White collar crime in the time of a pandemic

Thorne Godinho

As the novel coronavirus (COVID-19) pandemic threatens economic stability and business as usual, will we see an increase in white collar crime as a direct consequence of the ‘new normal’: social distancing and isolation, limited direct oversight of employees, and in some cases, the relaxation of internal policies and controls?

In our experience, where we have advised clients on the recovery of assets or internal investigations following large-scale fraud or embezzlement, such conduct primarily occurs under one of the following two conditions:

  • The company has ineffective policies, processes and controls, allowing for internal malfeasance or prohibited conduct – such as bribery – to occur; or
  • Internal actors perceive that the company they work for treats them poorly or has done something that adversely impacts them.

In many jurisdictions, working from home is now advised or mandated by employers and government. Given that many companies were not sufficiently prepared for the pandemic, internal processes and controls related to finance, procurement, and the like, have often been relaxed or side-stepped for practical reasons. Similarly, where Covid-19 has resulted in significant disruption to the ordinary course of business – seamless supply chains, for example – persons may be tempted to engage in prohibited conduct such as bribery and corruption. Employees or agents may feel it necessary to provide illegal ‘kickbacks’ in order to expedite a government process or obtain goods from a supplier.

Such conduct may arise because of guidelines and policies being unclear or unenforced as a result of Covid-19. Proactive measures such as increased oversight and monitoring will reap many dividends, and perhaps, prove less challenging than managing the aftermath of white collar crime.

Despite the enforcement of social distancing, we have witnessed that a greater perception of unity – inside and outside companies – during this period. In many cases, employees and their managers appear to have successfully implemented remote working measures and continue to deliver services as before.

Internal cohesion and a positive, open and responsive corporate culture during this period can mitigate employees’ feeling that they are anxious or unhappy about internal company decisions made as a consequence of Covid-19. Practically, companies should have a greater awareness of pressures experienced by employees during this time, seeking to build a common purpose around successfully emerging from the Covid-19 crisis.

Whilst it is possible that rogue employees – now, out of sight and often working with limited supervision from home – could exploit the Covid-19 crisis in order to seek unjustified enrichment, we believe it is more likely internal malfeasance and white collar crime emerges due to insufficient internal controls or a breakdown of trust within the enterprise.

Enterprises will likely be focused on mitigating the effects of Covid-19 on business at this time. However, remaining vigilant and proactively building internal unity and trust during this turbulent time will assist companies in becoming more resilient in the face of any internal malfeasance.