Corporate victims of white collar crime may decide not
to report it to the police for many reasons, but that failure may
itself be a criminal offence.
Frequently, the first entity (apart from the criminal) which
becomes aware of the commission of a white collar crime is the
corporation which employs the criminal, because the corporate
employer is also the victim of the crime.
An employer's priorities will normally be to achieve
reimbursement of the missing funds and termination of the
perpetrator's employment. Reporting of the criminal conduct to
the Police (or other appropriate authority) is not necessarily
uppermost among the employer's priorities, which may sometimes
consider that the matter is best dealt with in house, without
involving the Police or other authorities.
The employer may well need to rethink its priorities. The above
approach is fraught with danger for the employer, because failure
to report the crime may itself constitute an offence, and can lead
to fines for the company and, potentially, even gaol time for its
officers who knew of the crime but failed to report it.
Why corporations don't report...
There are a few reasons why white-collar crime, even if
detected, is under-reported to the authorities. They include:
The bargaining chip:
When the perpetrator is discovered, the employer often wants
reimbursement and termination of his or her employment. The threat
of reporting is a way to generate additional leverage in the
damage: White-collar crime is a particularly sensitive
matter and has a real potential to bring negative publicity and
damage to the reputation of a corporation. In particular,
management may be concerned about a loss of confidence on the part
of customers and shareholders if it becomes widely known that
criminal activity has occurred within the corporation, or may feel
vulnerable to personal criticism if internal control mechanisms
have failed to prevent fraud.
It's wrong, but is it a
crime? In some cases, management may also have misgivings
as to whether the offence will be able to be proved or whether it
is serious enough to warrant the involvement of the Police.
Management can be reluctant to allocate time and resources to
assisting the Police with any inquiries. Once a corporation reports
the commission of a crime to the Police (or other appropriate
authority), management loses control over what happens next.
...And why they should
In New South Wales, the effect of section 316(1) of the Crimes
Act 1900 is that a person who fails to report conduct which amounts
to a serious indictable offence is liable to imprisonment for two
The elements of the section are:
a person (including a company) has committed a serious
another person (including a company) knows or believes that the
offence has been committed
that other person has information which might be of material
assistance in securing the apprehension of the offender or the
prosecution or conviction of the offender; and
that other person fails, without reasonable excuse, to bring
that information to the attention of a member of the Police Force
or other appropriate authority.
A "serious indictable offence" is defined as an
indictable offence which is punishable by imprisonment for life or
for a term of five years or more, but section 316(1) does not
require that you know the relevant conduct amounts to a serious
indictable offence, only that it is an offence.
In NSW, a serious indictable offence can include:
larceny by clerks or servants;
embezzlement by clerks or servants;
fraudulently appropriating property by a director, officer or
member of any body corporate or public company;
cheating or defrauding by a director, officer or member of any
body corporate or public company;
fraudulent misappropriation of monies collected or received;
obtaining money by deception.
Section 316(1) leaves no room for an employer to agree not to
report to the Police (or other appropriate authority) the conduct
of the officer or employee as part of a settlement, if that conduct
amounts to a serious indictable offence. In fact, agreeing not to
report for a quid pro quo will actually increase the maximum
penalty to five years' imprisonment, under section 316(2).
Section 316(1) of the Crimes Act is not replicated in other
Australian jurisdictions but that is not the case with section
316(2). The Commonwealth and most States and Territories have laws
making it an offence for a person to accept a benefit in exchange
for not reporting an offence, a serious indictable offence or a
crime: see the Crimes Act 1914 (Cth), section 44, Crimes Act 1958
(Vic), section 326(1); Criminal Code Act 1899 (Qld), sections
133-134; Criminal Code (WA), section 136; Criminal Code 1924 (Tas),
section 102(1); Criminal Code Act (NT), section 104(1).
What you can - and cannot - do
This should sound as a warning to all directors and other
officers or employees of a corporation dealing with white collar
crime, including in the context of settlement discussions with a
assume that an employee's misconduct is too trivial or
embarrassing to report. You should take advice on the nature of
that misconduct and report where necessary;
use reporting as a bargaining chip, because keeping quiet for
money or other benefits will increase the maximum term of
imprisonment from two to five years in NSW and is an offence in
other States and Territories.
ask for reimbursement or termination as long as the quid pro
quo isn't that you will not report the perpetrator to the
offer not to launch civil proceedings as a negotiating
In short, your employee will have to take his or her chances
with the criminal justice system - otherwise you will have to.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This increase has financial implications for companies and individuals found guilty under a wide range of Federal laws.
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