The Origins of Modern Financial Crime

Historical foundations and current problems in Britain

Sarah Wilson

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781136237720
• Edition: 1
• Topic: Law
• Subtopic: Legal History
• Index: Law

The recent global financial crisis has been characterised as a turning point in the way we respond to financial crime. Focusing on this change and 'crime in the commercial sphere', this text considers the legal and economic dimensions of financial crime and its significance in societal consciousness in twenty-first century Britain. Considering how strongly criminal enforcement specifically features in identifying the post-crisis years as a 'turning point', it argues that nineteenth-century encounters with financial crime were transformative for contemporary British societal perceptions of 'crime' and its perpetrators, and have lasting resonance for legal responses and societal reactions today.

The analysis in this text focuses primarily on how Victorian society perceived and responded to crime and its perpetrators, with its reactions to financial crime specifically couched within this. It is proposed that examining how financial misconduct became recognised as crime during Victorian times makes this an important contribution to nineteenth-century history. Beyond this, the analysis underlines that a historical perspective is essential for comprehending current issues raised by the 'fight' against financial crime, represented and analysed in law and criminology as matters of enormous intellectual and practical significance, even helping to illuminate the benefits and potential pitfalls which can be encountered in current moves for extending the reach of criminal liability for financial misconduct.

Sarah Wilson's text on this highly topical issue will be essential reading for criminologists, legal scholars and historians alike. It will also be of great interest to the general reader.

The Origins of Modern Financial Crime was short-listed for the Wadsworth Prize 2015.

1 The search for the ‘lexicon' of financial crime ‘Business crime' in legal definition and societal consciousness

DOI: 10.4324/9780203101933-1

The relationship between the law and the mores tends to be circular. The mores are crystallised in the law and each act of enforcement of the laws tends to re-enforce the mores. The laws regarding white-collar crime, which conceal the criminality of the behaviour, have been less effective than others in re-enforcement of the mores.¹

¹ E. H. Sutherland, ‘Is “White-Collar Crime” Crime?’, American Sociological Review, 1945, 10, p.139.

Introduction

This analysis of the significance of nineteenth-century responses to financial crime for twenty-first century Britain focuses on particular illegal activities found within this broad rubric: those termed in legal discourse and in common parlance as ‘business crime’ or ‘business fraud’. The ‘locations’ of these activities within both law and wider societal consciousness are now explored, commencing with the proposition that activities regarded as ‘financial crimes’ occurring in the ‘commercial sphere’ will continue to interfere with goals of societal stability and economic prosperity into the twenty-first century until the realities of their impact upon past societies are confronted.² Equally, this narrative seeks to redress a point of further dissatisfaction which flows from a poor understanding of white-collar crime’s past that what eminent US criminologists Rosoff et al. term the ‘lexicon’ of white-collar crime actually became part of wider societal, as well as legal consciousness in Britain during the nineteenth century.³ For many like Rosoff, the term white-collar crime is lexiconic because of the way in which this seminal construct of social science has become embedded in popular consciousness. It has become a rhetorical expression of a wide understanding that although those in upper-socio-economic groupings commit criminal activity, this behaviour is seen to differ from ‘the criminal behavior of the lower socioeconomic classes’.⁴

² Lord Irvine (then Lord Chancellor), Law Commission, Fraud and Deception: A Consultation Paper, CP No. 155, London: HMSO, 1999, para. 1.4. ³ S. Rosoff et al., Profit without Honor: White-Collar Crime and the Looting of America, New Jersey: Prentice Hall, 2010, p.3. ⁴ Ibid.

Similar patterns of reaction and response can be observed from nineteenth-century encounters with what contemporaries actually termed ‘financial crime’. Then as now, it reflected contemporary hopes and expectations but also fears and anxieties about these unlawful activities.

