This article is written by Aayushi Swaroop, a student of National University of Study and Research in Law, Ranchi. In this article, she has written about what white collar crimes are, its various types and how it is growing at a faster rate and impacting our society.
“The practitioners of evil, hoarders, the profiteers, the black marketeers, and speculators are the worst enemy of our society. They have to be dealt with sternly. However well placed important and influential they maybe, if we acquiesce in wrongdoing, people will lose faith in us.” -Dr. S. Radhakrishnan
The most influential criminologist of the 20th century and also a sociologist, Edwin Hardin Sutherland, for the first time in 1939, defined white collar crimes as “crimes committed by people who enjoy the high social status, great repute, and respectability in their occupation”. The five attributes of the given definition are:
- It is a crime.
- That is committed by an important person of the company.
- Who enjoys a high social status in the company.
- And has committed it in the course of his profession or occupation.
- There may be a violation of trust.
Related to the corporate sector, white collar crimes are defined as non-violent crimes, generally committed by businessmen and government professionals. In simple words, crimes committed by people who acquire important positions in a company are called white collar crimes.
White collar crime in India
Corruption, fraud, and bribery are some of the most common white collar crimes in India as well as all over the world. The Business Standard on 22.11.2016 published a report titled ‘The changing dynamics of white collar crime in India’ stating that in the last 10 years, the Central Bureau of Investigation (CBI) has found a total of 6,533 cases of corruption out of which 517 cases were registered in the past two years.
Statistics showed that 4,000 crores worth of trading was carried out using fake or duplicate PAN cards. Maharashtra showed a rapid increase in the number of online cases with 999 cases being registered. The report also mentioned that around 3.2 million people suffered a loss because of the stealing of their card details from the YES Bank ATMs which were administered by Hitachi Payment Services.
Advancement in commerce and technology has invited unprecedented growth in one of the types of white collar crimes, known as cybercrime. Cybercrimes are increasing because there is only a little risk of being caught or apprehended. India’s rank on Transparency International’s corruption perception index (CPI) has improved over the years.
In 2014, India was ranked 85th which subsequently improved to 76th position in 2015 because of several measures to tackle white collar crimes. In 2018, as per the report of The Economic Times, India was placed at 78th position, showing an improvement of three points from 2017, out of the list of 180 countries.
India is a developing country and white collar crimes are becoming a major cause for its under development along with poverty, health, etc. The trend of white collar crimes in India poses a threat to the economic development of the country. These crimes require immediate intervention by the government by not only making strict laws but also ensuring its proper implementation.
Reasons for the growth of white collar crimes in India
Greed, competition and lack of proper laws to prevent such crimes are the major reasons behind the growth of white collar crimes in India.
The father of modern political philosophy, Machiavelli, strongly believed that men by nature are greedy. He said that a man can sooner and easily forget the death of his father than the loss of his inheritance. The same is true in the case of commission of white collar crimes. Why will a man of high social status and importance, who is financially secure, commit such crimes if not out of greed?
Easy, swift and prolong effect
The rapid growing technology, business, and political pressure has introduced the criminals to newer ways of committing white collar crimes. Technology has also made it easier and swifter to inflict harm or cause loss to the other person. Also, the cost of such crimes is much more than other crimes like murder, robbery or burglary, and so the victim would take time to recover from it. This would cut down the competition.
Herbert Spencer after reading ‘On the Origin of Species’ by Darwin, coined a phrase that evolution means ‘survival of the fittest’. This implies that there will always be a competition between the species, and the best person to adapt himself to the circumstances and conditions should survive.
Lack of stringent laws
Since most of these crimes are facilitated by the internet and digital methods of transfer payments, laws seem reluctant to pursue these cases as investigating and tracking becomes a difficult and complicated job. Why it becomes difficult to track it is because they are usually committed in the privacy of a home or office thereby providing no eyewitness for it.
Lack of awareness
The nature of white collar crimes is different from the conventional nature of crimes. Most people are not aware of it and fail to understand that they are the worst victims of crime.
People also commit white collar crimes to meet their own needs and the needs of their family. But the most important thing that the people of high social status want to feed their ego.
The reasons behind white collar criminals going unpunished are:
- Legislators and the people implementing the laws belong to the same class to which these occupational criminals belong.
- The police put in less effort in the investigation as they find the process exhausting and hard, and often these baffling searches fail to promise favourable results.
- Laws are such that it only favours occupational criminals.
- The judiciary has always been criticised for its delayed judgement. Sometimes it so happens that by the time court delivers the judgement, the accused has already expired. This makes criminals loose in committing crimes. While white collar crimes are increasing at a faster rate, the judiciary must increase its pace of delivering judgements.
Popularly known as the Carrier’s case, it was the first case of white collar crimes which was documented in the year 1473 in England. In this particular case, the agent was entrusted with the responsibility of the principal to transport wool from one place to another. The agent was found guilty of stealing some of this wool. The English Court after this case adopted the doctrine of ‘breaking the bulk’ which means that the bailee who was given the possession of goods tried to break it open and misappropriate the contents.
