Psychology of Criminal Behaviour: A Canadian Perspective Chapter 6: Economic Crime
CHAPTER 6: Economic Crime
1. Distinguish the various types of white-collar crime.
2. Differentiate between theft and fraud.
3. Contrast characteristics of prostitutes versus their clients.
4. Describe characteristics of organized crime groups.
5. List the illegal activities engaged in by organized crime.
6. Discuss the connection between substance abuse and economic crime.
7. Identify the core features of drug treatment courts.
White-collar crime is partitioned into occupational crime versus corporate crime.
Occupational crimes are offences committed against businesses and government by
those with a “higher” social status. Examples include expense account fraud and tax
evasion. In contrast, corporate crimes are committed by organizations to advance
their own interests. Corporate crime offences include price fixing. The distinction
between occupational and corporate crime can be thought of as occupational crime
being focused on individuals and corporate crime being focused on organizations.
Theft is the notion of “stealing”; that is, taking something that belongs to someone
else. Theft is covered in section 322 of the Canadian Criminal Code. There is a
demarcation line at $5000 when deciding on punishment for theft. Fraud occurs
when deceit or fraudulent means are used to deprive someone of property, money,
valuable security, or services. The Criminal Code defines fraud in section 380. There
are two categories that are similar to theft: fraud under $5000 and fraud over $5000.
Many thefts also can be frauds and it is sometimes up to the police to decide whether
to charge an offender with fraud or theft.
Compared to non-prostitute youth, adolescent prostitutes are classified as runaways
more frequently and use a wider variety of drugs, whereas the non-prostitute youth
experience more childhood physical abuse. The characteristics reported in previous
research, although present in adolescent prostitutes, do not differ significantly from
adolescent non-prostitutes. Although adolescent prostitutes have a number of issues
(e.g., abuse and poor family relations, low self-esteem), these variables are also present
in the adolescent non-prostitutes. Clients are significantly less likely to subscribe
to a feminine sex role orientation, have lower social-sexual effectiveness, and have
higher sensation seeking tendencies.
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A “criminal organization” is defined in section 467.1 of the Criminal Code as a group
1. composed of three or more persons in or outside of Canada; and
2. has as one of its main purposes or activities the facilitation or commission of one
or more serious offences that, if committed, would likely result in the direct or
indirect receipt of material benefit, including financial benefit, by the group or by
any of the persons who constitute the group.
Organized crime groups engage in fraud, including mass-marketing fraud and intellectual
property rights crime, the sex trade (including prostitution and human trafficking),
and the drug trade, including the importation and distribution of a variety of
drugs such a marijuana and cocaine.
The drug trade often involves organized crime groups. Individuals in the drug trade
may or may not have drug abuse problems. Those with substance abuse problems may
engage in economic crimes such as theft and prostitution to support their drug habits.
The core features of drug treatment courts include:
1. they reduce crime committed as a result of drug dependency through court-
monitored treatment and community service support for offenders;
2. they reduce the cost of substance abuse on the Canadian economy;
3. offenders participate in a structured outpatient program where they attend both
individual and group counselling sessions, receive appropriate medical attention
(such as methadone treatment), and are tested randomly for drugs;
4. offenders make regular court appearances, where a judge reviews their progress
5. can then either impose sanctions (ranging from verbal reprimands to expulsion
6. the program) or provide rewards (ranging from verbal praise to fewer court
7. and staff associated with drug courts coordinate with community partners to
address offender needs, such as housing and employment.
Once an offender has conquered his or her addiction, criminal charges are either stayed
(i.e., suspended or postponed) or the offender receives a non-custodial sentence (i.e.,
house arrest). If unsuccessful, an offender will be sentenced as part of the regular court
A number of crimes are committed with the purpose of economic gain.
Although Canada may have a “getting tough on crime” position, which is
evidenced in higher incarceration rates compared to other countries, this
notion seems to apply to violent offending rather than economic
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on an international scale, Canada is viewed as soft” on white-collar crime,
with few prosecutions and even fewer convictions.
Following a four-year span where a group of dedicated Royal Canadian
Mounted Police were tasked with investigating white-collar crime in
Canada, there were only two convictions—both against the same person.