Acknowledging that the beginning of the twenty-first century has already revealed itself to be a time of tremendous optimism and indeed opportunity, yet also one of intense anxiety, raises interesting prospects for this analysis. It would appear that the time is ripe for exploring the idea of a ‘societal journey’ as proposed by Tosh especially as current discourses continue to lament the problem of financial crime for twenty-first century Britain.⁵ If we are to regard Victorian experiences as having lasting significance, what is required is an interdisciplinary exploration of the rich and voluminous commentary on white-collar/financial crime today, to promote an understanding of how financial crimes have been (and are) accommodated within British/UK legal culture, with particular emphasis on English law. Currently the scholarly analysis of white-collar/financial crime – notably from criminologists given their dominance in this academic commentary – has largely left itself unable to appreciate the significance of the experiences of past societies for their reflections on these activities and their significance for the present across a spectrum of social and economic dimensions. This analysis ‘teases out’ that significance by illuminating the implications of the silences within the modern literature. It has also required paying close attention to how historians have constructed the nineteenth century as an intellectual end in itself within the general historiography as much as it does explaining how historians have hitherto approached the study of financial crime specifically.

⁵ J. Tosh, The Pursuit of History: Aims, methods and new directions in the study of modern history, Harlow: Longman, 2010, pp.1–2, 40–1.

In following the lead of historian Peter King, this task is very much one of remedying the position whereby historians of crime ‘have relatively rarely made explicit the links between their own work and that of their criminological contemporaries’.⁶ This reflection provides a valuable general statement on the lack of dialogue between scholars from different academic disciplines whose intellectual agendas clearly interface, and the importance of a different approach. In 1999 King insisted that cross-disciplinary dialogue must be engagement which occurs not merely within disciplines as between willing participants, but actually systematically across disciplines.⁷ This spirit and intendment was expressed a short time later, and in the context of financial crime specifically, in calls made by the author of this present analysis for scholars of history, criminology and law to interface more extensively with one another.⁸ Both this general sentiment and its more specific orientation towards financial crime received important recognition from the criminology community in Locker and Godfrey’s 2006 work.⁹ Shortly prior to Locker and Godfrey, William Sewell JR stressed the importance of developing serious dialogue between social scientists and historians. Notwithstanding that this ‘mutual enlightenment’ was likely to enrich social science scholarship, Sewell also lamented that the contributions capable of being made by historians on account of their sophisticated understanding of the ‘temporalities of social life’ had scarcely penetrated ‘social theoretical debate’.¹⁰ Capitalising on this now requires a more extensive focus on integrating accounts of Victorian experiences of financial crime with current realities in order to show the echoes between those experiences. This is oriented towards achieving better understanding of the nature of the challenges presented by financial crimes for society in the twenty-first century and how these challenges are currently manifested in legal definition and wider criminal justice process culture and operating practices.

⁶ P. King, ‘Locating Histories of Crime: A Bibliographical Study’, British Journal of Criminology, 1999, 39(1), p.161. ⁷ Ibid, pp.161–2. ⁸ S. Wilson, ‘Invisible Criminals?: Legal, Social and Cultural Perspectives on Financial Crime in Britain 1800–1930’, unpublished PhD thesis, University of Wales (Swansea), 2003. ⁹ J. P. Locker and B. Godfrey, ‘Ontological Boundaries and Temporal Watersheds in the Development of White-Collar Crime’, British Journal of Criminology, 2006, 46(6), p.976. ¹⁰ W. H. Sewell Jr., Logics of History: Social Theory and Social Transformation. Chicago: University of Chicago Press, 2005, p.1, and pp.6–12.

This also involves further reference to the intellectual case in favour of looking at the past for illuminating and responding to current challenges. Consequently it is important to emphasise that this study is grounded in the numerous strengths of existing scholarship for understanding the significance of white-collar crimes for society in the twenty-first century, as it is in illuminating the implications of the silences within the modern literature. Thus this account of Victorian experiences of financial crime is strongly influenced by the basic premise of Sutherland’s work, which was itself rooted in the proposition that criminalising activity is considered to reflect and reinforce societal rejection of behaviour deemed injurious to its interests, through its ‘stigmatisation’ of wrongdoing and through consequences seeking to exclude participation from key aspects of ‘civic life’.¹¹ This analysis takes a particular interest in how Sutherland observed differences in the operation of this broad pattern, and in his argument that certain criminal activities attracted greater vigilance in legal responses, and mobilised greater repugnance in wider societal consciousness than others.