However, the growth of industrial capitalism has taken criminality to the next level. The bourgeois institution dwells into committing such crimes out of greed and misery to have and to be able to attain more. In 1890 in America, the Sherman Antitrust Act was passed, which made monopolistic practices illegal. The penalties imposed on offenders of white collar crimes in Great Britain and the adoption of competition or antitrust laws by other countries were not as sweeping as the Sherman Act.
In the late 18th and early 19th century, a group of journalist rose the sentiments in the mass seeking reforms. By 1914, Congress was seen making great efforts in strengthening the sentiments laid down by the Sherman Act. This Act proved out to be more stringent in comparison to the Sherman Act in dealing with the monopolistic illegal practices.
Edwin Sutherland’s Definition. It was in 1939 when for the first time Edwin Sutherland, an American sociologist, defined white collar crimes. He described it to be crimes committed by a person of high social status and respectability who commits such crimes during the course of their occupation.
Coleman and Moynihan pointed out that Edwin Sutherland’s definition had certain ambiguous terms, like:
- It has not laid down any criteria for who these ‘persons of responsibility and status’ would be.
- Also ‘person of high social status’ is not clear. It is perplexing as the meaning of the phrase in law could be different from its general definition.
- Sutherland’s definition did not take the socio-economic condition of the person into consideration. It only showed the dependency of white collar crimes on its type and the circumstances in which it was committed.
- Mens rea, i.e. guilty mind and actus reus, i.e., wrongful conduct are two essential elements to constitute a crime. However, Sutherland’s definition implies that according to him white collar crimes does not necessarily require mens rea.
Morris’s Comments. In 1934, Albert Morris advanced that, the illegal activities that people of high social status involved in during the course of their occupation, must be brought with the category of crime under which their illegal activity falls. He also asserted that it should be made punishable.
E.H. Sutherland’s demarcation. Sutherland again came into the picture and clarified that the crimes which would be committed by people belonging to high socio-economic groups, during the course of their occupation, would be termed as ‘white collar crimes’. And further said that the traditional crimes would be denoted as ‘blue collar crime’.
So he drew a distinction between white collar crimes, i.e. corruption, bribery, fraud, and blue-collar crimes, i.e., traditional crimes like robbery, theft, etc. After this, criminology in the year 1941 finally recognized the concept of ‘white collar crimes’.
Difference between white collar crime and blue-collar crime
The term ‘blue collar crime’ came into existence some time in the 1920s. The term was then used to refer to Americans who performed manual labor. They often preferred clothes of darker shade so as to stains less visible. Some used to wear clothes with a blue collar. These worked for a low wage on an hourly basis. White collar crimes have been prevalent since centuries and it is not new to all types of businesses, professions and industries.
The difference between ‘blue collar crimes’, which are crime of a general nature, and ‘white collar crimes’ was laid down by the Supreme Court of India in the case of State of Gujarat v. Mohanlal Jitamalji Porwal and Anr. Justice Thakker elucidated that one person can murder another person in the heat of the moment, but causing financial loss or say committing economic offences requires planning. It involves calculations and strategy making in order to derive personal profits.
Here are the characteristics of white collar crimes which distinguish it from other crimes of general nature:
Blue-collar crimes refer to people who work physically, using their hands, whereas white collar crimes refer to knowledgeable works, who use their knowledge to commit crimes.
New v/s Traditional
Where blue-collar crimes refer to traditional crimes that have been committed since ages, the concept of white collar crimes has recently developed. It’s a new species of crime.
To constitute a crime element of mens rea and actus reus is must. Where mens rea is an essential element of blue collar crimes, its involvement in white collar crimes is not necessary.
White collar crimes have no relation with the social conditions, like poverty, or personal conditions of the offender albeit it matters in the conventional nature of crimes.
Direct access to the targets
Since the offenders who commit white collar crimes are people at a higher position in a company they have easy, direct and valid access to their targets. The case is different with blue-collar crimes. For example, if Jhethalal decides to commit theft in the house of Babitaji, he will first have to break the door or make a passage of entrance to get inside Babitaji’s house and thereafter commit theft.
So, before actually committing theft, Jhethalal will first have to get access to Babitaji’s house. Whereas in white collar crimes, one can have direct access to their target making use of one’s higher position and power.
In the case of white collar crimes, one does not have to come face to face with the victim and so their identity remains veiled. Whereas in case of blue collar crimes, one has to come face to face in order to inflict injury upon others.
Involvement of politicians
In many cases it has been found that the offenders have strong connections with politicians and sometimes, politicians are also involved in committing the crime thus making it difficult for the victims to take action against such offenders.
The harm caused by white collar crimes are much more difficult to bear than those inflicted by blue collar crimes. Also, the harm caused by white collar crimes could cause great harm, not only to the public, but to the other institutions and organizations as well.
Effect on the company
White collar crimes causes huge loss to companies. In order to recover the loss, these companies eventually raise the cost of their product which decreases the number of customers for that product. This works according to the law of demand states that, other things being equal, when the price of a commodity rises, it’s demand would fall and when the price lowers, its demand would increase.
