Organisations of all sizes and across all industries can be vulnerable to illegal activity, from minor infractions to major violations. Whether it is accounting fraud, insider trading, illegal dumping or bribery, illegal activity within a company can have serious consequences for employees, customers, the public and the company itself. One of the biggest threats is that such misconduct could be performed by anyone and can be unexpected.

The potential damage caused by illegal activity should not be underestimated; even seemingly small acts can cause irreparable harm if left unchecked. The scope of illegal activity inside companies can vary but organisations can respond by being prepared to mitigate risk and detect misconduct before it spirals out of control. Generally, higher-level employees tend to cause greater damage as they have a greater authority and control over processes.

Types of illegal activity

Illegal activity is only restricted by an individual’s creativity and power. There are many factors that influence the type of illegal activity that is taking place within a business. Some fairly common types are:

  • Accounting Fraud
  • Insider Trading
  • Bribery
  • Money Laundering
  • Tax Evasion
  • Illegal Dumping
  • Intellectual Property Theft

Accounting fraud

Accounting fraud, also known as embezzlement and financial statement fraud, is an illegal activity that involves the manipulation of financial records to cover up illegal activities or embezzlement of funds. This type of illegal activity can be carried out by employees in organisations, who use their knowledge and access to company books for their own personal gain. 

 When accounting fraud is committed, it usually starts with small misappropriations or adjustments made to financial statements to hide illegal activities. These manipulations typically involve inflating revenue, misrepresenting expenses or understating liabilities in order to inflate the value of a company’s assets or stock prices. Accounting fraud can also involve outright theft or misappropriation of funds without any record-keeping changes. 

 The long-term effects of accounting fraud are significant for companies and investors alike. Not only does this illegal activity create a false picture of a company’s finances, but it can also result in serious legal repercussions for those involved in the fraudulent activity. Companies may face hefty fines and penalties due to illegal practices, while individuals found guilty may have their reputation tarnished among colleagues and customers. Individuals could also face fines or jail time in the most severe scenarios. In addition, accounting fraud can lead to lost profits, reduced shareholder confidence and even bankruptcy if left unchecked. 

 Despite the potential risks associated with accounting fraud, there are some measures that organisations can take to reduce its occurrence. Implementing stronger internal controls over financial reporting processes is one way that companies can detect irregularities before they become more ingrained in the corporate environment. Additionally, implementing internal audits conducted by experienced professionals on a regular basis can help uncover suspicious activities before they escalate into full-fledged illegal activities. Companies should also ensure that appropriate personnel are properly trained so that they understand basic principles involved with financial reporting accuracy and compliance with applicable laws.

Insider trading

Insider trading is an illegal activity that involves the use of confidential information for personal interest. It occurs when a person with access to non-public information about a company or other security uses it to buy or sell stocks, bonds, derivatives, futures contracts and other financial instruments before the public has access to that same information. This illegal activity can be highly lucrative for those involved in insider trading as they have an advantage over the rest of the market who do not have this privileged knowledge. 

 Insider trading is illegal because it gives certain individuals an unfair edge over others in terms of making financial decisions related to securities which are traded on public exchanges. For example, if a corporate executive knows that his or her company’s next quarterly earnings report will be significantly lower than expected, they may choose to sell off their stock before this news becomes public and cause prices on their shares to drop drastically. By doing so, they will make money at the expense of other investors who lack this insider knowledge and could potentially suffer significant losses as a result. 

 The consequences for engaging in illegal insider trading can be severe both financially and legally. Those found guilty may face heavy fines from regulatory authorities such as the SEC or other applicable bodies in various countries. They may also face criminal prosecution and imprisonment if the illegal activity is deemed to be particularly egregious. In 2014, two men in Australia were charged with insider trading that took place over several months and had produced millions of profits for the accused. As a result of the misconduct, one of them was sentenced 7 years and 3 months in jail while the other was sentenced 3 years and 3 months. 

 While that scenario had a major impact, usually those who engage in illegal insider trading face other civil penalties such as being barred from working in the financial industry or engaging in certain types of investments. Moreover, there are reputational consequences associated with illegal insider trading that can cause individuals to lose credibility among their peers and customers. 

 It is important for organisations and individuals alike to be aware of illegal activities such as insider trading and take steps to ensure these activities do not occur within their business or personal dealings. Organisations should make sure that all employees understand the laws around insider trading and have proper internal controls in place to detect any suspicious behaviour. Individuals should also exercise caution when dealing with information about publicly traded companies and always be aware of the potential for unethical practices. By understanding the risks associated with illegal activities like insider trading, organisations can prepare better and individuals can learn to recognise unacceptable behaviour.


