microbial

110TH INTERNATIONAL TRAINING COURSE
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variety as well as those which infect one’s
hard drive.
The globalization of finance, where
electronically mediated exchanges occur innanoseconds, is far removed from the days
where deals were sealed with a handshake,and ‘‘a man’s word was his bond’’. In recent
times, the Barings and Sumitomo
experiences have had significant global
repercussions, with adverse effects onfinancial markets and commodity prices.
In brief, the proliferation of anonymous
financial transactions is accompanied by acommensurate proliferation ofopportunities for betrayal of trust.
II. VARIETIES OF ECONOMIC
CRIME
Let me just outline some of the major
forms of economic crime which confront us
as we approach the 21st century. The
following categories are not mutually
exclusive, but are intended to illustrate therange and variation of economic crime.
A. Insurance fraud
Insurance is a most important
institution, enabling us to spread risk andthereby engage in activities of tremendous
commercial or individual benefit. With
insurance, however, comes the opportunity
for fraud. The fabrication of false insurance
claims is as old as the institution of
insurance itself. Whether at the hands ofopportunistic individuals, or criminalorganizations, the cost of insurance fraud
is substantial, and often borne by honest
and law abiding policyholders.
B. Fraud against Governments
Governments are at great risk of fraud.
They dispense benefits, and many citizens
are not beyond obtaining these benefits
fraudulently. They buy goods and services,and many purveyors of these goods andservices are not beyond providing inferior

products or otherwise inflating their
invoices. Governments raise taxes, andmany taxpayers evade payment.
Government employees may divert public
assets for private use. When governments
are defrauded, all honest citizens pay theprice. To the extent that funds defrauded
would otherwise be spent on worthwhile
government programs, the public suffers
twice.
C. Fraud against Employers
Organisations, whether in the public or
private sector, may be at risk from theiremployees. Embezzlement or theft ofmoney, goods or services by employees canmean the difference between economic
survival or collapse. When an employer’s
business fails because of employee theft,
law abiding employees are among those
who pay the price.
D. Fraud against Consumers
Purveyors of goods and services cancheat their customers in many ways. They
may provide defective or inferior products
or fail to deliver goods and services
entirely. They may advertise theirproducts in a deceptive manner. At theextreme, this can lead to death or injury,in the case of dangerous products
purported to be safe. At the very least, theconsumer or will pay more for a productthan he or she should
E. Telemarketing Fraud
The media of commerce are alsochanging. The days of face-to-faceexchange are yielding to increased sales bymeans of mail-order and telemarketing.
Telemarketing may involve the use of thetelephone, or increasingly, the internet,
which may well become the dominantmedium of commerce in the coming
century. While these new media offer
greater opportunity and choice for
consumers, they also pose greater risk; the45

RESOURCE MATERIAL SERIES No. 55
greater the uptake of new technologies forcommercial application, the greater therisk that they will be exploited for criminal
purposes.
F. Fraud against Shareholders andInvestors
The directors of large companies may
divert company assets for personal use.
When this occurs on a scale sufficient toeffect the company’s financial performance,
shareholders and investors suffer. At theextreme, companies may collapse leaving
investors and creditors at a loss. Endemic
fraud can taint an entire economy, leading
to capital flight and discouraging foreign
investment.
G. Superannuation Fraud
The world’s industrialised nations are atpresent experiencing economic change at
a dramatic pace. One of the most dramatic
examples of such change is the growth of
the superannuation industry, which
establish and manage private pension
funds. Over 100,000 superannuation funds
currently exist in Australia alone. Aroundthe world, vast sums have accumulated,
and the superannuation savings poolcontains trillions of dollars.
This is not to suggest that persons
charged with the stewardship of such funds
have unusual criminal propensities, but
again, the sheer volume of money
constitutes what may be an irresistible
temptation to the unscrupulous. Abusesof superannuation funds in the UnitedStates and the United Kingdom illustrate
the attractiveness of such enormous
amounts of money to those who would
commit fraud. Short of the risk of outright
fraud, the risk of imprudent management
cannot be ignored.
H. Bribery and Corrupiton
Public officials may demand or accept
financial or other considerations as the46