In short, the price of the commodity is inversely proportional to its demand. Since the company is in loss, the salaries of the employees are lessened. Sometimes the company cut down the jobs of several employees. The investors of that company and its employees finds it difficult to repay their loans. Also, it becomes hard for people to obtain their credits.
For example, a US-based IT cognizant landed up paying 178 crore rupees to settle the charges levied on it under the Foreign Corrupt Practices Act by the Securities and Exchange Commission. The company had bribed an Indian Government Official from Tamil Nadu to allow the building of a 2.7 million square feet campus in Chennai. Apart from loss in paying 2 million dollar bribery amount, the company also had to bear extra charges of 25 million dollars to get free from the charges.
Effect on the employees
White collar crimes endanger employees. They become conscious of their working conditions, whether it is safe anymore or not. They start doubting if they are safe and that they can still be given in their trust to the company.
Effect on customers
The most important concern of the customers is whether the products which they are using is safe or not. This doubt rise to see the rate at which white collar crimes have been increasing.
Effect on society
White collar crimes are harmful to the society for those people who should be cited as a moral example and who must behave responsibly are one committing such crimes. The society thus becomes polluted.
When the former director of Andhra Bank and the directors of a Gujarat based pharma company, Sterling Biotech, were arrested for their involvement in 5000 crore fraud case. They used to withdraw money from bank accounts of several benami companies. This was one big scam which put the people in fear.
Also in 2018 the Punjab National Bank (PNB) found that fraudulent transactions of value 11, 346 crore rupees have been taking place in its Mumbai branch. “The Staff there used to fake LoU ( Letter of Understanding) for the buyer’s credit to the company of Nirav modi and Gitanjali Group”, as published in the Business World.
Loss of confidence
Stock fraud or trading scandals, like that happened in the U.S. in the 1980s, makes people lose faith in the stock market. Barry Minkow, a teenager and the owner of the business of carpet cleaning built a million dollar corporation in the 1980s. But, he was able to achieve this only through forgery and theft.
He managed to create more than 10,000 counterfeiting documents and sales receipts without coming to someone’s notice. His company although created through fraud was able to make market capitalization of 200 million dollars and leased 4 million dollars of land. Later, he was sentenced to 25 years of imprisonment.
Eron was the seventh largest energy trading company, based on revenue, in U.S. Forgery made them waive off hundreds of millions of debts out of their book. The investors thought that the performance of the company was really good and stable. But later on it as found that the incredible numbers on revenue records were fictitious. The famous Eron scandal where all the retirement accounts were wiped out it was found that people had loss their normality, their power and public confidence.
Effect on offenders
The authorities have shown no consensus on the definition of white collar crimes. There are no accurate statistics available to analyse the causes and effects of such crimes and therefore government fails to take exact measures to prevent them. Also, though these crimes are on the rise, they are generally not reported.
These crimes have no eyewitnesses as they are committed in camera, which means that the offenders commit these crimes while sitting in a closed room or in their personal space using their computers, and nobody could know about what they are doing on their computer.
This makes it difficult to track the offenders. All these loopholes becomes an incentive for the offenders to fearlessly commit such crimes because the punishment is also for a short term unlike in blue-collar crimes. Offenders are mostly seen roaming freely which poses a danger to the society.
Effects on the temperament of the affected person
The target of the offenders are generally elderly people with little access to liquid assets and their cognitive ability is less than that of younger people. So they become an easy target for the offenders. The victims of such crimes often undergo depression and are seen to have suicidal tendencies, because sometimes the loss incurred is unbearable.
The renowned startup founder, Vijay Shekhar Sharma, the person who founded the widely used app for transaction namely Paytm, became a victim of blackmailing by his personal secretary Sonia Dhawan. She along with others stole his personal data along with sensitive business plans, to extort money from him. Also, Sharma received regular calls stating that his personal information would be revealed to the public if he doesn’t give the required amount to them. Sharma was put under a lot of pressure.
Project report on white collar crime in India
Various committees were formed to look into white collar crimes and set up rules and regulations to prevent them and ultimately eliminate them.
The Report on the Commission on the Prevention of Corruption, 1964
On the recommendations by the Committee on Prevention of Corruption, headed by Shri K. Santhanam, the Central Vigilance Commission was created in 1964. The Central Vigilance Commission is now the apex institution for vigilance, independent of any executive authority. Its function is to address corruption in government offices and to monitor all vigilance under the Central Government. This organization seeks its advice in planning, executing and reviewing their vigilance work.
The role that the Central Vigilance Commission plays is:
- To supervise the work of Delhi Special Police Establishment in only those matters which relate to the offences which have been committed under the Prevention of Corruption Act, 1988.
- To direct the Delhi Special Police Establishment in discharging their responsibility given to them under sub-section (1) of section 4 of the Delhi Special Police Establishment Act, 1964 .
The Report on the Commission of Inquiry on the Administration of Dalmia Jain Companies, 1963
In the 1930s Dalmia Group run by brothers, Ramkrishna Dalmia and Jaidayal Dalmia, merged with Sahu Jain Family to form Dalmia-Jain Group. This business was ultimately split between the two families and again between the two brothers in 1948. On the allegations of corruption against the group, Vivian Bose Commission of Inquiry into the affairs of Damila-Jain group of companies was set up in 1963.
