Organizational Crime and Illegalities

Updated: Oct 25

By Shreya Sharma


What is organizational Crime?

This question has often been asked and has even been answered in many forms and manners but usually got hampered and criticized with. Definitions of organized crime are numerous but mostly vague. You must have heard of many big words such as mafia, mob, syndicate, racket, gang and many more. But have you ever wondered of the origination of these words? Each word has a deep story behind them.

Organization has been described as a group of people who cooperate to accomplish objectives or goals (Albalese, 2000). According to Schrager and Short, ‘Organizational crime is an illegal act of omission or commission of an individual or a group of individuals in a legitimate formal organization in accordance with the operative goals of the organization’(Butt & Butt, 2016). Organizational crime is the violation of criminal statues committed in pursuit of the goals of legitimate organizations, organizational sub-units or work groups (Shover & Hochstetler, 2002). Individuals or group tend to commit organizational crime when they transgress not primarily from generation of self-interest but instead pursuit of organizational ones. In the United States, the Organized Crime Control Act 1970 defines organized crime as “the unlawful activities of a highly organized and disciplined association with high social status”(U.S. Code, 1970). Organized crimes are those crimes which are committed by illegal and association of people that has no legal status and illegal market is their primary marketing strategy. Organizational crime is distinguished and characterized separately, reason being that the crime begins with the fact that, when individuals commit criminal acts, they do so while being at work i.e. in their employment roles. These organizations may include charitable organizations, universities, religious organizations, or even other illegal ones. Organized crime is a collective result of commitment of an employee, knowledge and action of mainly three components: the criminal groups- each of which have at their own core, persons tied by racial, linguistics, ethnic and other bonds; the protectors- persons who are majorly recruited to protect the interest of organization; a specialist support- person who knowingly and deliberately renders services on an ad-hoc basis to enhance the group’s interests(Connell, 2005).

How is organizational crime different from other crimes?

One of the principal rationales for distinguishing organizational crime from other types of crime is the heavy financial, physical, and emotional toll, it extracts from its victims. Another reason might be the high cost raised value and their impact can range into crore of rupees and may victimize the entire nation. In case of organizational crimes, the organizational properties and dynamics can be autonomous the response it elicits. These crimes always seek to obtain a financial or other profitable benefit, whereas power and control can be termed as a secondary cause. Organizational arrangements can obscure decision-making participation and dynamics and thereby, increase the difficulties of oversight. They can also diffuse an individual’s responsibility towards misconduct, which may eventually facilitate the individual’s willingness to participate. The potential importance of organizational conditions, as causes of crime is most obvious in their long-standing patterns of criminal violation in organizations. Organized Crime is a continuous criminal enterprise which is maintained through the use of force, threats, monopoly, offensive control and/or the corrupt acts of public officials (Albalese, 2000). The conditions may be directly reflected through the economical state which includes economic conditions, government regulations, enforcement effectiveness, demand for a product or service and new product or the service opportunities that are either created by social or technological alterations, or by the criminal group itself. The criminal environment can be typically assessed by the extent of its relation and dependency between organized - group offenders and pre-existing crime groups. The formation of organized groups creates a resultant synergy between opportunity of a criminal and a well-established organized criminal group interaction.

