INTRODUCTION

According to Transparency International’s 1995 Corruption Index, compiled from several surveys to evaluate the perception of ‘improper practices’ in 41 countries in the developed and developing world, the problem of white-collar crime and corruption is endemic. Its findings are based on a scale of 1 to 10, where 10 denotes the total absence of corruption and 0 the entire penetration of business transactions by corruption, involving kickbacks, fraud and extortion. South Africa scores a disquieting 5,62, in contrast to New Zealand which leads the way as a shining example of integrity at 9,55, and other developing countries, especially Indonesia on the lower end of the scale at 1,94.2 Furthermore, the International Crime Survey on criminal victimisation in sub-Saharan and North Africa, Latin America, Asia and Asia/Pacific, found that consumer fraud and corruption, crimes which ordinary citizens are often exposed to by the commercial and public sectors, stand out as the most common forms of citizen victimisation in all the regions of the developing world.3

In South Africa the perception exists that not only violent, interpersonal street crimes have increased in recent years, but ‘white-collar crimes’ and corruption, however defined, are also rife in its private and public institutions. Although white-collar crimes do not receive the focus accorded to other crimes, for various and well-documented reasons, heightened concern about these crimes, believed to be costing the country billions, is evident in the following recent developments:

numerous conferences on commercial crime facilitated by organised business and the South African Police Services;



police Commissioner Fivaz’s declaration of serious economic offences as a "priority crime";4 and



President Mandela’s announcement of a national commission to investigate corruption, including allegations of irregularities in the administration and collection of taxes, customs and excise duties and exchange control.5

While investigative journalists in South Africa have done some significant work in this field, very little academic research on white-collar crime has as yet been undertaken. This can be explained partly by the fact that criminological research generally tends to reflect definitions by the public and state agencies of the principal social problems.6 Given the increasing focus on white-collar crime issues, it is argued that interdisciplinary policy research - combining comparative perspectives, gauges the nature and extent of the problem and suggests practical ways of tackling these crimes that can be utilised by the various stakeholders - is both necessary and desirable in South Africa.

COMPARATIVE QUANTIFICATION OF WHITE-COLLAR CRIME

It is well documented that the financial cost of white-collar crime far exceeds the value derived from all street crimes. However, cost and harm need to be understood in more than purely financial terms. A vivid example points to the illegal diversion of funds from an aid agency where the consequences may extend far beyond monetary costs to cause the death of thousands from malnutrition.7 Tax evasion may have major policy implications, for if nations cannot raise the revenue to meet their needs, the institutions and programmes that have been geared to benefit their citizens must either falter or be scaled down to an affordable level.8

However, beyond the indeterminable social and moral cost of these crimes, the methodological difficulties and considerable variables involved in a meaningful quantification of the costs of white-collar crimes in South Africa, let alone in comparative perspective, cannot be overstated. As such, it is necessary to first qualify what is historically understood by the term ‘white-collar crime’, internationally and locally, and secondly, to provide an explication of the methods used by various institutions to gather comprehensive statistics of these crimes. Following an awareness of these issues, sensational ‘guesstimates’ of South Africa’s commercial crime rate become open to scepticism from a critical audience.

While comparative research suggests that there has been a rise in commercial crimes globally, it is argued here that since national classifications of the denotation or boundaries of fraud, police resources and recording policies may differ, it is more useful to focus on intranational rather than on international changes regarding white-collar crime.9 Further reservations concerning a definitive comparison of white-collar crime in South Africa with that of other societies in a methodologically sound way, have been raised by Prof Michael Levi, widely regarded as the white-collar crime expert in Britain. Levi believes that "it is impossible, even in principle, to quantify levels of fraud"10 and that there are no comparative statistics and figures available that can be regarded as representative, as they are not based on true victim surveys.11 Responding to a request from the writer for a country-based breakdown of white-collar crime statistics, Prof Barry Rider, current Director of the Centre for International Documentation on Organised and Economic Crime (IDOEC), has noted that while most police forces in Commonwealth countries publish crime statistics, they are largely generalised and do not usually distinguish between specific offences within the category of economic crime or fraud. Although individual research institutions in various countries attempt such analyses, serious doubts have been expressed on the reliability of many of the results.12

While comparative studies on particular issues of fraud and corruption have been undertaken, such surveys are only useful if they are heavily qualified and understood to be limited in scope and representation. The first challenge is to achieve a common understanding of the meaning of the term ‘white-collar crime’.