This chapter will focus on crimes that occur with a primary goal of
financial profit; examine various types of economic crime and their
offenders and discuss the role of substance abuse both in the context of a
commodity to be sold for financial gain as well as the role it plays in other
types of offending.
Violence may or may not occur during the commission of these crimes,
although most often, if violence does occur, it is when the financial gain is
economic crime can be defined as criminal offences where the primary
motivation is for economic gain
to combat economic crime, a partnership must be formed across various
levels of government, law enforcement, business, and private sectors.
The Reporting Economic Crime Online (RECOL) group – the Royal
Canadian Mounted Police (RCMP), along with the Ontario Provincial
Police (OPP) and the Internet Fraud Complaint Centre (IFCC), joined
together to provide a mechanism to report economic crime that deals with
corporate/occupational/white-collar crime and fraud.
For other types of economic crime, such as prostitution and drug
trafficking, the RCMP and/or provincial police and international agencies
may be involved.
2. Types of Economic Crime:
white-collar crime is partitioned into occupational crime versus corporate
Occupational crimes are offences committed against businesses and
government by perpetrators with a “higher” social status.
These offences include expense account fraud and tax evasion.
Corporate crimes are offences committed by organizations to advance
their own interests.
Corporate crime offences include price fixing (i.e., companies that all sell
the same product decide on a price, preventing price variability for the
consumer) and the payment of kickbacks to manufacturers or retailers
(who use the organization’s product).
The distinction between occupational and corporate crime can be thought
of as crime focused on individuals versus crime focused on organizations
White-collar criminals tend to work for the institution they are stealing
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this theft may be ongoing due to lack of detection, or the organization may
prefer not to report it to avoid publicity.
White-collar criminals may be fired and/or requested to pay back the
equivalent of what they stole.
Federal, provincial, and municipal laws prohibit various corporate crimes.
Typically, government inspectors are responsible for the enforcement of
corporate offences and tend to have less authority to investigate than
Corporate crime can cause far greater financial harm and personal injury
(sometimes leading to death) than traditional crimes such as assault.
Profiling the Typical Offender of White-Collar Crime
Historically, white-collar criminals were viewed as high status and
respectable are often male, highly educated, and in an upper management
Following the work of Sutherland in the 1940s, a further distinction was
made to recognize corporate crime that occurs with the support of an
organization and occupational crime committed by an individual offender
Occupational fraudsters were thought to be primarily middle class
the common characteristics of offenders of “white-collar” crime: Age,
Race and Gender:
Unlike “traditional” offenders, the common white-collar offender is a
White, male, approximately 40-years-old
In contrast, the common street offender is described as a Black, male,
approximately 30-years-old (U.S. statistics).
Male offenders seem to outnumber female offenders when it comes to
Historically, women tended to occupy lower level positions such as
clerical positions compared to males who tended to have higher level
positions making it more likely that males would be in a position to
commit white-collar or economic crime.
White-collar criminals tend to have greater educational attainment
compared to other types of offenders
Higher level corporate positions require a particular level of education
whereas, more traditional offenders may have histories of low academic
achievement and be high school dropouts for example.
Often white-collar criminals will have knowledge and be involved in the
financial aspects of the organization that would facilitate occupational
crime such as embezzlement.
An individual’s position in the organization facilitates the types of white-
collar crimes possible to commit.
Those in managerial or executive positions may have greater opportunities
to commit white-collar crime.
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It should be noted that for most crime, including white-collar crime, male
offenders outnumber female offenders; an exception being prostitution as
described later in this chapter.
Common Characteristics of Victims of Organizational Crime
A study found that there was a positive association between the size and
level of bureaucracy of the organization and the willingness to approve of
stealing from that organization.
Corporations with large bureaucracies can receive little sympathy from the
public, often perceived as making large profits
Very generally, larger organizations are associated with greater crime than
A number of factors have been found to interact with organizational size
however, including decentralization and level of control
Organizations that have greater internal controls such as audits and
anonymous reporting systems, are less likely to be victimized.
if these controls then result in the dismissal of guilty employees less
victimization will occur
In a recent study, results found that individuals who made fraudulent
statements tended to be “high status.”; those involved in asset
misappropriation or corruption were considered “middle-class” offenders;
the organizations that were victimized for corruption were large profit-
generating corporations; asset misappropriation was committed in smaller
organizations compared to larger organizations; fraudulent statements
were primarily made in smaller organizations.
