Citation(2009) 21 SAcLJ 16
Date01 December 2009
Published date01 December 2009

Then and Now

This article attempts to give an overview of what constitutes white-collar crime, highlighting some of the more significant milestones of such in Singapore’s history, and perhaps also attempting to describe the trends which can be observed. It is perhaps a timely review, because the incidence of white-collar crime is escalating, as newspaper headlines bear this out regularly.

I. Concept — What is white-collar crime?

1 Let’s start off with getting the concept in focus. What is white-collar crime? The term “white-collar crime” itself has not been defined by judicial decisions in Singapore. It is also a term which has been used almost interchangeably with “corporate crime” or “business crime”.

2 Academics have their differences in trying to define what constitutes corporate or white-collar crime. An American sociologist Edwin H Sutherland tried to define “’white-collar crime” as “crime committed by person of respectability and high social status in the course of his occupation”.1 The deficiency in this approach is that it seems to concentrate on the social status of the criminal instead of the nature and context of the offences concerned; such a definition would appear to suggest that all offences committed by persons of high social standing could, therefore, be classified as “white-collar crime”, a proposition which presents obvious logical and semantic difficulties,2 for an accountant or lawyer may also commit murder but no one would call such an act white-collar or corporate crime.

3 In 1970, a sociologist, Edelhertz,3 proposed another definition as “illegal acts committed by non-physical means and concealment in order to obtain money or property or to obtain business or personal advantage”. This is submitted to be a better working definition of what is otherwise an amorphous or over-broad concept.

4 One could, therefore, identify the crucial characteristics of white-collar crime as follows:

(a) Perpetrators: white-collar crimes are crimes committed by persons who are either the directors, officers and employees of a corporation,4 or professionals serving such corporations.

(b) Context: white-collar crimes are crimes committed within a predominantly corporate or business context, and exclude those involving physical violence.

(c) Motivation: white-collar crimes are primarily motivated by and committed for the individual’s quest for illicit economic gains or business advantages,5 or to conceal either business losses or other forms of defalcations or non-compliance with regulations.

(d) Offences: white-collar crimes usually involve offences which involve the element of dishonesty or fraud, as it is through such dishonesty or fraud that property or business advantages are sought. This would be consistent with the fact that the predominant underlying motives of white-collar criminals are primarily economic.

II. Different types of white-collar crime

5 A study of cases falling within the above definition of white-collar crime would reveal that white-collar criminals may weave highly

complex schemes, and employ even more highly sophisticated means of concealing their wrong-doings and even creating deliberate misdirection for the investigators. White-collar crimes in Singapore as such usually entail one (or are complexes of more than one) of the following offences: “classic” Penal Code6 offences such as forgery, cheating and criminal misappropriation (“CBT”), followed by Securities and Futures Act,7 Companies Act8 and Computer Misuse Act9 offences.

III. Prevalence of white-collar crime

6 With economic development and the lure of living the high life, it comes as perhaps no surprise that a significant number of companies have been victims of white-collar crime. In 2007, nearly one in four of Singapore’s larger companies was hit by fraud.10 The amounts involved were also increasing — from an average of S$1.4m per incident in 2004 to S$4.4m per incident by 2007.11 The majority of the perpetrators appear to do so for materialistic reasons: about 70% committed their crimes to fuel a lifestyle beyond their means.12 It is, therefore, vital for all stakeholders in corporate governance to appreciate what constitutes white-collar crime, draw lessons from the historical examples, strengthen the systems and institutions of prevention, and have an effective risk management culture.

IV. Offences underlying white-collar crime

7 This article shall attempt to survey the types of offences entailed in white-collar crimes in Singapore’s legal history by discussing such crimes according to the categories of offences under which they fall.