DEFINING WHITE-COLLAR CRIME

Despite the fact that an adequate definition of the concept ‘white-collar crime’ remains problematic, it should not be allowed to debilitate discussion. Depending on the content of the definition used as a point of departure, white-collar crimes can be seen to include consumer fraud, tax swindles, insider trading, securities violations, corruption, bribery and kickback schemes, computer fraud, or corporate misconduct such as occupational health and safety offences. In most cases fraud, defined specifically in legal terms as a crime which invokes considerations such as ‘misrepresentation’ and ‘prejudice’, is involved.13

According to Edwin Sutherland, the American sociologist who first coined the phrase in 1939, "a white-collar crime is a crime committed by a person of respectability and high social status in the course of his occupation."14

Sutherland highlighted an important fact which is surprisingly often glossed over by South African commentators, that explanatory theories of crime which cite poverty and unemployment as the primary causes of crime are inadequate, insupportable and unworkable in that they fail to account for the "upper-world" or white-collar crimes committed daily within business and government institutions. Following from this, the somewhat uncritically adopted thesis claiming that the provision of more employment opportunities will automatically solve South Africa’s crime problems, fails to acknowledge that it is seldom the unemployed who commit white-collar crimes.

Sutherland’s definition, however, was controversial and was criticised for, amongst others, failing to distinguish between crimes committed by corporations as a collective unit and crimes committed by individual members. In reaction critics advocated disposing of the term white-collar crime, and suggested that a distinction be made between:

‘organisational’ crimes - those committed with the support and encouragement, and often even required by the occupational norms of a formal organisation in order to advance its goals; and



‘occupational’ crimes - those committed by an individual or group of individuals exclusively for personal gain.15

This distinction is important as it highlights the fact that it is not only individuals within a company that can defraud it for personal gain, but the business or organisation itself which may be the perpetrator of a crime, even though the common image of deviance which is strongly supported in legislation, focuses on people acting individually or in small groups.16 Thus, white-collar crimes may be committed both against and by, among or within, businesses and institutions. It is argued here, however, that the term white-collar crime is far too useful as a conceptual tool to be thrown on the intellectual scrap heap. It has already been universally adopted as identifying specific activities conducted by individuals and organisations as ‘criminal’.

According to the National Crime Information Management Centre of the South African Police Services, white-collar crime is described as "an umbrella concept used to refer to a whole host of activities such as fraud, embezzlement, tax evasion, bribery, insider trading, ‘kick-backs’ and corruption."17

However, compared to Britain and America, South African conceptions of white-collar crime traditionally have been very narrow and largely based on a few high-profile cases relating to property scams, insider trading and ‘roundtripping’. Criminal prosecutions of these incidents are extremely rare and when it comes to a broader concept of white-collar crime, including infringements of environmental, consumer or health and safety regulations by people or corporate ‘persons’, these have usually been addressed administratively within the province of civil law.18 Recently however, reports in the media calling for greater accountability for harm caused to employees by local chemical and mining corporations, seem to indicate a growing awareness of the criminal nature of certain corporate misconduct in South Africa.

RECORDING WHITE-COLLAR CRIME - OFFICIAL STATISTICS

Police claim that, in general, official crime statistics represent less than ten per cent of the incidence of actual crimes, with 51 per cent of all crimes not being reported at all. Because of their nature - secretive, sophisticated, with victims often unaware that they are being victimised - commercial crimes are open to even wider discrepancies in reporting and recording. In South Africa a mere twenty per cent of respondents in the accounting firm KPMG’s fraud awareness survey reported detected fraud to the police, indicating that eighty per cent of detected fraudulent activity went unrecorded.19

Very little is known about the factors influencing the reporting of commercial fraud by companies. These may vary according to company culture, as well as legal requirements which necessitate reporting. Reasons for non-reporting may include embarrassment and possible damage to a company’s reputation. In the absence of a legislative requirement or a clear insurance or compensation benefit, organisations usually perform a cost-benefit analysis before making the decision to report a case. The most likely reason for non-reporting is a management’s decision that the expense of dealing with prosecutors and time in court is not worth it.20 However, where the evidence sustains it, some companies do appear willing to invest the management time and effort required to obtain a successful prosecution.

Since reporting management fraud to management is prone to conflicts of interest, this may also explain the enthusiasm of some directors to keep matters in their own hands.21 Another fact that cannot be ignored is the perception that the police and the criminal justice system are simply not equipped to handle such cases, should they be reported. This is an admission made freely by the police as calls for private sector partnerships are raised, an issue that will be considered later in this article. To the extent that the policing system lacks the credibility to cope with fraud, many who have legitimate complaints refrain from making them.

