White-collar crime is a growing concern for Canadian companies

Updated 23 May 2024

Behind the glamour of glass buildings and formal suits of the corporate world are hidden and under-the-table transactions, which may be what we call white-collar crime. But what exactly is a white-collar crime? And how can corporations prevent it from happening within their walls?

This article can be referenced by lawyers and clients in identifying, preventing, and prosecuting a white-collar crime, in view of Canada’s laws and regulations.

What are white-collar crimes?

A white-collar crime is a non-violent offence, whose core is fraud, malice, deceit, or concealment, and for the purpose of personal or corporate gain. It was coined this way because it is usually committed by high-ranking corporate officers and political officials, who wear, as the name suggests, a white collar. In addition to the actors within the organizations, entities themselves (i.e., corporations) can also be held liable for white-collar crimes.

While it is also referred to as corruption, a white-collar crime may also generally refer to:

Nowadays, the term has expanded to include other crimes that can be committed using technology (e.g. cybercrimes), in addition to the more traditional ones. Know more about white-collar cybercrimes with this video:

Find more articles geared towards companies and their legal departments in our Corporate Commercial section.

Case study: notable white collar crime trial in Canadian history

In one high-profile case, SNC-Lavalin made headlines for charges of fraud and corruption over its former business dealings in Libya. The construction giant pled guilty in December 2019 and was imposed a negotiated penalty of $280-million fine, plus a three-year probation order. Then in 2020, its former executive was sentenced to eight years in prison for fraud, corruption and proceeds of crime offences in connection with the scheme.

How does white-collar crime differ from regular crime?

White-collar crimes are different from the other crimes in many ways, such as their coverage, parties liable, prosecution, and penalties. It can be compared with other non-white-collar crimes based on the following:

• character: white-collar crimes are non-violent and do not result in physical injuries (in most cases); while ‘regular’ crimes are associated with violence and physical harm
• commission: related to its character, white-collar crimes usually involve mental skills when committed (i.e., there’s abuse of trust, use of privilege, and employs stealthy transactions)

However, the criminal justice system established in each jurisdiction will mostly lay down the same procedural laws in prosecuting these two types of crimes: imprisonment!

What are the Canadian laws about white-collar crime?

In Canada, white-collar crimes fall under federal criminal and administrative laws, such as:

• Criminal Code
• Competition Act
• Conflict of Interest Act
• Corruption of Foreign Public Officials Act (CFPOA)
• Lobbying Act
• Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)

In addition are the provincial and territorial securities laws and regulations (since these are not governed by federal laws). Prosecution of a white-collar crime also considers common law principles and civil law on torts and damages in some cases.

Corporate criminal liability

Corporations can be held criminally liable — along with their directors and officers — for white-collar crimes under the Criminal Code and the CFPOA:

Securities and investment frauds

White collar crimes can also be found under the provincial and territorial laws on securities and investments. For example, below are some of the criminal acts prescribed by Ontario’s Securities Act as to dealing securities in the province:

• making false or misleading statements on any material information (s. 122)
• direct or indirect fraud and market manipulation (s. 126.1)
• misleading or untrue statements on the value of securities (s. 126.2)
• manipulation, or making false or misleading information regarding benchmarks (ss. 126.3 and 126.4)

Provincial securities laws also include other offences, such as the prohibition on insider trading and tipping.

Tax fraud

When a corporation exceeds the borders of tax avoidance, it may be tantamount to tax evasion, or worse, tax fraud. Several white-collar crimes are found under Canadian tax laws such as the federal Income Tax Act and other provincial tax laws which may overlap.

The most common white-collar crime under tax laws is tax evasion, which is the deliberate or intentional non-payment of taxes when due. Other acts that are also related to tax evasion and tax fraud include:

• employing fraud for higher deductions or for lower tax due
• misrepresentations or false statements in tax returns

Monopolies and cartels

Healthy competition among Canadian businesses is maintained by competition laws, such as the federal Competition Act. In addition to regulating mergers and acquisitions (M&A) among corporations, this Act also prescribes white-collar crimes and its criminal penalties.

These crimes may be related to the completion of an M&A, or to other prohibited business activities of a corporation with regards to their operations and products, such as:

• conspiracies: when competitors conspire to fix their products’ prices, or to allocate their products’ sales, markets, or customers (s. 45)
• bid rigging: when competitors conspire that one of them would not submit a bid, or withdraw one’s existing bid, to control the results of the bidding (s. 47)

White collar crime: prevention strategies for businesses

Leaders in the legal field have shared their insights on how white-collar crimes can be prevented. These insights are addressed to in-house counsel of companies and businesses, which are prone to encountering white-collar crimes.