A. Forgery, false entries and cheating

8 In numerous instances, creating forged or false documentation and/or false entries in accounts are required to defraud or evade internal or external scrutiny or audit of corporate undertakings. Such false documents or entries serve to conceal or divert attention from dishonest

deeds undertaken with the aim to siphon monies out of a business or concern. Forgery and cheating — both dishonest acts by themselves — are arguably the most common denominator of corporate crime. The “dishonesty” consists of intentionally causing wrongful loss to others or wrongful gain for oneself. It is, therefore, only proper to begin our discussion by focusing on the related concepts of forgery, false account entries and cheating.

B. Related concepts — False entries in accounts

9 Whilst it is true that the making of a false document as such without the intent to cause damage to the public or to a person would not amount to forgery, the making of false entries in accounts (defined comprehensively in s 477A of the Penal Code)13 constitutes a complete offence in itself, punishable with up to ten years imprisonment or fine or both.

10 It should be noted that the falsification of accounts constitutes a complete offence by itself, whether or not the falsifications were used or intended for the purposes of carrying out further acts of either cheating or criminal breach of trust.

C. Cheating

11 Since one of overwhelming motives of corporate crime is to achieve illicit personal gain, the offence of cheating may be said to be one of the central motives underpinning or explaining corporate crimes.

D. Criminal breach of trust

12 Together with cheating (discussed above), criminal breach of trust — conveniently and commonly abbreviated as “CBT”— is also an offence often encountered in any discussion of white-collar crime.

13 Wrongful loss in CBT usually entails an outright appropriation of company assets or property. However, disposal of company property at a deliberate undervalue to relatives,14 or intentionally discarding or abandoning property belonging to another,15 have also been held to be wrongful loss constituting dishonest misappropriation.

14 One of the ways in which CBT may be committed, even without wrongful gain enjoyed on the part of the accused, is for the accused to dispose of the property otherwise than in the manner or purpose for which the property had been entrusted to him. There should be some degree of specificity or exactitude in the definition of such prescribed manner or purpose.16 A general breach of director’s duties under the Companies Act17 or even negligence18 need not necessarily amount to CBT. On the other hand, a director or shareholder may be entitled to profits, but if the monies were to be withdrawn in a manner or procedure contrary to the procedures laid down by the Companies Act, CBT may well be committed.19

E. Other common offences involved in white-collar crime

15 With the development of Singapore’s economy and with the attendant rise in the level of sophistication of commercial life, the Legislature was constrained to keep pace. This resulted in the enactment of numerous new statutes (as well as the refinement/amendment of existing statutes) to regulate many new areas of commercial activities. This is usually achieved by the criminalisation of certain acts or misdeeds perceived as socially undesirable.

16 Thus, eventually, the other common offences involved in white-collar crimes have come to include contravention of various provisions of the following statutes:

(a) Bankruptcy Act;20

(b) Commodity Trading Act;21

(c) Companies Act;22

(d) Computer Misuse Act;23

(e) Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act;24

(f) Financial Advisers Act;25

(g) Multi-Level Marketing and Pyramid Selling (Prohibition) Act;26

(h) Securities and Futures Act.27

V. Significant cases

17 Some of the more historically significant cases of white-collar crimes in Singapore include the following.

A. Gemini Chit Fund case— Criminal breach of trust

18 Very few people below the age of 60 now will remember this saga. However, it represents a seminal moment in the modern history of white-collar crime in Singapore and it would serve us well to commence our overview with this case.

19 In 1964, an enterprising man called Abdul Gaffar Mohamed Ibrahim founded the by now infamous Gemini Chit Fund Corporation Ltd as a private limited company. Such schemes are historically practised in rural societies.

20 A Chit Fund is an informal or primitive system of micro-financing (in modern parlance). It acts as both a loans and deposits scheme in which members are both investors and borrowers. Members put their savings into a common pool, within prescribed or agreed periods. At the end of each period or credit cycle, the pooled funds are auctioned and the bidder with the lowest bid wins. Such schemes in its historical context usually operated at a personal level, as a quasi-credit co-op between friends or villagers. However, the Gemini Chit Fund attracted public subscription and in the end enrolled up to 40,000—50,000 members. The lure was the promise of unusually high returns on investment. In 1973, Abdul Gaffar was charged with three counts of criminal breach of trust...

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