One study found that white-collar criminals were more hedonistic (i.e.,
more supportive of the pursuit of pleasure and life enjoyment) and had a
greater likelihood of giving into temptation where they had the
opportunity to make money illegally. The criminals also had stronger
narcissistic tendencies and less behavioural self-control than the managers.
White-collar criminals were more conscientious.
Another study found that found that white-collar criminal have lower
integrity than non-criminals, irresponsibility, lack of dependability, and a
disregard of rules and social norms on the part of white-collar criminals.
According to a 2007 survey by PricewaterhouseCoopers, approximately
52 percent of Canadian companies surveyed stated they had been victims
of economic crime.
This rate is a 3 percent decrease from data obtained in 2005, but a 6
percent increase from 2003.
The estimated average loss was US$3.7 million. A similar survey was
conducted among companies in various countries around the world.
Approximately 43 percent reported being victims of economic crime,
losing an average of US$2.4 million.
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white-collar crime results in a loss of approximately $250 billion per year
in the U.S., compared to an approximate $17.6 billion for losses due to
personal and household crimes.
the U.S. Department of Justice (2005) reports that white-collar crime is a
low priority compared to violent crime and issues regarding national
This lower priority is reflected in the degree to which researchers and the
criminal justice system investigate personal violence crime versus white-
Punishing White-Collar Criminals
In a national telephone survey to assess the public’s view on white-collar
crime versus street crime, a large proportion of respondents wanted white-
collar criminals punished as harshly or more harshly than violent
This finding is contradictory to earlier research, possibly due to the recent
media attention on a number of high-profile white-collar crime cases
Respondents also wanted greater government resources allocated to
combat white-collar crime.
Along similar lines in 2007 a study found that U.S. citizens perceived
street criminals as more likely to be apprehended and sentenced more
severely than white-collar criminals.
These researchers also found that the public felt that those who commit
robbery should be punished similarly to those who commit fraud.
In 2003, the National White-Collar Crime Centre of Canada (NW4C) was
incorporated under the Canada Corporations Act in order to prevent and
respond to economic crime by linking national and international systems
through the Reporting Economic Crime Online centre (RECOL) and
Phonebusters National Call Centre (PNCC) for private- and public-sector
regulatory and law-enforcement organizations concerned with preventing,
investigating, and prosecuting economic crime.
There are a number of acts dealing with various forms of economic crime.
Economic crime generally is synonymous with the notion of “stealing”;
that is, taking something that belongs to someone else.
The Criminal Code of Canada (section 322) states that “every one
commits theft who fraudulently and without colour of right takes, or
fraudulently and without colour of right converts to his use or to the use of
another person, anything, whether animate or inanimate, with intent.”
there is a demarcation at $5000 when deciding on the punishment for a
Theft over $5000 is an indictable offence with a maximum punishment of
10 years imprisonment.
Theft under $5000 is considered a hybrid offence, meaning it can be
treated either as an indictable offence or a less serious summary
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This decision is made by the Crown’s office prosecuting the case.
If theft under $5000 is prosecuted as an indictable offence, the maximum
penalty is imprisonment for not more than two years.
As a summary conviction, the maximum penalty is six months
imprisonment, a fine of $2000, or both.
A common type of theft is shoplifting.
It is not a specific criminal offence, but simply a theft categorized by the
value of the merchandise stolen under the Canadian Criminal Code.
It incorporates both low-value and high-value items.
Under section 380 of the Criminal Code of Canada, fraud is divided into
two categories: fraud under $5000 and fraud over $5000.
Fraud occurs when deceit or fraudulent means are used to deprive
someone of property, money, valuable security, or services.
Many thefts can also be fraud, and it is sometimes up to the police to
decide whether to lay a fraud charge or a theft charge against an offender.
Consider the scenario in which a person switches price tags at a store,
attaching the price tag of a lower-priced good to a more expensive item.
This is really an example of theft, but police may choose to lay a fraud
charge because the person technically paid for something.
In other words, the price paid was illegitimate, so the fraud is the
difference between the actual value and the price paid.