Be prepared for effects of global crises

Experts say that corporations must be prepared for the after-effects of global crises, such as pandemics, as these may increase the commission of white-collar crimes. “It’s a mistake not to be vigilant on the anti-corruption front because these things come in waves,” says Riyaz Dattu, an expert on international trade and investment law.

Dattu also says that disputes between Canadian companies and foreign governments may arise as general counsel may be less alert to these concerns.

Increased risks for corporations

In dealing with new business partners amid broken supply chains, such as during the pandemic, risks inevitably increase for private companies. “From my perspective, working at a corporation and talking to in-house peers in corporations, we face risks in terms of procurement, and the risks have increased,” says Daniel Fombonne VP, Compliance and General Counsel, Africa at Kinross Gold Corp.

He also points out the following challenges during the COVID pandemic, which also apply to any global crisis:

• processes and protocols would be different because counsels and corporations don’t have the same ability to vet new third parties
• challenges on demands in the supply chain/procurement space as companies scrambled to procure goods from other means or other third parties when borders were shut or jurisdictions restricted the ability of suppliers to export

While Fombonne’s legal/compliance department has not revised internal protocols, an extra level of caution has been applied to due diligence to ensure that no steps are skipped.

Kinross donates to communities in which it operates. To avoid several risks when interfacing with governmental entities, the gold mining company favours in-kind donations as opposed to cash.

“A good way to mitigate risk with any kind of donation is to openly source goods instead of someone telling you where to procure the goods to avoid potential collusion and the risk of fraud. We try to ensure we don’t get into dangerous territory,” Fombonne says.

Stricter international regulators during crises

During the previous pandemic, US regulators were actively investigating the public filings of companies to screen for those that were using the crisis to hide prior failings or losses. This is what Lincoln Caylor says, a partner at Bennett Jones LLP.

He also warns that regulators are actively investigating the use of government funds, so in-house counsel should continue to be vigilant. “The regulatory environment will swing back to more active investigations, and you won’t be able to sweep things under the rug because of COVID. Those that try will risk compliance issues,” Caylor says.

Be cautious when conducting business overseas

Many Canadian companies have mining operations in less-governed countries such as Mexico, Argentina and Venezuela. As such, in-house counsel should pay attention to financial transactions with these countries, particularly in times of economic hardship, said Dattu.

He also advises in-house counsel to go back after the crisis period is over, to examine potential fraud and payments that could be construed as bribes.

“Changes in intermediaries, suppliers, etc. could give rise to violation of economic sanctions and export control rules [on] the goods that the company is in the business of importing or exporting,” Dattu says.

Be proactive in preventing a future white-collar crime

Aside from being reactive when white-collar crimes occur at their doorstep, companies can also be preventive when it comes to future crimes. An important part of Fombonne’s role is training colleagues throughout the international company on anti-corruption.

“It’s going to be incumbent on all of us, including corporations like Kinross, to keep focusing on due diligence and keep asking the right questions and not cut any corners,” he says.

Léon Moubayed, a partner at Davies Ward Phillips & Vineberg LLP, advises in-house counsel to work toward bringing a cultural shift within a company to make corruption socially unacceptable. Outlining rules on a company website is not enough.

Such a shift requires real conversations between all stakeholders to create a clear commitment against financial crime. He adds that this is also to ensure that everyone understands why it is so important.

Learning from the history of local white-collar crimes

Although high-profile cases of white-collar crimes are unusual — such as the SNC-Lavalin case — business crime on a smaller scale will always be a rampant problem according to Moubayed.

“The history of white-collar crime shows us that, in every situation — whether you have a booming economy or a financial crisis — white-collar crime will always find its way,” Moubayed says. “The role of in-house counsel is to make sure you have proper systems in place to detect, prevent and remediate those problems.”

Addressing a white-collar crime head on

A general counsel who becomes aware of white-collar crime within an organization should drop everything and immediately focus on triaging the situation, according to Norm Keith.  He is now a senior partner at KPMG Law but was previously a White Collar Risk Advisory & Litigation Lawyer at Fasken Martineau DuMoulin LLP.

He suggests retaining external counsel and a forensic investigator is recommended, together with rapid freezing of digital data and electronic documents. “When you have taken all remediation and terminated the necessary employees and third parties, then do a review and update of your policy and procedures,” Keith says.

White-collar crime: a continuing concern

Even with or without a global crisis, white-collar crime is an ongoing concern for corporations, the government, and the lawyers working for these entities. Legal departments must ramp up due diligence and internal efforts as fraud and corruption continue — and increase— within their operations.

In-house counsels are not left without remedy against perpetrators of these crimes. Canada’s legal system is robust with ways in helping corporations prevent and address white-collar crimes.

For a list of lawyers who can help companies combat white-collar crimes, check out this list of the best corporate commercial lawyers in Canada as ranked by Lexpert.