The committee said that because of the group’s collection of black money, undisclosed assets and undetermined income tax liabilities, the dissolution or split had become so complicated that it could not be officially said that the groups had split. The Commission headed by Justice S.R. Tendulkar and after his death by Justice Vivian Bose, sentenced Ramkrishna Damia on charges of tax evasion, perjury and criminal misappropriation of funds in 1962.
The Report on L.I.C. Mundra affairs
It was in the 1950s when, Haridas Mundhra, a stock speculator was arrested and imprisoned in the case of the first big financial scandal of newly independent India. At that time, Jawaharlal Nehru was the Prime Minister of India. His daughter Indira Nehru was married to Feroze Gandhi, who was also a Member of Parliament. Feroze Gandhi was the driving force behind the anti-corruption movement which led to the imprisonment of Ramkrishna Dalmia.
When Feroze Gandhi finally came to power he questioned whether the newly established Life Insurance Corporation had used premiums from the policyholders. Ultimately a committee was set up which was headed by the retired judge of the Bombay High Court, Justice M.C. Chagla which came to the conclusion that Mundhra be sent to jail on the ground of, as many as 124 prosecutions against him and 113 of them resulting in convictions.
Das Commission Report, 1964
In the case of R.P. Kapoor v/s Pratap Singh Kairon , Pratap Singh Kairon, who was the Chief Minister of Punjab was accused of using wealth to boast his high status of and also of his family at public expense. The Commission exempted him on the ground that a father could not be held liable for actions of his grown-up children. The Commission clarified that a son cannot be stopped from carrying out a business of his choice except that the son cannot use his father’s political position and power to exploit others. The petition was therefore dismissed by the court.
Administrative Reforms Commission on Reports
Administrative Reforms Commission’s 4th report titled ‘Ethics in Governance’ had made amendments and included new provisions in order to reduce the number of white collar crimes in India.
- The report introduced a new provision stating that partial funding by the state is allowed in elections so as to avoid illegitimate and unnecessary expenditures by the political parties.
- It suggested an amendment to section 8 of the Representation of the People Act, 1951, keeping people facing charges in case of a grave or heinous crimes and corruption out of participating in elections.
- The report on the election of the Chief Election Commissioner and other Election Commissioners decided to form a collegium in order to select them. The collegium would consist of the Prime Minister of India, the Speaker of Lok Sabha, the Law Minister and the Deputy Chairman of the Rajya Sabha as its members. This would prevent in wrongful exercise of power and prevent manipulation by the authorities enjoying dominance.
- It was proposed that an office of ‘Ethics Commissioner’ be formed by each House of the Parliament. This office would be regulated by the Speaker or the Chairman to follow the code of ethics, to advise the body whenever required and maintain records of the office.
- Most importantly the Commission asked the Government to recognize ‘collusive bribery’ as a special offence. The Commission advanced that section 7 of the Prevention of Corruption Act needs an amendment for the inclusion of ‘collusive bribery’ as an offence. This would prevent the public servants from performing such acts which leads to loss to the public.
- The Commission also recommended to take immediate measures for the implementation of Benami Transactions (Prohibition) Act, 1988.
- The Commission gave protection to whistleblowers on the grounds of confidentiality. And also made harassment and retaliation against them a punishable offence.
- The Commission said that the media should have their Code of Conduct and self regulating mechanism to avert from wrongful actions and government be allowed to disclose the cases of corruption to media in order to help them fight against corruption in the country.
- The Commission made an important decision stating that the head of the office should be given the responsibility to take proactive vigilance on corruption.
There are other provisions that were presented by the Commission before the Government thereby assisting the Government in their fight against corruption and other malpractices by the people at higher positions in the authority.
Law Commission 47th Report
In its 47th report, the Law Commission said that since a corporation does not have a physical body, no pain can be inflicted upon them as a punishment. A corporation does not have a mind that can be accused of guilty intent and therefore new penalties should be created to punish them for their illegal and wrongful acts.
The Commission found that the real penalty for the corporation would be to experience a curtailment in their reputation. And that they be called a disgrace. The commission said that not only the directors or managers should be punished but the corporation as well. The people should be able to link the offence with the name of the corporation also.
The Commission recommended the inclusion of the following provisions in the Indian Penal Code, 1860:
- In every one of those cases where the offence has been committed by the corporation and the punishment includes imprisonment or fine and imprisonment both, the court will have the power to impose on these offender fine only.
- In every one of those cases where the offender is the corporation and the punishment for his offence can be either imprisonment and any other punishment other than fine, than in that case the court shall have the power to impose on such offenders fine only.
- In this section, ‘corporation’ should mean an incorporated company or other body corporate. It would also include firms and other association of individuals.
Like the above mentioned provisions, the Commission in its report has mentioned the punishment the offender corporation or company would be subjected to.
