There is a well-known Japanese proverb that says, “If you get on the wrong train, get off at the next station.” This life metaphor suggests that when you realize you’ve made a mistake, it’s best to change direction quickly, because the longer you stay on the wrong train, the more difficult and costly the return trip becomes.
This wisdom applies to many aspects of life, urging people to leave bad jobs, relationships, or unhealthy habits sooner rather than later to prevent more severe problems and regain happiness and peace.
It also applies when you have been creating something for fun, and monetizing it makes you feel icky.
It’s only been two weeks since I started accepting payments for a premium version of the Threats Without Borders newsletter, and I realize I need to get off the train.
I don’t want to charge people to read my writing. It’s humbling that anyone gives me five minutes of their time each week, and I don’t want to turn this thing I love doing weekly into a chore.
I have initiated refunds to everyone who paid for a subscription.
Credit to Steve Lenderman for being the first I saw to share this release from the U.S. Attorney’s Office for the Eastern District of Pennsylvania announcing a new white-collar crime initiative. It’s exciting to see law enforcement take a stand against fraud and financial crime. But I’m not counting on it to make a difference.
https://www.justice.gov/usao-edpa/corporate-transparency-initiative
This program marks a significant change from previous practices. Instead of waiting to find companies violating rules, prosecutors now promote self-reporting. The concept is straightforward: companies that police themselves and admit faults voluntarily will receive much lighter penalties than those attempting to conceal issues.
If a company discovers that employees or managers have committed crimes, they can voluntarily report this to federal prosecutors. However, there are strict rules to qualify for benefits. The company must report the crime willingly—not because they are already legally or contractually required to do so. They must report it promptly, before the government begins investigating or the public becomes aware. Additionally, they must fully disclose what they know, cooperate completely with investigators, and address the issues that enabled the crime.
The rewards for following these rules are significant. Companies that qualify entirely avoid having to plead guilty to crimes. They also get their financial penalties reduced by at least half of what they would normally face under federal guidelines. Some companies might not have to pay any criminal penalties at all. Even companies that don’t fully qualify can still receive penalty reductions of 50-75%, though they might still have to plead guilty.
This sounds like a great plan, right? Yes, but... there’s always a but.
First, I dislike the term ‘white collar crime’ because it implies that financial and business misconduct are only carried out by high-status professionals. The phrase was introduced by criminologist Edwin Sutherland in the early 1900s to describe crimes committed by individuals of higher social standing during their work. In reality, these crimes are facilitated not only by regular office workers but also by organized and semi-organized crime groups that strategically infiltrate businesses to carry out fraud. These criminals aren’t sitting in cubicles wearing stiff white shirts. Additionally, the term suggests these crimes happen only in traditional office environments, but now business crimes include tech startups, gig economy platforms, cryptocurrency, and digital global operations.
More importantly, it’s essential to understand the structure of the federal judiciary. The system comprises 94 federal judicial districts, each headed by a United States Attorney. Similar to a county’s District Attorney, the US Attorney is appointed rather than elected and operates under the guidance of the U.S. Attorney General. Their main role is to prosecute federal crimes within their district. While they work within the Department of Justice and follow the presidential administration’s priorities, they have considerable independence in managing their offices.
Just because one district undertakes an anti-crime initiative doesn’t mean another will have the same priorities.
For example, Pennsylvania is divided into three federal judicial districts: the Western District, the Middle District, and the Eastern District. Just because a federal policy or initiative is actively applied to cases arising from the city of Lancaster, Pennsylvania (Eastern District), doesn’t mean it’s accepted and operational 30 miles to the west for a case from the city of Harrisburg (Middle District).
The Corporate Transparency Initiative is a program of the United States Department of Justice, but that doesn’t mean it will get the same coverage across the country or be carried out with the same enthusiasm by the various U.S. Attorneys.
Another barrier to the more significant prosecution of financial crime is the U.S. Attorney’s Office's (all of them) reliance on plea bargaining.
98% of federal criminal cases end in plea bargains. This figure represents an overwhelming dominance of plea negotiations over trials in the federal system. Only 2-3% of federal convictions result from actual trials. Feel free to fact-check me on that.
Understand that a plea-bargained case counts as a conviction. Federal prosecutors currently maintain a conviction rate of over 95%. Some sources suggest it’s even higher—many federal districts achieve conviction rates close to 100%. Again, fact-check me on that.
They rely heavily on conviction rates. Federal prosecutors tend to be very risk-averse and won’t jeopardize their success statistics. Consequently, they only accept criminal cases from law enforcement if they are confident these will result in a plea bargain conviction.
In the local system, the police drive the prosecutions. Police can initiate an investigation without the prior approval of the local prosecutor. For the most part, prosecutors receive what they are given. While prosecutors may dismiss charges, police do not need permission to file them. In contrast, federal law enforcement cannot open a case without the U.S. Attorney’s office approval. Federal investigators present a preliminary case, and prosecutors then decide whether to proceed with a full investigation and, ultimately, whether to file charges.
Financial crimes are messy. Federal prosecutors hate taking chances. Accepting a financial crime case for prosecution involves taking a very calculated risk.
Hopefully, the companies coming forward and saying, “Hey, some of our people did this… and here’s the evidence” will lead to slam-dunk cases. However, never underestimate the ability of corporate attorneys to undermine a very good plan.
Thank you for reading. See you ALL on Tuesday.
Matt
Threats Without Borders offers original commentary and educational pieces related to cybercrime investigations and information security topics. We also summarize and comment on news articles concerning active threat intelligence for the financial industry. The newsletter interests everyone tasked with cybersecurity or involved in preventing or investigating technology-enabled fraud, theft, or money laundering.
Legal: I am not compensated by any entity for writing this newsletter. Obviously, anything written in this space is my own nonsensical opinions and doesn’t represent the official viewpoint of my employer or any associated organization. Blame me, not them.