NEW RESEARCH | Here are the crimes that increase most among small businesses

We know about companies as victims of crime, but we know less about companies as tools of crime. Researchers at Södertörn University want to change that.

Measuring the extent of corporate crime is not easy. Statistics from different authorities are often fragmented, and crimes are often only discovered when the company has already gone bankrupt. But by analyzing data on different types of crime, researchers have now identified a pattern.

– We clearly see that certain types of crime are increasing, both in number and proportion, says Associate Professor Marcus Box, a researcher at Södertörn University who is involved in several projects on business-related crime, entrepreneurship and economic regulations.

Criminal bankruptcies increasingly common

One of the clearest patterns in the statistics is the increasing number of criminal bankruptcies. When a company goes bankrupt and a receiver examines its finances, irregularities are often discovered. These may include accounting irregularities or unauthorized borrowing of money from the company by its owners.

– It’s not just about big business or high-profile scandals like the Think Pink case. Most crime happens in small businesses – not because they are more likely to cheat, but because they are simply the most numerous.

In addition to bankruptcy-related crime, tax evasion – i.e. tax crimes linked to inadequate accounting – is a common crime that has steadily increased in recent years. Money laundering – a relatively new crime (introduced in 2014) has also grown rapidly and is often linked to money exchange activities and organized crime.

– We have also seen an increase in the number of restraining orders issued as a way of stopping repeat economic offenders, says Box.

Policy reforms explain the increase

Individuals often commit crimes for a variety of reasons, but Södertörn researchers believe that recent policy reforms linked to entrepreneurship may have contributed to the sharp increase in corporate crime:

– The abolition of the audit obligation for small limited liability companies in 2010 has made it easier to avoid audits.
– Reduced share capital has lowered the threshold for starting a business – and at the same time made it easier to use companies as a tool of crime.
– Privatization and deregulation, particularly in health and social care, have in some cases created opportunities for organized crime to enter welfare systems.

– The reforms were clearly well-intentioned, but they have not always been followed up with sufficient transparency. This is an example of how institutional changes can have unexpected consequences.

– Often it is a combination of these factors that leads to crime – not a single cause, explains Box.

A growing field of research

The research group at Södertörn University is also part of a national collaboration project – SMOB (Sweden against Organized Crime) – where academia, authorities and business collaborate to combat organized crime, with a particular focus on the criminal economy.

– Understanding the dark sides of business is an important part of safeguarding both a healthy business community and a law-abiding society, says Marcus Box.

The article is produced in collaboration with Södertörn University.

Contact marcus.box@sh.se