The Report by Santhanam Committee
The Santhanam Committee was the first body to recognize the intensity of the crimes committed by the people of high social standards, which was acknowledged by the 29th report of the Law Commission released in 1972. Santhanam Committee in its report on the Prevention of Corruption has talked about the reasons behind the prevalence of white collar crimes in India.
The technological advancement and development in scientific temperament has been assigned as the major reason behind the growth of white collar crimes. These large numbers with advanced disposition is being regulated by only a handful of elite who form the monopoly. The need of this technologically and scientifically advanced era is to make these masses adhere to the rules laid down by the elites to conduct them. Those who fail to do so land up becoming the offender of white collar crimes.
The committee showed its concern regarding the great damage that these crime can cause to the public morals. The case of white collar crimes are so complex and since people are not much aware about it, it is only the experts who can recognize such crimes and protect themselves from becoming a victim of it.
Types of white collar crime in India
The ambit of white collar crimes is varied. Some of the white collar crimes that have been reported in India are:
Section 503 of the Indian Penal Code, 1860 defines blackmailing or criminal intimidation as, making a demand for money or any other consideration by imposition of threat to cause physical injury, or to cause damage to ones property, or to accuse one of a crime, or to expose somebody’ secret. The threat can be induced in the following ways:
- By revealing a secret of the person which the offenders knows if revealed will cause great embarrassment to the victim. For example, if A, the Managing Director of the company XYZ, knows that B, a female employee of the same company, was bearing the child of somebody other than her husband. A asked B to commit forgery on the account papers so that he could embezzle 20 lakhs rupees from the company without anybody knowing about it, or else he would reveal her secret which would cause great embarrassment not only to her but her family as well.
- By revealing those matters of the victim which are sensitive enough to cause financial loss to him. For example, if X knows that the property Y owns has been fraudulently been taken over from Y’s parents by deceitfully taking their signatures on the will. The X, a senior manager of a law firm, asks Y, a junior employee of the same company, to take out the file containing the personal details of the chief secretary of the company from the storehouse of the company. When Y refuses to do so, X threatens to reveal her secret of forgery to the police. X is said to be blackmailing B.
- By doing acts which could falsely accuse the other person of a crime, thereby affecting his life in many ways. For example, when X, an officer at senior most post asks her secretary to marry his son else he would falsely accuse her of embezzlement of 10 lakhs rupees from the company, which actually has been done by X. This is blackmailing as a white collar crime.
- By revealing a report which shows that person’s involvement in a crime. For example, M, the lawyer of N, and an old enemy of his, which N has no idea about, in a murder case, asks him to pay him double the amount else he would give the court the recordings in which M has confessed that he had murdered the person and the manner in which he has committed the same. This is blackmailing.
When does blackmailing become a white collar crime
For blackmailing to be considered under the ambit of white collar crime, it should be committed by or show an involvement by someone enjoying higher social status in an occupation.
Credit card frauds
These frauds are committed when one person uses the credit card of another person unauthorizedly to obtain goods of value, he is said to have committed credit card fraud against the other person. For example, in 2003 in Mumbai, Amit Tiwari, a 21 years old engineering student was arrested for using too many names, for having too many bank accounts and too many clients, all false managed to defraud a Mumbai-based credit card company, CC Avenue, of around 9 lakhs rupees.
This case brought to the notice of the authorities that credit card frauds have not been recognized by the Information Technology Act, 2000. The loophole in the law has caused a great loss to the company.
As per the report released by the Economic Times, it was found that over 900 cases of credit/debit cards and internet banking have been registered during the period of April-September, 2018. All these cases involved an amount of 1 lakh rupees and above. Minister of State for Electronics and IT (2018), S.S. Ahluwalia, informed that the Reserve Bank of India by 30th September, 2018 had registered a total of 921 cases of credit/debit card fraud.
In 2017 a Metropolitan Magistrate became a victim of credit/debit card where the victim received two messages for two transactions done from his debit card, not in India, but abroad. The victim claimed that those transactions did not have his consent. A complaint of cheating under Section 420 of the Indian Penal Code, 21860 was filed.
These schemes basically refers to the practice of determining the value of the currency in the near future. The determining of the value is not based on any firm evidence though.
According to a report, ‘Trend and Progress of Banking in India’ released by the Reserve Bank of India, published by the Financial Express in January, 2019, it was alleged that the banks have lost 41,168 crore rupees in the financial year of 2018 which shows a 72% rise from what was in 2017. The reason behind this rise is the fraud against currency schemes. The report cited that fraud have turned out to be a major concern with a 90% rise of such cases in the credit portfolio of banks with the major chunk of fraud being concentrated in off-balance sheet operations, foreign exchange transactions, deposit accounts and cyber-security.
Schemes involving advance payment of fees
In these cases the victims are asked to make an advance payment of the sum. They would be promised to be receiving just the double of what they have invested. But one the money has been given, no track of the offenders can be found. In these cases, the scammers target those people who have already lost much amount somewhere. An appeal is made to their sentiment that the amount they are investing would be doubled and they would be able to recover the loss caused from the last transaction done by them.