A critical element in fraud is that the offender uses deception to take
something that does not belong to them.
Identity theft refers to the collection, possession, and trafficking of
personal information - it typically takes place independent of, or in
preparation for, the commission of identity fraud.
Identity fraud refers to the use of another’s personal information without
their knowledge or consent to commit various crimes such as fraud, theft,
The Criminal Code lists as offences the misuse of another person’s
identity information, including impersonation and forgery.
However, the collection, possession, and trafficking of identity
information is not against the law.
The Canadian government is working on legislation to amend this area of
The new legislation will provide law enforcement and the legal
community with tools to deal with these offences.
Other Types of Fraud
In addition to identity fraud, a number of other types of fraud are possible.
1. Advance fee fraud: Fraud that requires a payment before delivery of
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2. Online auction fraud: Fraud that occurs through online purchasing
(e.g., non-delivery of goods and services, non-payment for goods
3. Investment fraud: Fraud that occurs with investments impacting a
person or company (e.g., insider trading)
4. Counterfeit: Fraud associated with counterfeit currency or payment
cards (e.g., currency counterfeiting)
5. Home renovation fraud: Fraud associated with home and property
renovation services or sale (e.g., real estate fraud)
6. Health fraud: Fraud associated with health care or services, including
7. Fraudulent bankruptcy: Fraud associated with personal or corporate
bankruptcy claims (e.g., concealment of assets)
8. Corruption/bribery: Any misuse of power and position by a public or
non-government official (e.g., bribery of a public official)
Providing sexual services in exchange for money is broadly known as
This “exchange” requires a buyer and a seller, who may be heterosexual or
Female sellers and male buyers constitute the most common form of
prostitution, with male homosexual exchanges occurring less frequently.
Very little information exists regarding lesbian prostitution.
In Canada, there is no prostitution law per se in the Criminal Code, but the
activities associated with prostitution are illegal.
Arranging to buy sex in a public place is illegal; living off of the monies
someone obtained from prostitution (i.e., pimping) is also illegal, and can
carry maximum sentence of 14 years imprisonment.
although prostitution itself may not be against the law, the unlawful
activities surrounding it make the act virtually illegal.
There are currently four activities related to prostitution that are against
the law, according to the Criminal Code::
1. Procuring or living on the avails of prostitution
2. Owning, operating, or occupying a bawdy house (i.e., brothel)
3. All forms of public communication for the purpose of prostitution
4. Knowingly transporting another to a bawdy house
Prostitution can occur in brothels (i.e., a place where people pay to have
sexual relations with prostitutes—brothels can sometimes disguised as
massage parlours) or on the street. Some model and escort services are
actually covers for prostitution.
Street prostitution in Canada is the smallest proportion of the sex trade,
comprising about 10 to 33 percent.
Brothels were the prominent environment for prostitution through the
1800s in Canada.
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These houses were often grouped together near taverns and poorer parts of
It was not uncommon to find alcohol and gambling in these brothels, as
Following the late 1800s, it became more difficult to legally operate
brothels and prostitution moved to the streets.
It represented a means for some women to make money.
When greater opportunities existed for employment following World War
II, the number of women involved in prostitution declined.
the prostitute/seller and the buyer are both engaging in illegal acts.
Prostitution is one crime where women are more likely to be penalized
While male buyers accounted for approximately 56 percent of
prostitution-related offences in the mid 1990s, they were less likely to
receive incarceration than women convicted of prostitution-related
offences (3 percent versus 39 percent)
The Male “Client”
In one study, in terms of demographics, the clients and non-clients were
similar in age, education, marital status, and occupation; were significantly
less likely to subscribe to a feminine sex-role orientation, had lower
social-sexual effectiveness, and had higher sensation-seeking behaviours.
In terms of motivation to visit sex workers, the client group appeared to
partition into two separate groups:
1. one group had low social-sexual effectiveness and seemed motivated
to visit sex workers because they desired interpersonal intimacy, and
2. the other had a high level of sensation seeking and seemed motivated
to visit sex workers because they wanted novelty and variety in sexual
A Profile of the Adolescent Prostitute
Many children and adolescents who run away from home end up using
prostitution as a means for survival
Research on youth prostitution suggests that many were abused sexually
Their homes were often plagued with poor family relations, inter-parental
violence, parental alcohol abuse, adolescent alcohol and/or drug use, and
research found that compared to non-prostitute youth, the adolescent
prostitutes were classified as runaways more frequently and used a wider
variety of drugs, whereas the non-prostitute youth had experienced more
childhood physical abuse.
