Pink-collar crime may be the least publicized kind of illegal activity in the U.S. and beyond, but it’s worth taking seriously. Criminologist Kathleen Daly popularized the term in the late 1980s, and pink-collar crime expert Kelly Paxton is concerned that the pandemic may lead to a rise in this form of criminal behavior.
She explained to me what pink-collar crime is, how it harms businesses and what we can do to prevent becoming victims of it.
Bruce Weinstein: What is pink-collar crime?
Kelly Paxton: It involves low- to mid-level employees, primarily women, who steal from the workplace. The concept is about position, not gender. Women hold 90% of all bookkeeping jobs. These are the positions where money moves through business. The people in these roles know the accounting and office systems better than most. They see every dollar that goes through the business, from the CEO’s expenses to vendor payments.
Weinstein: How much does pink-collar crime cost businesses in the U.S. each year?
Paxton: Only 15% of all embezzlement cases are reported to law enforcement, according to the Association of Certified Fraud Examiners (ACFE). Fraud costs 5% of gross revenues worldwide, and many businesses experience losses that are too costly to investigate, says the ACFE. These businesses write the amount off and send the employee out the door. Smaller businesses that are least able to afford a loss have the highest median loss of all size businesses, as noted in the ACFE’s 2020 Report to the Nations.
Weinstein: When I told a colleague that I would be interviewing you and I explained what the topic was, she was fascinated but also bristled at the term “pink-collar crime.” She suggested it’s sexist. Your response?
Paxton: The only thing that is sexist about it is the fact that women are in the lower-level positions. Pink-collar jobs are lower on the organizational chart. The position of the job on the chart does not reflect value or IQ. It reflects only status, and unfortunately it is women who often occupy these lower-status positions. I want women to succeed more than anything.
Weinstein: How has the pandemic affected the kinds of pink-collar crimes, how often they’re committed, and the nature and stakes of the crimes themselves?
Paxton: It is too soon to tell, but I believe that fraud will increase dramatically because of financial pressures and rationalization. In 2019, in families with children under the age of 18, 72.3% women were working or looking for work, up from 71.5% in 2018, according to the U.S. Bureau of Labor Statistics. The pandemic is affecting more service- and lower-level positions than other kinds. In the U.S., approximately 60% of the unemployment claims are being filed by women.
Many businesses have had to adjust quickly in dealing with the pandemic. Some businesses have relaxed their controls. It is crucial for businesses to keep track of the changes they’re making. such as providing additional credit cards to employees or opening bank accounts. If a business owner forgot she opened a new account, for example, an employee might take advantage of this and embezzle funds.
Weinstein: Why do you specialize in this area?
Paxton: When I was a Special Agent for U.S. Customs I was used to arresting typical “bad guys.” Eventually I went to work at a Sheriff’s Office as their fraud analyst and specialized in embezzlement cases. One day I realized that all of my suspects, with the exception of one man, were women. These were women I could have been friends with.
It led me to Google “women embezzlers” and I found the term “pink-collar crime.” I was immediately fascinated. This new criminal element was nothing I was familiar with. We aren’t raise to say “bad women.” We are raised with the concept of “bad guys.”
I want business owners to understand that good people sometimes make bad choices. Businesses should set the tone at the top so that employees want to do the right thing. A bad environment may cause a good employee to take advantage of the lack of controls.
Weinstein: How can small-business owners decrease or eliminate the risk of pink-collar crime affecting their businesses?
Paxton: Having your bank statements mailed home is one of the easiest things to do. Most embezzlements are discovered by a tip or by mistake. Open your own bank statements. You would be surprised at how many business owners don’t do that. Surprise your employees by reviewing items you don’t normally review. Change the audit schedule, mandate vacations and segregate duties as much as possible.
A good example where it pays to segregate duties is cash. The person who receives the cash should not the same person who records or deposits the cash in a small business.
Another area for segregation concerns payroll. The person calculates gross and net pay should not be person who verifies the numbers. If the same person does these two tasks, they could inflate the payroll or add ghost employees.
Weinstein: What is one question I haven’t asked you that you’d like to answer?
Paxton: What is the hardest part of my job? The hardest part of my job is seeing both sides of an embezzlement and what it does to both sides. While money is replaceable, the trust that is lost is much harder to recover from.
Every victim I have talked to except for one person told me they liked, trusted and cared for the employee who stole from them. The employee was like a member of the family. This causes so much pain. Suspects’ families are destroyed. Many of the families say they had no idea what was going on.
Many victims don’t talk to their friends, families or associates about the theft because they feel shame and humiliation. They need a safe place to understand how it happened and how to prevent it happening in the future. No industry is immune to pink-collar crime.
You would be surprised to know which businesses have been affected. I know billionaires as well as working-class business owners who have been stolen from. Embezzlement can happen to anyone. Mark Cuban was the victim of a pink collar crime when he started his first business.