Financial crime is theft, pure and simple

Fraudsters may not physically rob individuals of their cash, but their victims will suffer none the less

The specialised vocabulary we use to describe financial crime prevents people from seeing clearly what it is - stealing. Often, financial theft is made to seem no worse than dubious book-keeping or naughty dealing. Financial crime is breaking into and entering somebody's bank account or somebody's savings rather than somebody's home, but the aim is the same: it is to steal.

It may not always be easy to see exactly how a financial burglary has been carried out. Rows of figures in computer print-outs are not as instantly revealing as a broken window pane or a forced door. But the result is similar. In the case of the Lloyd's insurance market, for instance, its pin-striped criminals created "baby" underwriting syndicates to which they directed their best business exclusively for their own benefit rather than that of their investors (the so-called "names"). Diverting profits in this way is called fraud; this technical description of a form of theft should not disguise the nature of the crime. Some of the apparently respectable participants in the Lloyd's insurance market were, until recently, thieves.

Now another revered City institution, the merchant banking house Morgan Grenfell, is trying to establish whether one or a number of its employees - all middle-class executives - have been picking their customers' pockets, while their colleagues turned a blind eye. At risk have been the sums placed in three of Morgan Grenfell's trusts by 90,000 investors. That is where the equivalent of footprints in the flower beds and a ladder in the wrong place have been found. The evidence appears to be investments in mysterious Scandinavian companies, not quoted on any stock exchange, made via Luxembourg holding companies. But, if malfeasance is proved, the crime will have been no less serious than robbing an old lady in her cottage.

There are two basic forms of crime in the financial markets, each with innumerable variations. One is to create a false impression of value; the other is to put your clients' trading profits into your own bank account rather than theirs. In a common version of the first, above-average returns on investments are promised. However fishy this may look, there are always a number of fools who are tempted. These greedy folk are paid what they have been promised, not out of wise investments made on their behalf, but out of their own money, although they don't realise this. They are pleased and word of their "good fortune" spreads. More investors are attracted and their funds are used in the same way. The system works so long as new investors keep coming forward.

The best recent example is Barlow Clowes, the financial company which collapsed in the late 1980s owing pounds 225m to 11,000 mainly elderly investors. At the subsequent trial of Peter Clowes, prosecuting counsel put the case with brutal frankness: "You persuade people to entrust their savings to you by telling them that they will be kept safe in a particular rock-solid investment. You don't put the money in rock-solid investments but use it to live the life of Riley. You make good the deficiencies that come up with fresh money from new investors and you lie and cheat to cover your tracks."

Morgan Grenfell's problems look to be essentially of this type, only in this case the false value would have been created by over-valuing shareholdings in dubious companies. The result would be to inflate the prices of the bank's unit trusts. In turn this would attract investors to place more money with Morgan Grenfell than they might otherwise have done.

Just a week earlier, the equally prestigious City firm Fleming illustrated the second form of financial crime when it was fined a substantial sum and forced to compensate its customers on a massive scale because one of its dealers operating in Hong Kong had systematically placed profitable trades into his own account rather than his clients'. This is very similar to the Lloyd's example. The Fleming executive dealt in a particularly volatile type of security. When trading was finished he decided which transactions should be booked to which accounts. The person concerned has since made good clients' losses. But it is intimated that no criminal proceedings are expected.

I hope that at least a criminal investigation is going on. Prima facie a crime has been committed. The employer has been fined, compensation is being paid, funds have been put back, the dealer himself has resigned. But, straight away, we run into the special difficulties of financial crime. Is it the City of London police or the Hong Kong police who should mount an investigation? Have not the financial authorities, quasi-official as they are, already inquired, reached a conclusion and passed sentence? Do the police need to repeat this work? If they do, will a conviction be obtained? Because juries naturally find it difficult to understand complicated financial manoeuvres, they are more reluctant to convict than they should be.

These are real difficulties, but I think that they are also excuses. Middle-class people like to believe that crime is solely committed by an unruly, out of work, ill-educated fringe of society, which has nothing to do with them. That is why nobody in the City calls financial crime what it actually is: a sophisticated form of stealing.