The characteristics reported in previous research, although present in
adolescent prostitutes, did not differ significantly from adolescent non-
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Human trafficking is the recruitment, transportation, or harbouring of
persons by means of threat, use of force, or other forms of coercion;
abduction, fraud, or deception for the purpose of exploitation.
Trafficked females are often sexually exploited and frequently lured by
individuals known to them or their families with promises of jobs as
waitresses, nannies, or cleaners, then forced into sex work or exploited
Women risk abuse and exploitation as prostitutes for up to 18 hours a day,
7 days a week, until they repay so-called travel debts to regain their
passports from their captors/employers.
The trafficking of women and adolescents is increasingly recognized as
one of the world’s fastest-growing crimes and a significant violation of
The RCMP estimates that 800 persons are trafficked into Canada each
Using data from non-governmental agencies, however, this figure is closer
to 16 000 persons.
On an international scale, some sources suggest that there are
approximately 4 million girls and women sold for prostitution, slavery, or
forced marriage every year.
Bill C-49 (section 279.01—279.04) created three new indictable criminal
offences to specifically address trafficking in persons:
1. Section 279.01 prohibits anyone from recruiting, transporting,
transferring, receiving, holding, concealing, or harbouring a person,
or exercising control or influence over the movements of a person
for the purpose of exploiting or facilitating the exploitation of that
person. The maximum penalty for trafficking involving the
kidnapping, aggravated assault, aggravated sexual assault, or death
of an individual is life in prison.
2. Section 279.02 prohibits anyone from receiving a financial or other
material benefit for the purpose of committing or facilitating the
trafficking of a person, with a maximum penalty of 10 years.
3. Section 279.03 prohibits the withholding or destruction of
documents such as a victim’s travel documents or documents
establishing their identity for the purpose of committing or
facilitating the trafficking of that person (maximum penalty: five
Under the new federal legislation, charges were laid against an
acupuncture centre in 2005.
The defendant was charged with bringing women into Canada under false
pretences and forcing them into prostitution
The changes to the Criminal Code also allow for charges against
Canadians who go to other countries to seek child prostitution (known as
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The first such charge occurred in 2004 against a British Columbia man
who travelled to Cambodia for child prostitution.
Law-enforcement agencies also can charge tour operators or travel agents
who arrange for such services (Criminal Intelligence Service of Canada
Organized crime groups are involved in prostitution, human trafficking,
and the drug trade.
The Effects of Human Trafficked Women
In one study, all women had been sexually exploited; almost all (95
percent) reported being sexually and/or physically abused while being
trafficked, and 59 percent had been abused prior to being trafficked;
twelve percent had a forced or coerced sexual experience before 15 years
of age; three-quarters of the females reported having had personal
freedoms restricted and had not been able to do what or go where they
wished; had physical symptoms experienced in the previous two weeks
such as headaches, (82 percent), feeling easily tired (81 percent), dizzy
spells (70 percent), back pain (69 percent), memory problems (62
percent), stomach pain (61 percent), pelvic pain (59 percent),
gynaecological infections (58 percent), depression (39 percent reporting
suicidal thoughts within the previous seven days).
Treatment/Support for Sex-Trade Workers
Women working in the sex trade may experience violence, substance
abuse, physical and mental health issues, and homelessness.
In order to address these issues, a group of Victoria, B.C., sex-trade
workers formed the PEERS program (Prostitutes Empowerment Education
and Resource Society) in 1995
PEERS is based on four principles:
1. Choice: PEERs supports both women who want to get out of the sex
trade and those who want to continue working within it. PEERS
focuses on providing sex-trade workers with concrete, practical, and
accessible help without judgment.
2. Capacity building: Recognizing the strengths of sex workers (e.g.,
communication and interpersonal skills, adaptability, ability to work
under pressure, experience with difficult clients, and the ability to
negotiate). Capacity building includes employee therapy,
counselling, and chemical dependency treatment.
3. Harm r