This article has been written by Akhoury Anusheel pursuing the Diploma in Cyber Law, FinTech Regulations and Technology Contracts from LawSikho. This article has been edited by Prashant Baviskar (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho).
An economic crime, as the name indicates, is a crime that has an adverse impact on the economic standing of an individual or group of persons, a company or many such institutions, or the government (State or Central), thus affecting the economic condition of a certain nation.
These crimes differ from crimes against persons because they do not directly affect the physical state of the person aggrieved. In simpler words, an economic offence, say fraud, is different from assault because the former implies the illegal extraction of money from a person’s bank account, whereas the latter implies creating actual fear of imminent physical injury in a person’s mind and/or causing actual physical injury to said person.
Such crimes are also called white-collar crimes or blue-collar crimes. They are different from crimes against persons as they lack the element of violence, happen after careful deliberation, and are oftentimes committed by groups of individuals, especially those who have a say over others, i. e., those with influence, such as directors of a company, general managers, politicians, bureaucrats etc.
Economic offences are symbolic of an ailing government and give evidence of a corrupt bureaucracy and executive, the market and institutions. The following definition may be handy here:
“Corruption… has a wide range of corrosive effects on societies. It undermines democracy and the rule of law… distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish.”
Another definition of economic crime is as follows:
“Economic crimes are a manifestation of criminal acts done either solely or in an organised manner with or without associates or groups with the intent to earn wealth through illegal means, and carry out illicit activities violating the laws of the land, other regulatory statutory provisions governing the economic activities of the Government and its administration.”
There are certain characteristics of economic crimes that make it different from other crimes, or crimes against the individual. These are:
- The intention behind an economic crime is to gain some material profit or escape material loss, or to cause the aggrieved person some material loss. Here, material profit and loss also includes pecuniary (monetary) profit or loss.
- Such offences contain elements of criminal breach of trust, deception, fraud or cheating.
- Economic offences do not cause physical/bodily harm to a person, but adversely impact his/her financial health; companies or other financial institutions too can be targeted.
- Such crimes have a negative effect on a country’s financial standing.
- These offences are committed by privileged or well-off sections of the population – people with influence in the economic or political spheres of society, who have access to secure, sensitive information as well as the reach to commit said offences.
Kinds of economic crimes
Economic offences can be broadly classified into three types, which are as follows (However, this categorization is not exhaustive):
- Traditional economic offences like corruption, smuggling, false imports, etc.
- Emerging or modern economic offences such as credit card theft/fraud, counterfeiting of currency, UPI fraud, cyber crimes, etc.
- Cross-border economic offences which consist of offences such as money laundering.
- Now, we shall look at some of the aforesaid economic offences in brief.
- Blackmail – not entirely an economic offence, but has an economic aspect to it. It is a threat to do bodily harm to a person, in order to coerce another person to give something valuable – money, a precious object, sensitive information, property, etc.
- Bribery – a very common kind of economic offence – this is an act in which money, or any other valuable object is given or accepted, in expectation of or in return for favours related to say, employment opportunities, promotions, bureaucratic circumvention, etc. Government officials, politicians, members of the executive body of the states and nation oftentimes give or accept bribes. It is a crime to both give and accept a bribe.
- Credit card fraud – unauthorized access and use of a person’s credit card to purchase something of value, or siphon money.
- Forgery – Passing off a fake negotiable instrument as genuine, so as to defraud or cheat the recipient.
- Insider trading – When a person/employee, working at a company or institution has sensitive, confidential information related to the business, and uses it to trade in shares of publicly held corporations.
- Insurance fraud – across kinds of insurance, when the insurer defrauds the insured of his or her funds.
- Money laundering – the investment or transfer of money from racketeering, drug transactions or other embezzlement schemes so that it appears that its original source either cannot be traced or is legitimate.
- Embezzlement – a person entrusted with the safekeeping of money or property, seizing it for his or her own benefit.
- Racketeering – a broad term which covers any illegal business transaction done for personal gain.
- Tax evasion – different from tax avoidance, which is legal (tax avoidance is finding nitpicks in the law to legally “escape” from payment of avoidable taxes). Tax evasion is the illegal hiding of income, which in turn allows persons to file lower tax returns, therefore enabling them to save money.
Aside from these general terms, there are many economic offences mentioned in the Indian Penal Code, 1860, but they are too many to mention here.
Computer-aided/cyber economic offences
[Note: It should be kept in mind that economic crime and financial crime are synonymous with each other and so are cyber economic crime and cyber financial crime. This is to avoid confusion.]
All cyber economic offences are not new offences unheard of entirely in as much as they are the same offences already known committed through new means – technological aids which have been the result of time and are misused for such purposes. However, some are new crimes entirely.
Common cyber crimes include hacking of a computer device or network, stealing sensitive personal information (often financial details), fraud and cheating. These are just a few examples of many attacks which happen with the aid of technology and the internet. Some attacks are large-scale and sophisticated, requiring a clear understanding of banking institutions, their systems, fail-safes, security measures, etc.
For example, in 2018, the World Economic Forum noted that fraud and economic crime constituted a trillion-dollar industry and that in 2017, private companies spent a total of $8.2 billion on anti-money laundering strategies and systems alone.
Cybercrimes such as illegal trafficking and money laundering are on the rise, as many methods of payment, sale and overall exchange of currency have opened. New methods mean more paths for potential attacks. With an unyielding increase in digitization and automation of financial institutions and their systems, financial or economic crimes have become legion.
The blurring of the traditional division between a financial crime and fraud is also an aspect of recent origin. For instance, financial crime has generally consisted of money laundering, bribery, tax evasion and the like. Fraud, contrariwise, points to offences such as forgery, insider trading, deception, theft, credit scams, etc. But these boundaries are becoming less distinct and more entangled, in the sense that cybercrimes of an economic nature move between the spheres of both financial crime and fraud.
Economic offences have taken a different shape in the past two decades or so. With the advent and upsurge of the internet, access has increased – to financial institutions and to sensitive financial information of people. This has given rise to new risks in everyday transactions and businesses, of which not everyone is aware. The ease of use has made transactions seem trivial, but perhaps it is due to this familiarity that victims of economic offences suffer. The technology and ease we have should not be taken for granted. Other points are valid too, that technology and ways of exchange of currency are ever-evolving at a rapid pace and our own legislators and present legislations cannot keep up with the same, which results in more instances of such crimes. Sometimes, the perpetrators escape punishment. People with influence are another factor – they have a say over the flow of commerce and trade, they know the pulse of the market, and are able to manipulate the same to their unfair advantage. It is difficult to apprehend such individuals, due to their influence, but apprehensions must be made, sooner or later, because this cannot be left unchecked. The bottom line remains, be aware, be cautious; information is key to safety – both of the person and the society and nation at large.
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