Know more about what a white-collar crime is, the Canadian laws about it, and the ways it can be addressed by companies and their counsel
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.
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:
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bribery and extortion |
corporate fraud |
corruption |
embezzlement |
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money laundering |
securities or investment frauds |
tax evasion |
theft |
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.
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.
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:
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!
In Canada, white-collar crimes fall under federal criminal and administrative laws, such as:
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.
Corporations can be held criminally liable — along with their directors and officers — for white-collar crimes under the Criminal Code and the CFPOA:
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White-Collar Crimes under the Criminal Code |
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Corporate negligence: offense caused by the negligence of corporate directors and officers, given that they have the legal duty to prevent or address the negligent acts |
Offences of negligence — organizations (s. 22.1) |
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Duty of persons directing work (s. 217.1) |
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Criminal Negligence (ss. 219-221) |
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Offences which require fault: offence caused by fault (other than negligence) by corporate directors and officers |
Other offences — organizations (s. 22.2) |
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Theft: committed by representatives against their own organization |
Theft by or from person having special property or interest (s. 328) |
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False pretenses: false written statements, for personal or corporate benefit, regarding property, loans, credits, cheques, financial condition, etc. |
False pretense or false statement (s. 362) |
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Money laundering: where properties or their proceeds (which were obtained through crimes) are transferred, concealed, or converted (hence, “laundered”) |
Laundering proceeds of crime (s. 462.31) |
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Bribery, corruption, and influencing government officials: the direct or indirect giving of money or any consideration for the benefit or advantage (whether corporate or personal) of a person or their organization; also includes accepting these bribes on the part of the government official |
Bribery of judicial officers, etc. (s. 119) |
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Bribery of officers (s. 120) |
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Frauds on the government (s. 121) |
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Breach of trust by public officer (s. 122) |
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Municipal corruption (s. 123) |
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Selling or purchasing office (s. 124) |
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Influencing or negotiating appointments or dealing in offices (s. 125) |
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Secret Commissions (s. 426) |
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Fraud: generally, the use of deceit and other false statements to defraud another of their property, money, etc. (e.g., identity theft, Ponzi schemes, pyramid schemes) |
Fraud (s. 380) |
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Making a false prospectus (s. 400) |
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White-Collar Crimes under the CFPOA |
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Bribery of foreign officials: when committed by Canadian citizens, corporations, or their officials, against foreign public officials for their advantage (whether corporate or personal) |
Bribing a foreign public official (s. 3) |
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Accounting (s. 4) |
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Offence committed outside Canada (s. 5)
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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:
Provincial securities laws also include other offences, such as the prohibition on insider trading and tipping.
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:
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:
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.
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.
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:
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.
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.
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.
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.
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.”
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.
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.