In South Africa commercial crime statistics are gathered by means of register and thus based on the values of a particular case as originally reported. Since these investigations often stretch over long periods, the actual number of charges and the amounts involved tend to fluctuate during the investigation. However, these figures are not reflected in the register. It has been argued that an "additional dark figure" representing crimes, such as stolen cheques, unknown to the victim and the police at the reporting stage, may further aggravate the shortcomings of commercial crime statistics. Possible solutions are being suggested by the commercial branch of SAPS to remedy this.22

Additionally, in recording offences such as fraud and forgery, difficult decisions are often required as to what constitutes one offence, since cases may involve a large number of instances of deception and forgery with several offenders acting together or in different groups on different occasions. Because of these problems and the fact that the system currently does not differentiate between potential and actual loss, which could be substantial,23 recorded numbers are particularly sensitive to variations in recording practice.24

According to the latest available commercial crime statistics, a total of 51 117 cases with a potential value of R2,8 billion were reported during the period January to December 1995, compared to 53 441 cases with a potential value of R4,7 billion during the same period in 1994. Nationally, a total of 25 260 cases involving R7,3 billion were in process by the Commercial Branch on 31 December 1995. (A figure of R21,1 billion has been suggested by police, and some reports say that the police estimates losses to white-collar crimes as much as R375 billion, more than South Africa’s Gross Domestic Product).25 More or less eighty per cent of these cases involve fraud and the other twenty per cent theft (from employers), as well as transgressions of over fifty Statutes policed by the Commercial Branch.26

These figures serve to give an indication of the workload of the 775 commercial detectives handling these dockets. In addition to the commercial branch, the Office for Serious Economic Offences (OSEO), which prioritises cases according to the amounts involved, complexity of the offence, public interest, as well as urgency, was established in 1991 to effect speedy and effective investigation of serious economic offences using multi-disciplinary investigation teams.27 The latest figures from this office cite that as of 29 February 1996 OSEO was conducting 33 investigations amounting to R8,5 billion.28

Official statistics are fraught with various well-known shortcomings and are known to be an underestimation of the true extent of crime, since they only reflect reported crimes. To obtain a clearer picture of the unreported ‘dark figure’ of crime, victimisation surveys have been developed as an alternative to official police statistics in order to gather valuable information on the ‘true’ nature and extent of these crimes.

VICTIMISATION SURVEYS - A MORE ACCURATE TOOL

In response to the problems experienced by comparative criminology as a result of shortcomings in official police statistics in most countries, the International Crime Survey came into being. This victimisation survey is aimed at creating comparable indicators amongst countries. However, it does not include specific questions relating to commercial crimes, possibly because it is confined to calculate crime rates that apply to clearly identifiable individuals rather than organisational victims.29 While the incidence of criminal victimisation against individuals and households have received increasing global attention during the past decade, similar surveys have been initiated among organisational victims, such as businesses.30 While such surveys cannot be regarded as representative of the local business community as a whole in South Africa, they highlight the fact that South African businesses are considerably more often the victims of crime than individual households and that the highest actual monetary losses result from the incidence of robbery and employee fraud and theft.31

One of the more useful surveys aimed at uncovering the dark figure of particularly white-collar crime and fraud, is an international victimisation survey conducted among the largest companies by KPMG in order to compile an international fraud awareness profile. KPMG’s international fraud awareness survey (1993) provided comparable indicators of the nature and extent of particular types of white-collar crimes occurring within large corporations, and determined the following main points regarding fraud internationally:

Most companies had recently experienced fraud involving large amounts.



Fraud was perceived to be a major problem which was increasing.



Current and increasing fraud levels were thought to be caused by:

* the weakening of societies’ values and business ethics in particular;
* economic pressures such as prolonged recession;
* Political uncertainty (Hong Kong and South Africa); and
* increasingly sophisticated and organised criminals exploiting information technology.



Fraud occurred mostly because of poor internal controls, as well as collusion between employees and a third party.



Fraud was detected, if at all, through internal audits (not external audits).



‘Red flags’ were observed, but ignored or not acted upon quickly enough.



Responses to fraud were mainly to dismiss those involved, with fewer reporting cases to the police.



Steps planned by companies to prevent fraud included:

* introducing a corporate code of conduct;
* increasing management focus on fraud; and
* instituting a fraud prevention and detection plan.