price of doing business. This can erode thelegitimacy of an entire government.
Companies in the private sector may
require side payments from suppliers. In
the long run the cost is borne by consumers.
Widespread, entrenched corruption cand e t r a c t f r o m a n a t i o n ’s e c o n o m i ccompetitiveness, and may discourage
foreign investment.
I. Money Laundering
The term ‘Money Laundering’ is used todescribe the process by which the proceedsof crime (‘dirty money’) are put through aseries of transactions which disguide theirillicit origins, and make them appear tohave come from a legitimate source (‘clean
money’). This makes criminal activity moredifficult to detect, can lead to the criminal
infiltration of legitimate business, and candistort the ecnomies of small nations.
J. Telecommunications Fraud
As telecommunications services become
more widely accessible, the theft of suchservices becomes more common. From the‘cloning’ of cellular telephones, to theunauthorised access and use of telephoneswitchboards, to the fabrication of stored
value telephone cards, millions of dollarsof telecommunications services aremisappropriated.
K. Credit Card Fraud
There are four basic vulnerabilities ofplastic card payment systems:
1. Vulnerability of cards to alterationand counterfeiting;
2. Vulnerabilities arising from the issueof cards;
3. Vulnerabilities arising from card
holder identification systems (PINs);
and
4. Vulnerabilities arising from themisuse of cards.
As plastic cards eclipse the use of

110TH INTERNATIONAL TRAINING COURSE
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currency, opportunities for their misuse
will increase. The cost will be borne bymerchants, and by card issuers.
L. Industrial Espionage
The world of international business isin some respects a jungle. Competitors athome and abroad, and nations which might
be hosts to a company’s investment, may
have a strong interest in a company’s trade
secrets and other economic intelligence.
The lengths to which some will go in orderto acquire such information are
substantial, and at times, illegal.
Industrial espionage by governments andprivate sector institutions is a fact ofcontemporary commercial life. One’sc o m p a n y ’s , i n d e e d o n e ’s n a t i o n ’s ,competitive advantage may be at stake.
M. Theft of Intellectual Property
Copyright infringement can occur
quickly and easily, greatly facilitated by theadvent of digital technology. Text, video,
sound, designer labels and computer
software can be copied and reproduced asnever before. Unrestrained, such modern
forms of piracy can discourage invention
and innovation, and deprive artists andcreators of the royalties to which they areentitled.
N. Forgery
Currency, negotiable instruments, anda variety of other valuable documents may
be forged or counterfeited. The advent ofdigital technology, including scanning andcopying, enables almost perfect
reproduction. Not only may the recipient
be left holding a worthless piece of paper,
but forged documents can be used in thefurtherance of a variety of other economic
crimes.
O. Business Opportunity Fraud
In the industrialised world, thedownsizing of organizations in both the
public and the private sector has begun to

generate growing numbers of individuals,
in mid-career, with significant disposable
income. With increasing sums of money toinvest, the temptations of fiduciary fraud
are bound to increase.
In addition to entrusting their funds tofinancial managers, those with money toinvest may wish to start a small business.
Unfortunately, they are also within reachof other fraudsters who would exploit them.
Business opportunity fraud or other ‘getrich quick’ scams may be an unfortunate
by-product of a nation’s move to a morecompetitive economy.
One of the easiest avenues into small
business is through purchase of a franchise.
It has been estimated that in the UnitedStates, by the year 2000, over half of allretail sales will occur through franchisedestablishments. Short of the most blatantform of franchise-related fraud, i.e. simply
taking the new franchisee’s up-front moneyand disappearing with it, there remains thepotential for a variety of lesser
misrepresentations, such as overstatementof earnings potential and understatementof risks or other hidden costs of a franchise
agreement.
P. Electronic Funds Transfer Fraud
The move to a cashless society has
significant implications for both law
enforcement and society. Although
reducing the use of cash in the community
may help to solve traditional forms of bankrobbery and theft, new cashless payment
systems will create new problems. The
proliferation of electronic funds transfer
systems will enhance the risk that suchtransactions may be intercepted anddiverted. Existing systems such as
Automated Teller Machines and Electronic
F u n d s Tr a n s f e r a t P o i n t o f S a l etechnologies have already been the targetsof fraudulent activity. Most of the large
scale electronic funds transfer frauds which

