People have been doing bad things and disregarding compliance rules for a long time. People have been studying why for almost as long. There are many notable psychiatrists, sociologist, criminologist, economists and others who've been researching this. Now, we don't have time to go all the way back to Adam and Eve. But it's worth noting that, as far as financial misdeeds go, they'd been around for a long time as well. In fact, I think that corporate crime became so noticeable in general culture that it led to one of my favorite comic books, Corporate Crime Comics. This was a short-lived 1970s comic book only two editions that I'm aware of. But if you look at the covers, it's worth noting that the first edition talks about true stories of corporate crime and highlights what are presumably damaging documents about a corporation. The stories inside the comic book touch on bribes and kickbacks in health care industry, a political lobbying scandal, an airline company fraud, and other corporate misdeeds. The cover of the second edition says it all with its corporate crime lineup of tax avoidance, bribery, false advertising, and more as well. But let's focus on what's referred to commonly as white-collar crime. That term was coined by Edwin Sutherland, a sociologists and criminologist in the late 1930s. Before he popularized the concept of white-collar crime, most people erroneously believe that less than two percent of the crime was committed by what we'll call the well-to-do, those people that wore fancy clothes and shirts with white collars. Sutherland defined white-collar crime as crime committed by a person of respectability and high social status in the course of his occupation. Most white-collar crime involves nonviolent financially motivated crime, let's call it fraud. The shortlist includes; bribery, money laundering, Ponzi schemes, insider trading, theft, racketeering, forgery and now, cybercrime and identity theft. But there are many other kinds of fraud. The FBI actually lists 23 common fraud schemes. So, why have people engaged in white-collar crime in the past and why does it continue? As I've mentioned, people have studied this area for many years and there are lots of theories. Eugene Soltes, a Professor of Business Administration at Harvard Business School, spent almost a decade communicating with dozens and dozens of former executives, some of whom were in prison for a myriad of financial crimes. Professor Soltes' book Why They Do It: Inside the Mind of a White-collar Criminal is a fantastic in-depth look at what drives many rich and powerful people to commit white-collar crime. In my view, it's extremely helpful in starting down the road to understanding the why, in order to figure out the how, how to get people to be compliant. While there are many many great observations that the Professor makes in his book, one in particular is directly on point in crafting a compliance program. He says that, in court, "Many of the executives that had committed fraud often reduced the complexity of the real world to make matters appear black and white." As you'll see, one of the key ways to try to get people to be compliant is to deal with the gray areas and the nuances of the real world. Now, based on my experiences, research, and practical applications in this field, for our purposes, I think we can summarize why people commit financial crimes into 10 general theories. Now, this is not necessarily a complete list, and I'm going to make some generalities and there of course is substantial amount of overlap between the theories, but it is nevertheless a helpful start in our discussion. So, the 10 theories of why people commit financial crime: the Psychological Aberration or Deviation Theory, the Privileged or Entitled Theory, the Stress and Pressure Theory, the Excessive Greed or Excessive Ambition Theory, the Cost-benefit or Risk Reward theory, the Lack of Recognition Theory, the Lack of Self-control Theory, the "Everyone is Doing it" or the Virus Theory, the "I Could Have Done it Another Way" Theory, and the last one, the No Harm Theory. This is a good, if somewhat simplistic, list of reasons of why people violate laws, rules and regulations and fail to be compliant.