Bribery is an illegal activity that involves the exchange of money or some other form of value in order to influence a person’s decision-making process. It is often used as a way to gain an unfair advantage over competitors or find a way around laws and regulations. In many cases, bribery occurs when someone pays off government officials or other individuals for illegal favours such as access to restricted information, contracts, licences, permits and more. It is usually a way to get better terms or more favourable conditions that benefit the interests of an individual or a company. Bribery can be perpetrated by both private citizens and organisations alike, with dire consequences that can have lasting impacts on those involved. 

 Bribery could take the form of questionably constructed contracts or employees setting up unprofitable deals. This is why it is important to check employees for potential conflicts of interest before delegating certain tasks to different people as this will make it less likely for inappropriate behaviour to occur. 

 When it comes to entities engaging in bribery, there are potentially severe penalties which could include criminal prosecution as well as financial repercussions such as fines and reputational damage. Businesses who are found guilty usually face punishments from government bodies and the consequences usually impact daily operations.. If an individual within a company is found guilty of bribing another party then they too could face personal legal action depending on the severity of their actions. For example, if a company executive has been found guilty of paying bribes in order to secure lucrative contracts then they may be subject to civil lawsuits brought forward by shareholders who were not aware that illegal activities had taken place at their investment. 

 In order to protect themselves from illegal activities such as bribery, organisations should have clear policies in place that outline the steps to be taken if any suspicious activity is suspected. Additionally, it is important for companies to ensure their employees are knowledgeable of the laws around illegal activities such as bribery so they can take appropriate measures when it comes to dealing with potential situations.

 If employees receive the appropriate training, they are more likely to recognise signs of bribery. Moreover, organisations should encourage employees to speak up; it is not enough to identify suspicious activity. Employees should be comfortable to come forward and voice their suspicions as well as share any evidence that helped them come to this conclusion. 

Money laundering

Money laundering is the illegal process of concealing or disguising the true origin and ownership of illegal funds. It involves taking illegal money generated from activities such as drug trafficking, tax evasion, fraud and corruption and moving it through legal channels to disguise its illegal origin. This process can involve a series of complex transactions which are designed to make the illegal funds appear legitimate. Money laundering is a global problem that has been estimated to account for between two to five percent of global GDP each year, accounting for billions to trillions of dollars. 

 Money launderers use various techniques in order to conceal their illegal activities including layering, integration and smurfing. Layering involves breaking up large sums into smaller amounts in order to hide its source by using multiple accounts or financial institutions across different areas. Integration is the process whereby illegally obtained funds are blended with legitimate income streams so that any suspicious activity will be difficult for law enforcement agencies to detect. Smurfing refers to depositing small sums into various bank accounts over time in order to avoid raising suspicion from authorities who monitor large cash deposits or transfers on an individual basis. 

 There are several methods used by organisations in order to combat money laundering such as customer due diligence (CDD) measures and transaction monitoring systems (TMS). CDD measures involve verifying the identity of customers in order to make sure they are not involved in illegal activities. TMSs involve monitoring a customer’s transactions and flagging any suspicious activity for further investigation. Organisations can also look into implementing effective anti-money laundering (AML) programs which include outlining policies and procedures for detecting, preventing and reporting illegal activities. 

Tax evasion

Tax evasion is the illegal practice of avoiding taxes by hiding income or assets from the authorities. It occurs when individuals, businesses or organisations deliberately misreport their financial activities in order to avoid paying the full amount of taxes they owe. Tax evasion can take many forms such as underreporting income, overstating deductions and expenses, claiming false exemptions and credits, failing to pay taxes on time and not filing tax returns in the first place. This illegal activity increases the burden on law-abiding citizens who have to bear a greater share of the tax burden as well as negatively affects government revenues which could otherwise be used for public services.

In order to prevent tax evasion, governments around the world have implemented various measures such as strengthening laws regarding taxation and increasing enforcement efforts. They should also ensure that businesses are not excluded for unethical reasons from tax payments.

Some countries have developed sophisticated computer systems which monitor taxpayers’ financial activities to detect any suspicious behaviour. Governments have also implemented various incentives such as reduced penalties for those who come forward voluntarily to report their illegal activities. There are also countries that provide educational campaigns aimed at raising awareness about the consequences of tax evasion so that more people are aware of their responsibilities when it comes to taxes.

Aside from government efforts to curb this illegal activity, there are also several steps that businesses and individuals can take in order to protect themselves from tax evasion. These include ensuring accurate record-keeping practices are in place and regularly monitoring accounts for any suspicious transactions or discrepancies. It is possible for tax evasion to happen by accident due to missed or forgotten records.