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RESOURCE MATERIAL SERIES No. 55
have been committed have involved theinterception or alteration of electronic data
messages transmitted from bankcomputers, sometimes with the complicity
of bank employees. The development ofelectronic commerce will be impeded to theextent that the security of electronictransactions is threatened.
Q. Commonalities
One common thread running throughmost if not all of the types of economic crime
listed above is that they are greatly
facilitated by recent developments in
information technology. This does notmean that we should ‘pull the plug’ on our
computers. Indeed, if we were to reject alltechnologies because of their potential forabuse, we would have rejected the wheel.
Rather, we must learn to exploit thebenefits of new technologies, and manage
the risks which accompany them. But weshould not underestimate the challenges
which the digital age poses to those of us
involved in the prevention and control of
economic crime.
Where computers are used in thecommission of fraud, difficulties ofinvestigation are exacerbated, as offenders
are able to disguise their identities andactivities through the use of complex
electronic technologies. Those who seek tomask their identity through the use ofcomputer networks are often able to do so,by means of ‘looping’, or ‘weaving’ throughmultiple sites in a variety of nations.
Electronic impersonation, colloquiallytermed ‘spoofing’, can be used infurtherance of a variety of criminal
activities, including fraud. Anonymous emailers and encryption devices can shield
one from the scrutiny of all but the mostdetermined and technologicallysophisticated regulatory and enforcement
agencies. As a result, some crimes may not
result in detection or loss until some timeafter the event, thus making the process48

of investigation ever more challenging.
Other issues which may complicate theinvestigation of computer-based frauds
entail the logistics of search and seizure
during real time, the sheer volume ofmaterial within which incriminating
evidence may be contained, and theencryption of information, which may
render it entirely inaccessible, or accessible
only after a massive application ofdecryption technology.
R. Economic Crime in a Shrinking
World
It bears noting that not only can many
fraudulent initiatives originate on theother side of the globe, few remedies areavailable to the unfortunate individual who
might fall victim to transnational economic
crime. Even if one is able to mobilize thelaw, the chances of locating the offender,
obtaining extradition, mounting aprosecution, or recovering compensation
may be impossible.
Particular problems arise when financial
crimes are committed against a local
company or government agency by a person
situated in a foreign country.
Enlisting law enforcement assistance inthe foreign country may be difficult, as
their resources will be finite, and theirpriorities may well lie elsewhere.
Even when a perpetrator has been
identified, two problems arise in relation
to the prosecution of offences which havean international aspect: first, thedetermination of where the offence
occurred in order to decide which law toapply and, secondly, obtaining evidence andensuring that the offender can be locatedand tried before a court. Both thesequestions raise complex legal problems ofjurisdiction and extradition.