Theoretical understanding behind Organizational Crime

Rates of organizational crime vary temporarily, spatially and differ even across organizations. Rational choice theory predominantly and logically stands compatible with the working of organizational criminal acts. Rational choice theory intends to accommodate logically and integrates in a straight-forward fashion. It often incorporates fact-learning and is associated with the concepts of rational actors, rational assumptions, self-interest of organized groups and the invisible connection behind illegal acts. Every choice made must be completed by first considering the cost, risk and the benefits of making the prolonged decision. It focuses on factors that range from time and space to inhibit criminal opportunities and provide space for illegal acts. When crime is viewed as a product of choice, it results from a decision-making process in which the actors balance diverse utilities with the cost-benefit analysis leading to potential risks and rewards. The latter might be of diverse character but when it claims to be of organizational matter, it may include everything, from increased profit or market share to increased personal income, while in return, the former includes loss of reputation or income and formal penalties imposed either by the state or by the national judiciary. While mainly focusing on the decision-making process, rational-choice theory provides a way of understanding how both i.e., the world beyond organizations and their internal conditions and their dynamics shape the odds, even of crime. Organized crime can be performed using the Routine-activity theory. It is a theory of crime events and focuses on explaining why people commit crimes, while explaining the motivation and illegitimate desires to commit crime. Routine activity mostly focuses on various opportunity structures that facilitate crime occurrence, but routine activity theory focuses on both, occurrence and prevention of crime. According to Cohen and Felson (1979), crime should be thought of as an event that occurs at a specific location and time and involves specific people or object. As per the theory, three minimal elements must be present to cover in time and space:

  • An Offender: who was prepared to commit the offence.

  • A suitable target: expenses to be exploited or a building to venting the crime and;

  • Absence of witnessing authority: absence of any person having related knowledge.

  • The lack of any of the above elements would be suitable and result in prevention of crime.

Characteristics of an organized crime

In India, the State of Maharashtra is perhaps the only State which has enacted the Maharashtra Control of organized Crime Act, 1999 (MCOCA) which defines organized crimes and elaborates the main characteristics of an organized crime (Kamal Jeet. v/s Maharashtra, 2008):

  • The accused must be a member of an organized crime syndicate or a gang.

  • The gang should be engaged in unlawful activities of an organized crime.

  • Unlawful activity must constitute a cognizable offence punishable with a term of punishment in form of imprisonment which may extend up to three years or more.

  • Such activity should have been committed singly or jointly, but necessarily as a member of an organized crime syndicate.

  • It must involve the use of threat, threat of violence or intimidation or coercion or other unlawful means.

  • It should be with the object of gaining some pecuniary benefit or economic advantage.

  • More than one charge-sheet must have been filed against the perpetrator before a competent court within preceding a ten years period.

Reason for increase in Organizational Crime

As discussed above, rational choice theory highlights two principal cause of deviation in the aggregate rate of organized crime: the volume of criminal opportunities and the size of employees and individuals who are well- prepared to exploit the organization. Organizational criminal opportunities are objectively given situations or conditions encountered by organizational personnel, that offer attractive potential for furthering organizational objective by criminal means. Where there is a paucity of opportunities, the rate of organizational crime contracts.

Competition & Uncertainty

The onset of developmental pace or the financial service revolution, new technologies for information sharing and financial transactions, the globalization of the economic markets and relationships and state provision of tax incentives and subsidies to business vary from one nation to another, but these changes have ultimately affected the supply of criminal opportunities around the globe.

The size of vulnerable organizations to get involved and area to high odd risk in suffering and crime commission is a probable function of:

  • Economic trends and the level of uncertainty in critical markets.

  • Competition over the different organizations present in market.

  • Resistance to gain acceptance and legitimacy in a specific industry.

  • Estimating the uncertainty and severity in potential disinclined consequences.

Fluctuations in the business cycle has been linked repeatedly to changes in the size of the pool of white- collar offenders. Economic down-turns reduce both income and prospects for the future, which eventually increase fear and competition. Fluctuations of the business cycle are important because they complicate and make more uncertain predictions of market trends. To acquire financing, personnel and raw material, other resources are needed for production. Organizations of all kinds compete with one another, over the prices charged for their products and also in credit and labour markets. In competitive worlds, progress is assessed by comparison with peers, and inevitably there are ‘winners and losers’. Desire to become the former is ignited in parts by fear of becoming the latter. Competition need not be economic, however establishing or maintaining the standard respect from peers for exceptional achievement is a priority for many, but humans compete for attention from heads, for plump assignments, and for possible career advancement (Miller, 2009).