SOUTH AFRICA AT RISK

Findings from the South African component of the survey indicate that 79 per cent of respondents experienced fraud recently and ninety per cent perceived fraud to be increasing. Compared to the 98 per cent of New Zealand business respondents who thought fraud was a concern, only 41 per cent perceived fraud to be increasing. This is largely due to the fact that proactive steps have been taken in New Zealand to address fraud, whereas in South Africa very few preventive measures are in place, resulting in the pessimistic view that fraud will increase. In addition there are some uniquely South African risk factors that should be considered in explaining the fact that white-collar crime is a problem at present and perceived to be at risk of increasing. These factors will be discussed briefly.

Fraud is known to thrive in a social and business environment where low ethical standards prevail and moral flexibility reigns. In South Africa one can argue that motive, opportunity, and the neutralisation of ethical concerns regarding white-collar crime, have been exacerbated by historical circumstance. In particular, the ‘techniques of neutralisation’ prevail which enable individuals to violate important normative and ethical standards, but neutralise any definition of themselves as deviant or criminal. For instance, on an individual level, neutralisation of ethical restraints may justify theft as ‘borrowing’ and on an organisational level, criminal activities are defined in such a way as to make them appear routine, unproblematic and necessary.

Offenders often justify their behaviour by claiming that

they are not really hurting anyone;



the law itself is unnecessary or unjust;



while something may be illegal, it is not criminal (in that it does not directly harm anyone);



‘everyone else is doing it’, and they are merely going along with a pattern of behaviour accepted among peers, or in the industry; and



these activities are a necessary part of business, or common business practice.

During the apartheid era in South Africa, certain practices arguably provided an environment which was structurally conducive to white-collar crime. A couple of pertinent examples include:

‘Sanctions busting’ - a catalyst for pervasive fraud which stimulated legitimate businesses to seek alternative systems, albeit illegal, for achieving profit margins, for example necessitating the forgery of certain documents.



‘Roundtripping’ - a practice which cost the country billions, encouraged by the dual financial system which involved sending funds out of South Africa in commercial Rand, bringing them back through the financial unit, and making a profit on the discount between the two.32



Tax evasion - where this proved a rational response towards a government regarded by the majority of citizens as illegitimate, some held a genuine belief that this was no crime as the inequitable tax system was in itself immoral.

These secret systems and habits have resulted in a lack of transparency that is advantageous to criminals. It is this background, combined with increasing opportunities, a ‘get rich quick’ social ethos, as well as the prevalence of large-scale malpractices that escape punishment as institutions do not pursue prosecution which has contributed to the expansion of fraudulent activities in the economy.

Looking towards the future and considering those risk factors highlighted in KPMG’s survey which may give rise to increasing white-collar crime, South Africa is certainly at risk on the bases of political uncertainty, pressing economic conditions and the increasingly organised and sophisticated nature of white-collar criminals. Fraud is known to occur when general insecurity pervades the employment sector and difficult economic conditions exist which give rise to redundancies. In South Africa the desire to ‘protect what one already has’, no doubt will increase incidences of white-collar crime, where uncertain employees fearing unemployment, or the loss of property may seek to ‘feather their own nest’, albeit through illegal means. Indeed, when weighed up against the actual fear and the likelihood of being detected, the urge to commit a commercial offence to protect what one already has, may prove stronger.

KPMG’s South African fraud survey indicated that a significant proportion of perpetrators were in management, compared to the UK where results indicated that 71 per cent of perpetrators were company employees. With affirmative action a reality in South Africa, it should be taken into account that it is not by their innately superior morality that there are so few female and or black management fraudsters in Britain, the United States,33 or South Africa. Unlike ‘mugging’, white-collar crimes such as commercial fraud are not ‘equal opportunity crimes’. Rather, the opportunity to commit various types of white-collar crimes is unevenly distributed according to the occupational structure. For example, pilferage may be commonplace amongst certain employees, whereas crimes such as price-fixing and insider training might occur at different levels in the company and are largely related to the degree of trust placed in the holders of different occupational positions. Therefore, to the extent that there is disadvantage or discrimination by class, gender, ethnicity or religion in occupying certain roles, the opportunities for particular types of crimes are correspondingly restricted.34

To date, very little research has been conducted on the gender and race aspects of white-collar crime, areas of particular relevance to South Africa as affirmative action policies seek to make its private and public institutions more representative. Consideration of the above, however, could lead to the argument that the problem of white-collar crime will only increase as more people than the social elite are employed and motives and opportunities to commit crime in the transitional climate of uncertainty go unchecked.