The commission of this type of fraud had originated from nigeria. The first case of ‘Nigeria 419’ in India was registered in August in 2003 where Piyush Kankaria, a Howrah-Kolkata based businessman filed a multi-million fraud case under Section 420 of the Indian Penal Code, 1860. Piyush, out of financial crises, had become a victim to this fraud where he had to claim 7.5 million dollars from an account in return for 3 million dollar and for which Piyush had already advanced a mobile handset as a gift.
Scams in the boiler room
Boiler room refers to the office which are frequently changed, that is, the office which is not stable and shifts regularly. In these cases, the scammer creates a website giving all fake or false information. The address given on the website would be a temporary one, the toll-free number would be invalid, though all will appear legitimate on the screen. By the time one realizes that they have been defrauded, the scammer moves on to another similar scam at some other place.
It was recently in 2019 itself when a person by the name of Rohit Soni, from Rajasthan, who was a B.com. Graduate created a fake Amazon website similar to the original website. How Rohit made a profit out of it was by providing the customers with a link which gave access to an app named ‘4Fun’, and for every download he received a sum of 6 rupees.
Exempt securities scam
Exempt securities scam refers to the selling of securities by a company without filing a prospectus. This offence is committed against wealthy people who are persuaded to invest in a business. The offenders pitch a fraudulent investment as ‘exempt ‘ securities. A fake promise is made to the victim that the business would go public. These scams involves a great risk and make you lose all your investments.
It was in 1992 when an Indian stockbroker, Harshad Mehta, was held guilty with as much as 27 charges released against him for having committed various financial crimes under the securities scam of 1992. Harshad had been accumulating huge wealth through massive stock manipulation facilitated by the use of fake or worthless bank receipts.
The Bombay High Court, as well as the Supreme Court of India, held him guilty for being a part of a huge financial scandal involving 4999 crore rupees. This scandal had taken place against the biggest stock market that is the Bombay Stock Exchange (BSE). After having lived in jail for 9 years Harshad Mehta dies in 2001.
Scams in the foreign exchange market
In the foreign exchange market, investors buy and sell currencies depending upon its exchange rate. These markets are often dominated by large and developed banks that have plentiful resources at hand. The staff in such organizations are well skilled and trained in using the advanced technology and therefore it becomes difficult to beat these professionals.
In the foreign exchange market, it is not new to see people becoming prey to the illegal or fraudulent schemes known as forex schemes. Since these schemes are often carried online from another country, the chance of losing your money is high as one is likely to buy services from those firms which are not legitimately set up can market their services ultra vires. It is easy to fake things online. The result of these scams could be that the money one invests might get stolen and one might lose everything that he had invested.
As per the report published by the Times of india in 2017, the Central Bureau of Investigation has held a total of 13 private companies responsible for sending unknown foreign remittances which hold the value of 2,253 crore rupees under bogus imports of goods during 2015-2016.
Similarly in 2015, as published by the Times of India, the Bank of Baroda was alleged to have been involved in forex scam worth rupees 6,172 crore. This money was sent from India to Hong Kong for importing cashew nuts, pulses and rice. However, at a later stage it was found that nothing was imported and instead all this money went into 59 different bank accounts of several companies.
Similarly, in 2015-16, the Directors of a Mumbai-based company called M/s Stelkon Infratel Pvt. Ltd., Manish Prakash Shyamdasani and Mungaram Hakmaram Dewasi, were held liable for their indulgence in large scale illegal foreign remittances under fraudulent imports of goods 2015-16.
Offshore investing scams
These scams induces a person to send their money ‘offshore’ to some other country to get more money in return than invested. These scams mostly aim at exempting a person from paying taxes. But the ultimate result of it is that people land up paying money in back taxes, and penalties.
The major risk involved in these scams is that the victim in cases of foreign investment are not able to seek remedy from the civil court and thus one is not able to recover the invested money.
It was in 2008 when Ketan Parekh, a stockbroker from Mumbai, and the Director of the Madhavpura Mercantile Co-operative Bank, was convicted for his involvement in the scam that happened between 1998 to 2001 in the Indian Stock Market. Parekh was held responsible for rigging price artificallicy of securities.
He had been able to do this by borrowing money from various banks including his own bank which he was the Director. What parekh used to do was, at first place, he purchased large stakes from small market capitalization companies. He continued to do so unless a large sum of money has been accumulated and then jacked up the prices via circular trading with other traders, collusion with other companies as well as with the large institutional investors. This led to a huge rise in the prices of the shares. For example, the price of the shares of Zee telefilms rose from 127 rupees to 10,000 rupees. These stocks were referred to as the ‘K-10’ stocks and Parekh was given the name of ‘Pentafour’.
For the purpose of looking into such a scam, Joint Parliamentary Committee was set up which found Parekh guilty of circular trading of money and rigging the prices of 10 companies from 1995 to 2001, on a false pretext.
Scam against the pension of a retired person
Older people have their retirement accounts where they keep their savings for the period after retirement from their services. Usually, money from these accounts can be withdrawn only after the attainment of a certain age, and only a certain sum of money can be withdrawn in a year, and also some tax is imposed on the money withdrawn.