¹¹ E. H. Sutherland, ‘Is “White Collar Crime” Crime?’, American Sociological Review, 1945, 10, pp.136–7.

For Sutherland this was inappropriate because it did not reflect the injurious nature of (even unlawful) acts, because whilst white-collar crimes typically attracted far less of both legal vigilance and societal repugnance than other ordinary or ‘traditional’ crime, this did not reflect qualitative differences in social injuriousness. White-collar crimes were to be found, like all crimes ‘distributed along a continuum in which the mala in se are at one extreme and the mala prohibita at the other’.¹² This reflected the mistaken perception held that white-collar crimes amounted to mala prohibita – being merely technical violations of law rather than activities engendering serious harm.¹³ That this perception remains, and continues to be regarded as mistaken in some quarters, is apparent from Friedrichs’ call, 70 years later, for ‘transformative understandings of crime’ to redress the position whereby ‘activities with relatively mild harmful consequences for society are accorded much attention and treated harshly’ whilst ‘activities with demonstrably major harmful consequences for society are accorded little attention and only very selectively addressed’.¹⁴ Friedrichs sought to redress this by insisting that ‘fraudulent misrepresentations in many different forms and on many different levels were clearly at the center’ of the financial meltdown of 2007–8, as a reflection of pre-crisis financial system architecture embodying conditions ‘that promote criminal activities and actions’.¹⁵ Friedrichs’ commentary on the crisis was one on the absence of ‘collective consciousness about the nature of crime in relation to harm’, with strong echoes of Sutherland’s work generally, and specifically the latter’s hypothesis of ‘unorganised resentment’.¹⁶

¹² Ibid, p.139. ¹³ Ibid. ¹⁴ D. O. Friedrichs, ‘Wall Street: Crime Never Sleeps’, in S. Will et al. (eds), How They Got Away With It: White-Collar Criminals and the Financial Meltdown, New York: Columbia University Press, 2012, p.20. ¹⁵ Ibid, pp.15, 20. ¹⁶ Ibid, p.15; E. H. Sutherland, ‘Is “White Collar Crime” Crime?’, American Sociological Review, 1945, 10, p.137.

Both scholars express a vital component for unpacking the nature of societal attitudes towards financial crimes today, in the light of the challenges they present for law specifically and wider society more generally, and the circularity (or apparent lack of) operating between the two. For Friedrichs, it is such mistaken beliefs about financial crime that hinder responding to them effectively, and at the heart of this appears to lie how the ‘ambivalent’ status of financial crime in wider societal consciousness is undermining laws which are in place, and any impetus for strengthening legal responses. From this a key question for examining the impact of financial crime on ...

Table of contents

• Cover
• In this scrupulously researched book
• Halftitle Page
• Routledge SOLON Explorations in Crime and Criminal Justice Histories
• Title Page
• Copyright Page
• Contents
• General series introduction
• Acknowledgements
• Introduction
• 1 The search for the ‘lexicon’ of financial crime: ‘business crime’ in legal definition and societal consciousness
• 2 The ‘problem’ of financial crime: interdisciplinary perspectives on historiographical representations
• 3 Business, crime and ‘status’: what is missing from current understanding?
• 4 Locating Victorian experiences of financial crime in a ‘trajectory’: forwards and backwards
• 5 Victorian responses to financial crime: illustrating ‘transformative understandings’ of crime
• 6 The rhetoric of capitalism and the language of criminal proceedings: a ‘different’ type of deviance and the search for the ‘lexicon’ of financial crime
• 7 Anxiety, determination and businessmen as [criminal] policymakers
• 8 The ‘lexicon’ of financial crime in the twenty-first century understood as a complex legacy of Victorian experiences
• Bibliography
• Index