PREVENTING AND CONTROLLING WHITE-COLLAR CRIME

Internationally commercial fraud and regulated offences such as industrial safety, command a small pool of criminal justice resources. Therefore, while ample evidence and a clear-cut violation may exist, the evidence, its complexity, and the consequent demand on the criminal justice systems’ resources and time, makes it a Herculean task to bring white-collar criminals to book. Whereas the law provides a stigmatising label for those who violate its standards - a label especially repugnant to respectable businesses and professionals, governments and politicians who comprise the majority of white-collar criminals - this stigma is only effective as a deterrent if the law is actively enforced. Unfortunately, potential perpetrators are well aware that the resources in place are hopelessly inadequate. The crisis that has to be addressed centres around ways to prevent potential criminals from committing such crimes in the first place, since there is little likelihood that sufficient resources will be available in the near future to police and prosecute these crimes effectively once they have occurred.

Policing resources in South Africa in terms of trained staff and equipment are inadequate to investigate white-collar crime once it is reported, let alone prevent it. Comparative research confirms that South Africa is not alone in terms of these problems with far more emphasis being placed world-wide on policing the traditional crime sector. Thus common problems exist regarding investigators who are inadequately educated, ill-trained and poorly equipped for the task of combating white-collar crimes.35 Subsequently the police cannot be relied on to police these crimes effectively, and indeed admit themselves that "policing was never meant to be done by the police alone."36 In the current crisis, policing partnerships with the business sector, among others, appear to be the answer for South Africa, as is the case elsewhere in the world.

PARTNERS IN INVESTIGATION

In effect ‘partnership policing’ means that the State relies on several enforcement agencies and professional bodies to regulate violations of their members. Professionals, such as accountants and corporate lawyers, play a primary role as initiators of action via their decisions to report fraud or not, as well as to initiate investigation processes. When it comes to professional self-regulation, the concern has been raised that the boards and agencies charged with controlling professional misconduct often deflect criminal complaints from the justice system, thus protecting fellow professionals from prosecution.37 One way of addressing this is to ensure that ‘whistle-blowers’ - those individuals who follow their moral beliefs rather than conform to organisational pressure - are legally protected, making it a crime to retaliate in any way, with punitive damages paid to victims.38

Because the police are unlikely to be familiar with the systems and issues concerned, many South African companies realise that they have to do the necessary legwork and pay the expense of assembling the greater part of a fraud case themselves.39 In other words, white-collar crime is treated by companies as a problem for private policing.40 Once a company has done a thorough internal investigation aided by audits and legal advice and has enough evidence to establish a prima facie case, it might call in the police - depending on corporate policy and the particular position of the suspect within the company. Internal company investigators do not replace the police or make arrests, but rather assist in and expedite investigations. Many commercial branch detectives are being drawn into the private sector as organisations are forced to appoint internal fraud teams. While the police loses valuable personnel through their inability to compete with private sector salaries, the advantage is that experienced detectives handling internal investigations are able to compile a complete docket for prosecution.41

PARTNERS IN PROSECUTION

Police work however, may be pointless unless it is appreciated by the official prosecutor or another agency that will consummate an investigation with legal action. White-collar criminals have largely escaped punishment because of the antiquated legal apparatus brought to bear against them. They have mostly been segregated from traditional criminals, their crimes adjudicated by regulatory agencies and their offences handled administratively.42 Criminal referrals are rare and prosecutions almost non-existent since the wealth and influence of these criminals allow them to avoid the full force of the law - a primary concern raised by Sutherland. In terms of access to justice, the vast financial resources (albeit ill-gotten) and influence of most offenders, allowing them to employ the best legal talent, must be weighed against criminal justice agencies who simply cannot match such rates and are unable to retain the services of experts to fight long and complicated cases. Instead, cases are often ineffectively being fought against some of the country’s best lawyers, by a team of young and inexperienced lawyers. That cases even get as far as the recommendation to prosecute is considered ‘miraculous".43

It has been suggested that complainant companies should be allowed to appoint and pay for their own legal counsel in an attempt to address this situation. This would:

relieve the state of a massive financial burden;



make the investigatory and courtroom expertise currently lacking at senior level available to the State;



expedite the bringing of prosecutions; and



level the balance between the affluent accused with expensive and experienced senior counsel for his defence, and an inexperienced state prosecution team.44

The way policing partnerships are developing with regard to the investigation of white-collar crimes, bodes well for the prosecution process.