Performance pressure

Performance pressure is not a condition that occurs only in profit-seeking organizations, all organizations must acquire sufficient resources in quality and price to remain viable if not developed in their success rate. Significant aspects leading to potential effects on the odds of crime by executives, managers; employees and legitimate organizations are: performance pressure; doubt about credibility of oversight; organizational culture that permits infraction acts; and overt behavior by executive and managers where law-respect is not a priority for that organization. When an employee from an organization is not doing well and a constant pressure is put on him to perform better, he may fail to think rationally and is more vulnerable to make desperate decisions which may influence them and cause them to make choices recklessly. Going with a market-based economy, the need for firms to maintain profitability is of ulterior importance. Declining income and consistently decreasing profits may be the source of pressure for increased performance. For employees, the source of performance pressure is a combination of organizational and personal determination to succeed. The relationship between economic conditions and performance pressure and the supply of potential organizational criminals give rise to potential crimes. However, severe economic up-downs in organizations may increase the number of crime-indulged employees. Crime is often misinterpreted and stimulated by a false belief that ‘everyone is getting rich’. Many come to believe that to pass up the any opportunity is to miss the boat. Those who choose crime as the best chosen alternative, tend to often assume that the economic rise hide their activities and increases the likelihood of criminal chances.

Criminal-conduct in Act

Another cause of organizational variation in crime commission is the stance on criminal conduct communicated by executives and managers. Policies and decisions are often meant to influence subordinate actions in ways to contribute to organizational success. The signaling behavior by executives, managers and team leaders communicates to all the degree to which lawful behaviour is valued and expected. When they signal to colleagues and employees that miss-conduct will not be tolerated, the message might get lost. When they either fail to insist deliberately on law-obedience, it directs that law-adherence is not a priority. The result often turns to steady by nature. If superiors treat the subordinates within the standards of ethical conduct, they may quickly realize the risk of misconduct. In these misconducts, the managers and employees who are criminally disposed, terribly grow.

Crime in Organizations

Business crimes are those which are enacted by those associations who primarily deal in legal market as a legal entity. Thus, organized crime is the crime committed by group(s) or an individual in a firm with a loosely and unstable structure that mainly involves role in sale and purchase of goods or services in illegitimate markets. Illegal acts by individual or group performed within a legitimate formal organization in law-full market is referred as business crime.

Workplace crime

These types of crime may range from simple noxious comment to commission of a mass murder by a disgruntled employee or even by other stake holders. Learning through a broader perspective, workplace crime can be broadly characterized into:

Workplace aggression

Aggression in the workplace can be of any combination of verbal and physical or direct and indirect or active and passive mode of act. It can be in two forms i.e. either covert behaviour which can occur when the attacker participates in activities they want to disguise from the target so the target is not aware about the aggressive intentions or behaviour of the attacker. With overt behaviour, the perpetrator does not lead any way to disguise or hide their intentions and are open enough. Aggression may be defined as “ the delivery of an aversive stimulus from one place to another, with intent to harm and with an expectation of causing such harm, when the other person is motivated to escape or avoid the stimulus” (Butt & Butt, 2016). An employee may act aggressively in four possible ways:

  • Criminal- the intention is aggression or violence and the perpetrator does not know the victim and is not even a part of organization. e.g., Bank or a store robbery.

  • Customer or client- active participation of employee as the perpetrator is being served as a customer or client and aggression occurs thereby.

  • Co-workers- the perpetrator and the victim work together and may follow a supervisor-worker relationship.

  • Personal relation- perpetrator may have a personal relation with the employee. This relation is entirely private-mattered and is never disclosed. E.g., Workplace assault.

Workplace Violence

Violence may be referred to an act carried-out with the perceived intent of inflicting physical or psychological pain to another person. The word violence was delineated as “an intentional use of physical force or [power, threatened or actual, against oneself, another person or against a group or community that either results in or has a high likelihood of resulting in injury , death, psychological harm, maldevelopment or deprivation” (Daher, 2019). Violence can be characterized into three main types:

  • Self-directed - violence a person inflicts upon himself e.g., suicidal thoughts.