110TH INTERNATIONAL TRAINING COURSE
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Additional problems are reflected in the
difficulty of exercising national sovereignty
over capital and information flows.
Jurisdictional issues may arise fromtransborder online transmission. If an
online financial newsletter originating in
Albania contains fraudulent speculation
about the prospects of a company whose
shares are traded on the Tokyo Stock
Exchange, where has the offence occurred?
Even if the host law enforcement
agencies are willing and able to assist,collection of evidence in the foreign country
may be problematic. Distance will be moreof an impediment to the thief-taker than
to the thief. The cost of sending law
enforcement officers abroad to assist in an
investigation, or the cost of bringing
witnesses from abroad to testify inproceedings, may be prohibitive. Eventhen, there are often legal impediments
which must be overcome. The laws ofevidence of one’s own country are not likely
to be instantly hospitable to all evidence
obtained from abroad. In nations where adegree of thought has been given to theseissues, mutual assistance arrangements
may be reached with selected nations forthe collection of evidence on their soil, andspecial legislation may be enacted toprovide for the admissibility in one’s own
courts of evidence taken abroad.
It must be emphasized that none of these
impediments to the investigation andprosecution of transnational economic
crime are unique to high technology
offending. They exist for more conventional
forms of criminality as well. Theirsignificance is heightened, however, given
the increased opportunities fortransnational offending which newtechnology provides.
Extraterritorial law enforcement costs
are also often prohibitive. Moreover, thecooperation across internationalboundaries in furtherance of suchenforcement usually requires a congruenceof values and priorities across nations
which, despite prevailing trends towards
globalization, exists only infrequently.
This may be less of a problem with fraud
than with matters relating to political or
artistic expression.
III. COUNTERMEASURESThe extreme diversity of economic crimein its many manifestations means that noone institution of prevention or control will
suffice. There can be no ‘magic bullet’ orpanacea. The police alone will be unable
to cope with economic crime. Rather, eachseparate type of economic crime will be best
addressed by a combination ofcountermeasures. Some of these will begovernmental, some will lie in the handsof the prospective victim, and some will beat the disposal of third parties.
1. The first line of defence against
economic crime is awareness of one’s
vulnerability. The popular term for thisis ‘risk assessment’. This applies to theindividual consumer or investor, whoshould become familiar with the basic
pitfalls of the marketplace; tocompanies, who should be aware of theprocedures and processes which are
likely targets; and to governments,
whose various functions (such as
payment of benefits, and purchasing ofgoods and services) may be targeted for
criminal exploitation.
2. The next step is to take necessary
precautions. The key to fraud
prevention on the part of organisations,
whether of the public or the privates e c t o r, i s t h e d e v e l o p m e n t a n drefinement of a fraud control system.
Having identified one’s points ofvulnerability, one should put individual
systems and processes in place which

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RESOURCE MATERIAL SERIES No. 55
protect these vulnerabilities from‘‘attack.’’ These principles apply to thecontrol of ‘‘electronic’’ economic crime;
those offences committed with oragainst telecommunications andinformation systems, as well as themore conventional. The foundation forsuch a system is a management
philosophy which is sensitive to fraudrisk. The basic elements of such asystem are careful recruitment of staff,
a culture of integrity and loss
prevention within the organisation,and formal procedures for theprotection of assets.
The design of systems can be an
important means of fraud prevention. The
introduction of a requirement that therecipients of public funds have an accountwith a financial institution in which thefunds can be deposited automatically, has
dramatically reduced the risk of lost or
stolen cheques, or fraudulent claims.
Fraud control systems may include
technologies as diverse as the requirementthat company cheques be signed by two
people, to sophisticated systems of
biometric authenticalion (based on physicalcharacteristics such as fingerprints orretinal images) required for access to acomputer system. Let us briefly review
some of the basic principles for theprevention and control of economic crime.
A. Audit
The scrutiny of a company’s accounts byan independent auditor is an importantsafeguard against economic crime. It is by
no means ‘fail-safe,’ as accountants all too
often fail to detect irregularities. The very
necessity of having to prepare accounts in
a form suitable for independent scrutiny
and then subjecting them to a degree of
examination is an important first step.
B. Transparency
It was once said that ‘sunlight is the best50