There is, however, something paradoxical about companies who complain that they have been defrauded of millions being told that due to the workload of the police, the case cannot be investigated for twelve months and their best option would be to do their own investigation and return later. Why have they been paying taxes and rates?45 While organised business in South Africa has committed itself to combat white-collar crime by funding the necessary multi-disciplinary teams to investigate and aid with the prosecution of such crimes, a concern similar to the above has been raised. Why should businesses pay taxes if the State cannot do its job properly? If business is prepared to assist with the investigation of such crimes, should they not benefit from a tax rebate? These are important issues for future consideration.

Police in South Africa see the immediate challenge as mobilising resources to make white-collar crime more dangerous and less profitable. Removing the profits of crime, among others through the forfeiture of assets, is attaining widespread priority. South Africa’s eagerly awaited Money Laundering Act will come into effect later this year, thereby recognising that the driving force behind commercial crime internationally is drug money and its laundering. With the assistance of the Reserve Bank and financial institutions, this legislation should prove an effective tool in combating illegal financial transactions.

The police believe that their success in combating commercial crimes will be indicated by:

a decline in the incidence of white collar crime;

a rise in the percentage of recorded cases; and

a marked rise in the number of successful prosecutions.

They further believe that these objectives can be achieved through the:

development of codes of conduct, and prevention and standard response procedures to white-collar crime;



promotion of principles of good business practice/good governance;



lobbying of government for improved legislation to accelerate the prosecution process;



strengthening of the capacity of anti-corruption investigation units; and



rallying of public support for an anti-corruption ethic.46

Some of these issues will be considered briefly within the next few pages.

SELF-POLICING AND INTERNAL CONTROLS

In the current crisis, the best protection against white-collar crime and corruption in business and in government institutions lies in effective and enforceable codes, internal controls and vigilant self-regulation. All criminal behaviour requires both motive and opportunity coinciding before a crime can occur.47 To a large extent, motives such as financial gain, greed, personal difficulties, low loyalty, revenge and boredom, cannot be controlled,48 but opportunities to commit fraud may be limited through various crime prevention measures, including risk management.

There are various risks involved which point to the likelihood of fraud. These include personnel, cultural, structural and business risks.49

Addressing these risks demands certain common sense strategies such as personnel screening. Entry controls alone are theoretically inadequate in preventing fraud and it is argued that the focus of surveillance ought to shift to the monitoring of people’s conduct while transacting business and should include their domestic lifestyles.50 Whether this sort of control is acceptable is a separate moral and economic question, but without it incidences of fraud will certainly not abate. It is unlikely that white-collar crime will be eliminated altogether, but the risks can be greatly reduced by increased fraud consciousness and practical steps.51

In terms of structural risks, the organisational environment of an institution is believed to play a large part in creating opportunities for crime and there is something to be said for the corrupting institution thesis which argues: "Of course there may be corrupt men in sound institutions, but when institutions are corrupting, many men who live and work in them are necessarily corrupted."52 Organisations and occupational sub-cultures generate powerful pressures on employees to conform to their expectations and any effort to deal with the problem of white-collar crime on this level must be aimed at changing the "ethical climate" within corporations and government.53 In business, the ethical behaviour of a company’s personnel is determined by the example set by top management.54 Interviews conducted with 68 retired middle-management executives of the Fortune 500 corporations revealed that corporate crimes were determined by top managers who pushed too hard and made demands that could only be met by breaking the law.55 The question to be addressed is whether it is possible to create a business ethic favouring honesty at the expense of profit.56 While a discussion of the activities of the Parliamentary Committee on Ethics and the Office of the Public Protector are clearly outside the scope of this article, the establishment of these bodies, as well as a national commission to investigate corruption, may be indicative of the concern with which government regards white-collar crime issues.