Entities should also look into implementing internal controls which review financial transactions on a regular basis in order to identify any potential issues before they become a larger problem. Companies should make sure their employees receive adequate training on proper financial management processes so they are aware of all applicable laws when it comes to filing taxes correctly and paying them on time.

Illegal dumping

Illegal dumping is the illegal disposal of hazardous waste in unauthorised areas without the necessary safety precautions. This illegal activity has a negative impact on both people and the environment, as it can lead to water and soil contamination, destruction of habitats, and health problems due to exposure to hazardous materials. In some cases, illegal dumping also has an economic impact as it can reduce the value of land or increase costs for clean-up efforts. 

 The illegal act of illegal dumping often involves individuals, businesses, or other entities disposing of their waste without obtaining proper permits or following regulations that are intended to protect public health and safety. For example, items such as chemicals, batteries, medical waste, electronics, explosives and even construction debris can be illegally dumped in places like parks or abandoned lots where there is no supervision or regulation in place. Illegal dumpsites are often located near neighbourhoods where vulnerable populations such as children may be exposed to the health hazards associated with illegal dumping. 

 Illegal dumping can also occur in the ocean and lakes when businesses dump material too dangerous for marine life into the water. In order to combat illegal dumping, governments around the world have implemented various strategies such as creating environmental protection laws and increasing enforcement efforts against those who engage in this illegal practice. 

 Certain countries also provide incentives such as reduced penalties for those who voluntarily come forward to report illegal activities or provide information regarding illegal dumpers. Local authorities often notify residents when they become aware of potential illegal dump sites so they can take preventive measures. In many areas, educational campaigns are initiated to raise awareness about the dangers associated with illegal dumping and encourage people to report any suspicious behaviour they observe. 

 Aside from government initiatives aimed at preventing this illegal activity, there are also several steps organisations and individuals can take in order to prevent themselves from getting involved with it in any way. These include understanding all applicable regulations before disposing waste by researching local regulations regarding disposal practices as well as participating in recycling programs whenever possible so that certain materials do not end up in landfills illegally. Businesses should ensure they have appropriate policies in place which outline how employees should dispose of their waste including developing contracts with approved disposal companies if needed. 

Intellectual property theft

Intellectual property theft is an illegal activity that is becoming increasingly widespread as technology advances and becomes more accessible. This type of crime involves stealing ideas, designs, products and services from competitors without permission. Oftentimes the perpetrators are sophisticated groups or individuals who use illegal methods such as hacking, IP spoofing, malware, or other cyberattacks to gain access to a company’s confidential information and use it for their own financial benefit. 

 The effects of intellectual property theft can be wide-reaching and can affect not only the party whose intellectual property was taken, but also the economy as a whole. For instance, if someone steals a patented product design, they may be able to produce and distribute counterfeit products at lower prices than what the legitimate company could offer. This can then negatively impact the market by reducing demand for the genuine product and that company’s revenues.

 Furthermore, it puts those who have invested in research and development of this product at risk, as any future profits that could have been earned due to their innovation may now be lost due to illegal copies being sold on the market. This can then stifle innovation as it is too risky to develop new products.

 In order to protect companies from intellectual property theft there are various legal measures which must be taken such as obtaining patents or trademarks for any new products or services created. Businesses should create secure networks with strong passwords in order to protect data from unauthorised entry and regularly update security protocols so that any potential vulnerabilities are addressed swiftly before illegal access can occur. Companies should train employees on how to handle sensitive information such as customer data so that no one within an organisation is tempted by offers of money or other incentives to share details with external parties without proper authorisation. 

 It is also important for organisations to monitor competitors’ activities closely so they are aware of potential violations in regards to their intellectual property rights and take appropriate action if necessary. Staff should also ensure they take measures to properly back up their data so that in case of a successful cyberattack they will still have all relevant information available. 

Keep in mind

Protecting a business from illegal activity is an ongoing process that requires persistent effort to be successful. Risk management needs to be integrated into business processes to ensure that everything is being monitored and analysed carefully. Failure to identify an illegal activity early could have great consequences for the future of the entity. 

 Polonious helps its clients to handle investigations into many types of illegal activity including fraud and non-compliance with laws and regulations. We assist them in conducting successful and faster investigations by providing them with an efficient system that can keep all information in one place. Our customers can focus on their core business responsibilities while we handle automatic case updates and show the parties involved information that only applies to them. If you want to learn more about how we can help you, reach out, we are happy to talk!