Doing a Madoff: The Psychology of White-collar Criminals

Abstract

This article deals with the problem of white-collar crime—nonviolent financial crimes that include Ponzi schemes, insider trading, fraud, identity theft, copyright infringement and many more. White-collar crime is a major reason why approval and trust in businesspeople have eroded public opinion. The concept of the “Fraud Triangle” is introduced, identifying three major forces that influence white-collar crime: pressure, opportunity, and rationalization. There is evidence that white-collar criminals spend surprisingly little time thinking about the consequences of their actions. The article considers the extent to which personality differences play a role in white-collar crime, examining factors like greed, poor self-control, thrill-seeking, narcissism, and psychopathy. Neuro-criminological observations suggest that individuals with psychopathic tendencies show decreased amygdala and orbitofrontal cortex responses to emotionally provocative stimuli. Concerning the detection and exposure of white-collar crime, journalists and whistleblowers are apparently more proactive than standard law-enforcement agencies. The article concludes with a discussion of the preventive measures that can be taken to pre-empt white-collar crime, including a potentially important role for business schools to play.