  • Interpersonal - violence inflicted by another individual or by a group of individuals.

  • Mass-collective - violence inflicted by larger groups such as states, organizations, political organized groups and terrorist groups.

No remedy or immune has been given to the victims of violence. As per a research, the intensity of impact may differ but violence suffering has caused more than 1.6 million people per year to lose their life and numerous others have suffered from injuries and psychological and sexual related problems (Daher, 2017).

Unfair practices

Paying properly for overtime, violating minimum wage laws and misuse of employee’s pension funds are common and other tactics like economic exploitation are also pervasive in organizations to control the wages by weakening a union’s position by employing foreign parts in domestic goods, keeping large numbers of part-time workers and outsourcing the projects. E.g. Maruti Suzuki riots in 2012 and unfair labor practices.

Crime against Consumers

All those forms of crime committed by organizations against the demand of customers for their own profit may come under this category like manufacturing of unsafe products or false advertisement claims.

Unsafe consumer practices

It is an open secret that most of the organizations exist to make profit and in doing, it is usual for them to cut-corners especially in areas related to product safety. Every single product ranging from simple edibles to vehicle sell, we use in our daily life can be injurious to our well-being and health. Despite the fact that both sale and manufacturing of any type of unsafe product to consumer is illegal, but still organizations have been found to manufacture low standard products and jeopardized the life several innocent consumers just for the sake of their profit maximization.

Crime against Organization

Just like individual based crime, severe crimes can also be committed against corporate either by an individual or a business. The most common type of such a crime, are motor insurance frauds, cyber-attacks, job frauds, forgery related crimes etc. The organized groups have been delineated as all those illegal acts that are committed by unlawful association of people that have no legal status and illegal market is their primary market. This type of crime can be both transnational as well as international because of its ability to be opportunistic with products and services as well as alliances with other criminal and non-criminal groups.

Forming an Organized crime group

Organized crime groups have a pattern of four stages of development. The stages are as follows:

  1. Tactile/ incidental Crimes Most criminals, mostly first-time offenders, start their career from this stage. Tactile has been labelled so, because the local law enforcement will have to use tactical or incidental responsible methods of crime detection. Some of the common crimes in this category involve: arson, assault, extortion, robbery, manslaughter, corruption and hijacking. Stalking is a continues process of constant follow-watch on the victim.

  2. Illegal Business Activities When criminal groups tend to become more organized with an increased chain of members involved in the leadership structure, they move into more heinous crimes and incorporate more illegal activities with mass population. Common criminal enterprises may include: counterfeiting, frauds, illegal drug and alcohol trafficking, smuggling, prostitution, loan sharking and others.

  3. Legitimate Business When a criminal group has been formed with the common motive of illegal moves and is developed with a good organizational structure, they turn into a legitimate business to disguise their profits and to appear respectable in the community. At the same time, they must obtain a business that eventually leads and ends itself, hiding their illegal profits without attracting attention to law enforcement and tax authorities. Common businesses may include: auto agencies, factories, food products, garment manufacturing, night clubs and bars, vending machines, waste collection, transport business etc.

  4. Big Businesses Sophisticated criminal groups retain lawyers and accountants when they are involved in medium and large businesses. An organized group tends to accumulate every needed person in its group so as to save itself from entering into any trouble. Also, they may have an invisible political hand over them in order to preserve the status and reputation of the organization. They do this mostly to obtain respectability in the community and to lauder their illegal gains. Common businesses include banking, hotels and motels, real estates, credit cards, insurance, securities etc.

The fraud examiner will be eventually and unwontedly involved in the last three stages. However, each stage requires different investigative and audit techniques. Stage two and four focuses more on audit responsibilities. The more complex the enterprise, the more time is required to uncover the fraud.


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