How Financial Crimes Can Change Local Economies

Friday, November 10, 2017, 6:00 PM | Leave Comment

Financial crime is often mentioned as being a pressing issue for national economies, but an even greater impact can be felt at the microeconomic level, meaning that communities and local businesses stand to be the most affected by financial crime.

Modern financial crimes fit within a large spectrum and cannot be analyzed by means of a “black and white” approach. These crimes must be evaluated critically since not all of them will affect local economies in the same manner.

While financial crimes can be classified in various ways, it is easier to divide them into four major groups:

How Financial Crimes Can Change Local Economies

  1. Deceitful Crimes

    Deceit might bring to mind fake mustaches and disguises, but the more serious problem with financial fraud and scams is that they cause widespread mistrust within communities.

    Depending on the circumstances of each case, these offenses can be handled within the civil or criminal justice realms.

    Scams tend to be insidious and will target certain demographics or customers. The most common of these tend to be telephone scams, banking scams and IRS imposters.

  2. Underground Economies

    There are quite a few ways people can make a living through unregulated sales of goods, vice, smuggling, and performing services informally and without proper permits.

    Some of the activities in this regard may include selling smuggled goods, offering unlicensed services, running illegal lotteries, and many more.

    Although making a living in a shadow economy is illegal, it should be noted that people often gravitate towards these financial crimes when local economies have failed or are in a period of correction.

    The problem is that unregulated financial activity makes it difficult for officials to gauge the state of the economy, which in turns results in poor decision making.

  3. Money Laundering

    Described as a “financial scheme that aims to conceal the identity, source, and destination of illicitly-obtained money”, money laundering is particularly hard to track.

    Some historians and economists will often argue that money laundering, similar to the underground economy, has been vital in the development of major economies such as Miami, Switzerland, and a few Caribbean island nations.

    The problem with this financial crime is that it supports other crimes such as fraud, drug trafficking, embezzlement, and many others.

    When money laundering is rampant, it results in a breakdown and general mistrust of the banking system.

  4. Counterfeiting

    Many consumers specifically search for counterfeit goods to purchase because they feel that they cannot afford to acquire legitimate luxury items.

    The problem with counterfeit products is that they create losses at several levels, from the manufacturer to the retailer, and from the distributor to all the staff members whose livelihoods depend on the success of original products.

    While it may seem harmless, this financial crime can have serious consequences.

In the end, financial crimes will eventually impact local economies in a negative way. Even underground economies can be damaging if they are allowed to operate for long periods of time.

Author BIO

Eileen O’Shanassy is a freelance writer and blogger based out of Flagstaff, AZ. She writes on a variety of topics and loves to research and write. She enjoys baking, biking, and kayaking. Check out her Twitter @eileenoshanassy.

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