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Scammers Feel the Fear: Why Prison Sentences Deter White Collar Crime | Torsten bell


LLast month, the UK Financial Conduct Authority sent out a press release bragging about their success in getting three fraudsters running an investment scam convicted and sentenced to prison terms totaling more than 24 years.

It struck me because financial crime convictions are painfully rare, and significant prison terms even rarer.

The government, which recently launched a new anti-fraud strategy, says that for every 1,000 frauds there is one successful prosecution. This reflects the fact that pressing charges and obtaining convictions is difficult, with complex cases often crossing borders.

Are many countries too soft when it comes to sentencing in such cases? Fascinating new research, based on the case of Finland, concludes that it is.

The authors note that those guilty of financial crimes are less likely to go to prison compared to other non-violent crimes (despite the fact that fraud costs around 1.5% of GDP). Only 11% of defendants are incarcerated, half or one-third the rates for non-violent drug or property crimes, respectively.

One reason could be that the people who commit these crimes tend to be more privileged than the average criminal: they are wealthier, older, and better educated. We call financial crimes white collar crimes for a reason.

He shows that prison terms for financial crimes work. They reduce recidivism by almost 50% in the three years after conviction, a big problem given that recidivism rates are high. And they have a broader deterrent effect: prison sentences reduce the likelihood that a fraudster’s colleagues will commit financial crimes. When it comes to tackling fraud, deterrence may be our best form of attack.

Torsten Bell is Executive Director of the Resolution Foundation. Read more at resolutionfoundation.org

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