disinfectant’. Procedures for the public
disclosure of basic aspects of agovernment’s or a company’s operations
can help safeguard against a variety ofcrimes. Freedom of information legislation
can facilitate citizen access to government
information. This is not to suggest that
trade secrets, or military secrets for thatmatter, be made available to anyone whowants them. Rather, that fundamental
information is available to keep markets,and citizens, informed.
The requirement that organizations inboth the public and private sectors publish
regular accounts which disclose details of
income and expenditure, including thesalaries of executives, and liabilities
relating to environmental pollution, has
become an international standard of bestpractice. Markets are beginning to expect
nothing less.
C. Procedures for Independent
Review of Administrative
Decisions
The possibility of bias or otherirregularities in the administrativedecisions of governments can be addressed
through the system of administrative law.
Procedures for the independent review
of administrative decisions by a speciallyconstituted court, the institution of an
Ombudsman with investigative powers
who can hear complaints by individual
citizens, and freedom of information
legislation which provides public access togovernment documents are three ‘prongs’of an administrative law system which cancontribute to the integrity of governments.
D. Specialized Bodies for theInvestigation and Prosecution of
Serious Economic Crime
In many nations around the world, theinvestigation of complex and sophisticatedeconomic crime lies beyond the capacity of110TH INTERNATIONAL TRAINING COURSE
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conventional law enforcement agencies.
Some have thus created new agencies withspecial powers and expertise to address
specific issues. The Independent
Commission Against Corruption (HongKong); the Serious Fraud Office (UK) andtheir variations elsewhere, are all
examples of such agencies. This is not tosuggest that specialised bodies are an
essential solution to all problems in all
jurisdictions. Where more general law
enforcement bodies are adequate, there
may be no need to create new ones. Indeed,a proliferation of agencies may lead tooverlap and duplication, to bureaucratic
rivalries, and to important cases ‘falling
between the cracks’. The effective
exchange of intelligence and operational
information can be made difficult. Such alack of cooperation may often be to theadvantage of offenders who may be able todelay or avoid detection and prosecution
through a lack of coordination on the partof law enforcement agencies. But theincreasing specialisation of economic life
suggests that designated organizations
may be appropriate in some circumstances.
E. Cash Transactions Reporting
The challenge of money laundering andtax evasion is made that much easier, when
the offender is able to shift funds from place
to place undetected. To this end, a growing
movement among nations around the world
has seen the development of cashtransactions reporting systems. Banks andother financial institutions are now
required to report to a central authority alltransactions over a specified amount, or
any transaction of any amount whichappears in some manner to be suspect. In
those jurisdictions where cash transaction
reporting systems are in place, it becomesthat much easier to ‘follow the money trail’.
F. A Free Press
We have already noted the famous adagethat sunlight is the best disinfectant. To

the extent that an open and free press
exists within a nation, questionable
practices will be subject to questioning.
This is important across a range of offences,from bribery and corruption, to consumer
fraud, to fraud against shareholders anddirectors. This is not to suggest that somemedia are always virtuous and responsible
in their coverage. They most certainly are
not, but it cou1d be said that the best
antidote for irresponsible speech is more
speech.
G. An Adequate Regulatory System
Freedom of expression does not extend
to the freedom to publish false or
misleading advertising, or spurious
commercial claims. A regulatory system
which can identify such misconduct, andrespond to it effectively, will help insure
the integrity of markets. This need not be
the exclusive province of government.
Private remedies such as civil litigation,and self regulatory regimes by individualcompanies and industry associations, areno less important than government
agencies. A regulatory system which
combines private and public remedies islikely to be more effective than one based
solely on government or on self regulation.
H. Mechanisms for Building Public
Awareness
By no means should knowledge about
fraud and fraud risks remain the monopolyof law enforcement agencies. The first lineof defence against fraud can and should beself help; appropriate knowledge should beshared with private citizens, businesses
and public sector agencies alike. All
prospective victims of fraud, this includes
just about everyone, should be aware of thetypes of fraudulent activity to which they
are most vulnerable: the ‘red flags’ orindicia of fraud; the most appropriate
means of prevention; and the best avenuesof response when they detect an offence.

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RESOURCE MATERIAL SERIES No. 55
New developments in communications
permit not only the dissemination of basic
fraud control information, but also thereporting of suspicious activity toappropriate authorities. The Internet
abounds with materials on fraud control;some industry-specific, others focusing on
certain vulnerable groups such as seniorcitizens. Other sources of information are
medium-specific; sites are dedicated towarning of fraud on the Internet.
Moreover, many law enforcement andregulatory agencies have establishedhotlines which are available to fraud
victims or civic-minded third parties toreport illegal or questionable conduct.
I. Freedom for Individuals to Form
Non-governmenta1 Organizations
Some of the most effective activities tocombat economic crime comes from citizen
activity. Before the rise of the modern
State, citizens performed a number offunctions (including policing, prosecution,and imprisonment) which later became
governmental functions. Even in modern
times, one sees in some nations activities
undertaken by citizens’ groups which
complement the work of government
agencies. The examples of victim
assistance and prison aftercare
associations come immediately to mind.
The control of corruption is greatly
facilitated by organisations such as
Transparency International. Consumer
groups and Better Business Bureaus
remain vigilant against unfair trading.
Citizens crime commissions are vigilant
against activities as diverse as abuse of
power by law enforcement agencies,
bribery, and electoral fraud.
J. Responsible Banking
In addition to their role in the preventionof money laundering, banks and otherfinancial institutions have an importantrole to play in the prevention and controlof economic crime. Prudent lending

