The Effectiveness of White-Collar Crime Enforcement: Evidence from the War on Terror

This paper analyzes the impact of changes in regulatory priorities and resource allocation on criminal enforcement of white-collar criminal activities. Using the 9/11 terrorist attacks as a shock to the FBI's priorities and allocation of investigative resources, as well as variation in the Muslim population in the United States, I examine whether prioritization of counterterrorism investigations after 9/11 is associated with weaker enforcement of laws targeting white-collar crime. I then use a difference-in-differences estimation to study the magnitude of any increase in white-collar crime resulting from reduced oversight. I find a significantly greater reduction in white-collar criminal cases referred by FBI field offices that shifted more of their investigative focus away from white-collar crime to counterterrorism. Further, geographic areas in the jurisdictions of FBI field offices with greater shifts in attention from white-collar crime to counterterrorism experienced greater increases in wire fraud, illegal insider-trading activities, and fraud within financial institutions.