Some company can fake such accounts. It can ask the person to invest in their bank where they would be able to keep their savings safely. The bakers asks the person to buy the shares of the company from their savings which would be repaid by granting 60-70% loan from the invested money and the rest would be kept by the bank as a fee. These promises turns out to be fake and the investment made, worthless. There is a high possibility to lose one’s retirement savings in totality to such scams.
It was in 2009 when India Today published a report on pension scams in India. The report said that in Uttar pradesh, a huge amount of money which was supposed to be used for giving pension to the 60-years-old people, who were Below the Poverty line (BPL) and used to earn 300 rupees per month were being given to younger people.
The scheme was basically meant for the older people from the lower strata of the society. The divesting of the money to young people was assisted by the Uttar pradesh Government by issuing fake BPL cards and certificates showing false age. This helped each beneficiary of the scheme to earn 3,600 rupees annually, half of which was given as a commission to the official who has helped the very person in forging the documents.
Double dip scam
The person who has already been a victim of a scam is likely to become a victim again. And when it happens, it is called a double dip scam. The offender in the first instance can store the information of the victims and pass on to other such offenders, thereby assisting them in making money fraudulently.
The case might also be that the first offender calls you again and you spill out your grudge from the first fraud that you have become a victim of. The scammer then offers you to recover your money in return for a small fee. One would again lose one’s money in this way.
Unveiling the double dip scam taking place within political parties, the India Today has published a report back in 2016 when politicians were found to have converted back money into white money for 40% commission. The political parties were found double-dipping as brokers for undeclared wealth. There politicians used to do the business of converting black money into white in near to their offices in Ghaziabad, Noida and Delhi.
Such types of situation where politicians indulge in wrong practices have been very common for the politicians enjoy powerful position which comes with various powers, they tend to manipulate things and make illegal profits, which are basically the money supposed to be used for public welfare. And ultimately it is the common people who suffers the most.
Scam by building a relationship
In such cases the offender targets a group of people, or organizations or communities. The offender in cases are somebody close that the victim. He builds a relationship of trust with the victim, or become a member of the same religious community against whom he has committed fraud, and then misusing the faith people have planted in him, he gains profit by cheating those people. These scams are also called affinity scams.
Ponzi scam, also known as pyramid scam is a type of affinity scam where the scammer would through emails and advertisements offer one to earn huge profits by sitting at the comfort of their living room, only by investing a certain amount of money. They also keep exciting offers like early birds would be able to make more profits. After investing their money in such schemes people land up having nothing in their hand, as the scammer runs away with the money leaving behind no clue of their existence so as to track them.
The cases of ponzi scheme in India are:
- In November, 2018, Gaylen Rust of Utah was accused by the Government for running ponzi scheme and generating huge wealth, like that if 25-40% per year,which is about 47 to 200 million of money. It was found that more than 200 people had become a victim of this scheme.
- In the same year when Gaylen ruth was found guilty, in the month of September, a person by the name of Claud R. ‘Rick’ Koerber, from Utah itself, was found guilty of running a ponzi scheme. Under this the investors in the property had suffered a loss of 100 million.
- In 2017, Michael Scronic from New York, was held levied with civil and criminal charges, causing a loss of 27,000 million dollars to the investors.
Pump and dump scam
A company who owns a large amount in a low-priced stock, which is actually an illegitimate business, will find potential investors and persuade them to invest in their stock. As more people would invest, the price of the stock would increase and when it reaches its peak the scammers would sell all the shares, earn profit and run away, taking with him all your money.
It was in 2015 when Rakesh Jhunjhunwala was said to have raised his wealth by purchasing 2,50,000 odd shares because of which though his shares of the ‘Surana Solar’ experienced an 18% rise, but after the dump-sum scam was discovered, the prices quashed. That is how a loophole in the system was also discovered.
The happening of such scams reveals that there is no proper system to check the authenticity of the information being supplied. And taking the advantage of such a loophole, the Surana Solar made namesake deals easily with the investors causing them great loss.
Scams by way of sending spam emails
Often the scammer sends spam mails making fake offers and promises. In the year 2017, a record of 7.5 million cases of spam mails was discovered. Once you reply to such emails you get caught in the trap as these mails are fraudulent. Most of these mails are regarding microcap stock where investments are highly risky when compared to other stocks.
The customers of the ICICI Bank became a victim of such scam where certain group of people representing themselves to be an official of the bank, asked for sensitive information about tye bank account and defrauded them. The fraud was finally discovered by the manager of the bank when a few of the customers who had received such spam mails filed a complaint. Such a scam in the IT Act is defined as ‘phishing’.
The act of embezzlement
When a person who has been entrusted with money or property to use it for his own use and benefits starts using it any manner other than what it has been given for in an illegal manner then the person would be liable for embezzlement. The act of embezzlement may be characterised as criminal breach of trust which has been defined in section 405 of the Indian Penal Code, 1860.
It defines criminal breach of trust as an act where a person who has been entrusted with a property misappropriated it or falsely converted it to his own use or dispose of it without any law allowing him to do so. Embezzlement is a misappropriation of someone’s property where a person has an intent to cause loss to the other person and criminal misappropriation is an offence under Section 403 of the Indian Penal Code, 1860.