52

practices will deny opportunities to theunscrupulous. The challenge facing
governments today is to allow sufficient
flexibility in the financial services industry
to permit the economy to flourish, but also
to provide sufficient safeguards to protect
against irresponsible or predatory conduct.
K. Commercial Third Parties
A variety of other third parties cancomplement the work of governments inthe prevention and control of economic
crime. A burgeoning industry in
information security can assist clients inboth public and private sectors to ensure
the integrity of their systems. All of thelarge multinational accounting firms offer
fraud control services to clients anywherein the world. Many have establisheddepartments or subsidiaries specialising in
fraud prevention. Their products range
from a total review of risk management
practices to more narrowly focused issues
such as security of information technology
systems.
Private fraud control services are by nomeans limited to prevention. Privateorganisations which find themselves thevictims of fraud may retain their own
inhouse investigators, or may engage
specialised fraud investigators residing in
the private sector. These private
investigators may conduct an entire
investigation, handing the matter over tothe police for prosecution. This is common
in the Australian insurance industry in
response to insurance fraud.
Market forces themselves may exert
positive effects from time to time on the
behaviour of some public and privateorganizations. There are opportunities forthe second-order operation of market forces
through the guidance provided by financial
and insurance institutions, and by
institutional investors.

110TH INTERNATIONAL TRAINING COURSE
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L. An Open Political System
An open political system permits
individual citizens, interest groups, or an
organised opposition the freedom toquestion policies and programs. A viable
political opposition can be alert to financial
irregularities in both public and private
sectors, and can make them more difficult
to conceal.
M. International Co-operation
Because many fraud offences do not
involve face-to-face interactions in theircommission, it is possible for offenders andvictims to be located in more than one
jurisdiction. More sophisticatedconspiracies may involve individuals inthree or more jurisdictions with i nAustralia or overseas. Few remedies areavailable to the unfortunate individual who
might fall victim to such activities. The
transnational dimension of many economic
crimes requires unprecedented
international cooperation. This
cooperation must occur on many levels,from the most formal, involving treaties
and mutual assistance arrangements, toinformal liaison between and exchange oflaw enforcement personnel. In the case oftransnational electronic crime, it will
require very timely cooperation indeed,
involving the capability of contacting
overseas authorities at a moment’s notice.
N. Sanctioning of Offenders.
While some would argue that severe
penalties do not always deter crime, or that
increasing penalties are unilikely toachieve a commensurate decrease in crime,
one should not ignore the potential
usefulness of punishment for economic
crime. Perhaps to an extent greater thanin other areas of crime, economic crime isoften based on rational decision making.
Embezzlement does not occur in a momentof passion; corrupt payments are not madein an alcoholic rage. Penalties
commensurate with the seriousness of thecrime can send a message to would-be
offenders, as well as educating the publicthat economic crime is serious and will not
be tolerated.
O. Economic Crime Prevention
Requires a Combination ofCountermeasures
None of the above solutions isguaranteed to prevent economic crime. But
each helps reduce the risk. The more thatare in place, the more difficult it is toperpetrate fraud and other forms of
economic crime. Here it may be useful to
use the analogy of a web. Any one strand
of a web may be insufficient to support aload. But many strands, interwoven, may
be very strong indeed. Alternatively,
consider a cable. The same principle
applies.
The prevention and control of economic
crime, however, should avoid imposing
unrealistic burdens on commerce or on
agencies of the State. Absolute integrity
may be unattainable, and its pursuit may
have counterproductive consequences. One
might speak of ‘burning the house to roast
the pig’. At the end of the day, it is theoverall health of the economy and theintegrity of its markets which mattersmost. Initiatives for the prevention andcontrol of economic crime should beundertaken according to a risk-benefit
calculus. This would see the most stringent
controls operating where there issignificant vulnerability to catastrophic
loss, with fewer controls in place when risk
is correspondingly less. The challenge forthe future lies in designing systems which
will reduce opportunities for fraud, whileat the same time allowing commerce toflourish.

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