CODE OF ETHICS

Developing a code of ethics which includes a commitment to expose fraudulent action, is therefore a rational safeguard against victimisation for any institution. Within organised business in South Africa, the King Commission’s report on Corporate Governance (based on the UK’s Cadbury Proposals on Corporate Governance) which, among others, sets out to ensure greater transparency, integrity and accountability vis-à-vis prompt action on the discovery of fraud, have met with critical enthusiasm. Whether good corporate governance can actually combat fraud, remains to be seen. This strategy includes setting an ethical tone for the company, well-established systems of internal control, systems in place to respond once a crime has been reported, monitoring complaints against members of professions, and may include a company policy of dismissal and prosecution of fraud backed up by a police presence. For such a policy to be effective, it is important that it is communicated to all levels of an organisation. To this end, it has been argued that a code of ethics within a company should not be viewed as a contract to be produced when asked for, but rather as a commitment which extends throughout the company and with all employees being part of the development of such a code.57

The degree to which such a code has been formally instituted within South African companies remains unestablished. Even though lip service is being payed to such a notion, a widespread absence of fraud prevention strategies exists within companies, evidenced by the high incidence of secondary victimisation. The fact that multiple victimisation occurs may mean that companies do not, in practice for whatever reason, learn from previous incidents, or it may be that they do learn from their experiences, but are either unable to prevent its reoccurrence or do not believe it to be worthwhile to reduce risks further.58 The point is that codes of ethics as a company public relations exercise alone are unlikely to have much effect on the ethical climate. This has been underscored by research findings that there are "no difference" between those corporations with codes and penalties and those without them.59

CONCLUSION

The indirect effects of white-collar crime that transforms all South Africans into victims, need to be emphasised in order to encourage greater public mobilisation aimed at influencing government thinking on these less visible, ‘victimless’ forms of criminality. In this the media, who play a role in defining (and therefore moulding) the crime problem,60 can influence public opinion on white-collar crime. While some believe that white-collar crimes in general receive little or no attention in the news because the media is owned by big business, the relative neglect of reporting on business crime should rather be explained by the invisible nature of the crime and the difficulty in presenting it in the human terms common to the mass media and its audiences, than by any elite conspiracy to suppress it.61

The media is challenged to play an important role in raising public awareness of these issues by, for instance, pointing out the increasing costs due to white collar crimes, which remain hidden in the extra prices of goods and services passed onto the consumer, and challenging the public at large to take preventive steps. While conventional wisdom suggests that the public is indifferent to white-collar crime and may even sympathise with offenders when they are caught, it is argued that more knowledge about such crimes and their harmful consequences will lead to their condemnation. It is true that many South African citizens do not realise that they are victimised by price-fixing, or restraint of trade and under these circumstances the public can hardly be expected to react to such behaviour.62 Opinion polls abroad, however, indicate a great deal of resentment about the crimes perpetrated by those in positions of trust and responsibility,63 with strong condemnation of organisationally deviant actions, especially when the behaviour causes illness, injury or death.64

Examples of how the general public may be affected by white-collar crime include, for instance, insurance premiums rising significantly due to false claims made against the insurer. A conservative estimate indicates that thirty per cent of South Africa’s R5 billion annual insurance claims are fraudulent or grossly inflated.65 Since many South African short-term insurers have parent companies in the UK, and claims have been made that fraud in the UK now ranks with natural disasters as one of the major drains on insurance profits, this may impact indirectly on the general public. An individual may have an exemplary claims record, but premiums are based on overall claims, of which a large percentage may be fraudulent. These are the issues around which the public can mobilise as they become increasingly aware of how white-collar crimes threaten their lifestyles.

There are also various political reasons for redressing the imbalance between policing suite and street crimes. In a society such as South Africa where crime is of major significance, there is a great deal of political gain in harping on the unfairness of fraudsters, particularly those members of the affluent social elite, who ‘get away with it’, while the poor go to jail.66 However, if the criminal justice system is not bolstered significantly, burdening it with cases to appease increasing public concern, may not in fact be to the government’s political advantage. If these cases are not handled speedily and effectively, they may actually serve to undermine the justice system’s credibility even further. In addressing white-collar crime issues, it is thus essential for the State to give top priority to the provision of the necessary resources to enable law enforcement agencies to do their job. In the case of the Office for Serious Economic Offences it may imply expansion of its function to include prosecution.

Future control trends for white-collar crime thus point towards increasing the visibility of fraudulent activities, raising the consciousness of those not party to such actions, of the existence and incidence of fraud, employing internal controls and self-regulation within institutions, enhancing inter-agency co-operation both domestically and abroad, and improving the capacity of policing agencies and the courts to cope with investigation and trials. While perceptions in South Africa and abroad suggest that fraud is something to be managed and limited, rather than eradicated altogether, should the incidence of fraud reach unacceptable levels before anything radical is done to prevent it - which may indeed already be the case in South Africa - any action taken may prove to be too little, too late.

This edited version of a paper presented at Crime in the Beloved Country, conference of the Institute for Futures Research, Stellenbosch, 14 March 1996, is published as part of the Crime and Policing Policy Project, a venture jointly sponsored by the British High Commission, the Hanns Seidel Foundation of Germany, the Open Society Foundation for South Africa, Q Data Consulting, the Royal Netherlands Embassy and the United Nations Development Programme.



Commercial Crime, Monthly Review of Statistics, NCIMC, November 1995.



U. Zvekic & A. del Frate (eds.), Criminal Victimisation in the developing world, UN Interregional Crime and Justice Research Institute, Rome, 1995.



Business Day, 4 December 1995.



Business Day, 1 March 1996.



M. Levi, Regulating Fraud: White-collar Crime and the Criminal Process, Cambridge University Press, Cambridge, 1987.



Ibid., p. 46.



A. Bequai, White-collar Crime: A 20th Century Crisis, Lexington Books, Lexington, DC, 1978.



Levi, op. cit., 1987, p. 6.



M. Levi, Fraud in the city: an Overview, Chartered Banker, March 1996.



M. Levi, Telephone conversation, 28 February 1996.



B. Rider, Fax response, 26 February 1996.



KPMG, Fighting Fraud 1, p. 4.



E.H. Sutherland, The white-collar criminal, American Sociological Review 5, 1940, pp. 1-12.



Clinard & Quinney (1973) in J.W. Coleman, The Criminal Elite: The Sociology of White-collar Crime, St. Martin’s Press, New York, 1989, p. 9.



M.D. Ermann & R.J. Lundman, Corporate and Government Deviance: Problems of Organisational Behaviour in Contemporary Society, Oxford University Press, Oxford, 1992.



Commercial Crime, op. cit.



Ermann & Lundman, op. cit.



KPMG, South Africa: Fraud Survey 1994.



H. Edelhert & T.D. Overast, White-collar Crime: An Agenda for Research, Lexington Books, Lexington DC, 1982, p. 8.



Levi, op. cit., 1987, p. 129.



Commercial Crime Semester Review, CAICI Unit C2, September 1995, p. 12.



Ibid., p. 3.



Levi, op. cit., 1987, p. 3.



Fraud is more rife than reported, Natal Witness, 4 August 1995.



Commercial Crime Semester Review, op. cit., p. 3.



Office for Serious Economic Offences brochure.



Office for Serious Economic Offences, Fax response, 11 March 1996.



United Nations, Understanding Crime: Experiences of Crime and Crime Control, UN, Rome, 1993.



B. Naude, Crimes against the South African business sector, forthcoming in International Journal of Risk, Security and Crime Prevention, p. 2.



Naude, ibid.



Tracking round-trippers, Financial Mail, 17 December 1993.



Levi, op. cit., 1987, p. 2.



Levi, ibid.



Bequai, op. cit.



P. Wolmarans, Combating White Collar Fraud conference, January 1996.



J.W. Coleman, The Criminal Elite: The Sociology of White-collar Crime, St. Martin’s, New York, 1989, p. 155.



Coleman, ibid., p. 254.



Levi, op. cit., 1987, p. 133.



Levi, ibid.



Business Day, 2 July 1995.



Bequai, op. cit.



Levi, op. cit., 1987, p. 284.



Sunday Independent, 20 August 1995.



Levi, op. cit., 1987, p. 282.



Commercial Crime, op. cit.



Coleman, op. cit., p. 200.



KPMG, Fighting Fraud: Forensic Accounting 3, July 1995.



Stuart Patterson, Price Waterhouse Forensic and Litigation Services, January 1996.



Levi, op. cit., 1987, p. 353.



M. Levi, The prevention of fraud, Crime Prevention Unit Paper 17, 1988.



Wright Mills (1956) in W.G. Carson, Challenge of White Collar Crime, La Trobe University, 1983, p. 343.



Coleman, op. cit, pp. 248-9.



Coleman, ibid., p. 219.



Ermann & Lundman, op. cit., p. 35.



Ermann & Lundman, ibid., p. 81.



W. Esterhuyse, Conversation at the Annual Conference of the Philosophy Society of Southern Africa.



Ernst & Young, Fraud, the Unmanaged Risk, 1995, p. 5.



Mathews & Frederick (1987) in Coleman, op. cit.



Levi, op. cit., 1987, p. 10.



Levi, ibid., p. 13.



Edelhert & Overast, op. cit., p. 33.



Coleman, op. cit., p. 186.



Ermann & Lundman, op. cit., p. 35.



Business Day, 24 October 1994.



Levi, op. cit., 1987, p. 83.