The essential elements that constitute the crime of embezzlement are as follows.
- The two parties must share a fiduciary relationship, that is, a relationship based on trust.
- It is important that the defendant receives a certain amount of money or asset by making wrongful use of this relationship.
- The defendant while embezzling the asset or money should act like he is the owner of that goods or he owns the money which he is giving to another person
- There should be an intention to deceive on the part of the offender.
Some examples of embezzlement and the respective sector in which they are committed as a white collar crime are:
- In Banking sector the bank tellers, who are people directly dealing with the customers gives them access to the funds of the bank for work.
- The clerks or the cashiers in stores gives the customers or any person access to the till money kept in the store. Till money refers to the money which the bank keeps with it to meet everyday requirements for cash money.
- It is often found that the company provides a car to its senior employees for official work. But these cars are seen to be used for purposes other than official duties which amount to embezzlement.
- Many big companies, in order to make their employees technologically sounds provide them with electronic gazettes which are either sold in the market for a certain amount of money or used for some other purpose different than what the company has assigned.
Fraud with the insurance company
Sometimes the case may be that people use false documents to obtain insurance from the insurance company. For example, a person can fake the price of her property by raising its value on the fake documents and obtain insurance for that fake amount. They make the papers in such a way that it seems legitimate and insurance company get defrauded.
The case can also be that the consumer deliberately stage an accident, theft, injury or any other damage which comes under insurance policy. Or they sometimes exaggerate the damage caused. They even go on to omit or provide false documents or application or information to claim insurance. Also insurance fraud can be committed by an insurance company, agent or consumer where they deliberately deceive the other person for illegitimate financial gain.
Two officials of the Life Insurance Corporation of India were arrested for falsely extracting 3 crore rupees as death claims from the company. The officials forged documents they manipulated around 190 insurance policies with the account numbers of their acquaintances in place of the real nominee. Though the origin policy holders were alive they could not make out the fraud that has been made to them.
Relevant Legal provisions under the Indian Penal Code, 1860
- Section 205 which deals with false personation in suit or in a proceeding.
- Section 420 that deals in cheating and inducing someone to deliver property with dishonest intentions.
- Section 464 which talks about making false documents.
The kick-back fraud
A kickback fraud is one in which one person bribes another with something of value in order to convince the other to take a favourable decision. For example, a contractor in order to get the approval for building complex bribes the government official with a promise to give a small art of the land to him. In another example, a biomedical company offers a doctor to advertise his products by advising it to his patients and in return, the company would provide him with free travelling for the next 5 years.
Abhishek Verma, the youngest billionaire at the age of 28 in 1997, known as the ‘Lord of War’, was arrested for his involvement in the Scorpene submarines deal case, AgustaWestland VVIP helicopter bribery scandal and Navy War room leak case. He was accused of having received kickbacks for a total sum of 200 million dollars.
It refers to a wrongful act or says criminal act of a person where he indulges in illegal business with a profit motive.
The number of cases of racketeering has experienced a rise in the recent times. According to a report published in India Today in February, 2019, Raju alias Hakla was arrested for his involvement in 113 cases of murder, dacoity and robbery. A kidney racket case was revealed in 2019 where a businessman from Gujarat, Brijkishore Jaiswal, was about to undergo an illegal kidney transplant. This happened in Powai’s Hiranandani hospital. When the wrongful practice was unveiled, the CEO of the hospital, Sujit Chatterjee and 5 other people were taken under arrest.
Fraud in buying and purchasing of securities
When the broker of a company wrongfully shows the inflated price of stocks in order to make people invest in his stock, it is called securities fraud.
In 2019, pursuant to the report published by News18, Anilesh Ahija, known to the public as Neil, CEO and Chief Investment Officer of Premium Point Investments LP (PPI), an investment firm that managed hedge funds along with Jeremy Shor, former PPI trader, was arrested on the charge of securities fraud.
They collectively participated in a scheme to inflate the net asset value for hedge funds by more than USD 100 million. They started manipulating the funds by raising the value of the securities and thereafter obtained inflated quotes for the PPI which helped them raise USD 100 million. This kept the real value hidden and got the people into the trap by showing the inflated value of the securities of the PPI.
Fraud over calls
Commonly known as telemarketing fraud, these frauds are made over the phone calls. Here, a person is approached to make an investment for building a charitable organization, or asks for their bank account details to obtain a certain amount for charitable purposes. The amount received is then used for any other purpose other than the one it has been taken for.
Paul Witt, a Supervisory Data Analyst at Federal Trade Commission provided an information for its consumer stating that, according to a report on the number of cases of fraud, it has been found that people have lost 1.48 billion in 2018 which shows a rise of 38% from what was in 2017.
Fraud in welfare activities
Welfare fraud is committed when a person tries to seek profit from the State or the Federal Government by deriving benefits from its activities like public assistance, food stamps, or medical facilities, etc.
For example, Abdul Karim Telgi, was accused in the stamp paper case in India where he appointed 350 fake agents to spread the scam around 12 States. This business included selling stamp papers to banks, insurance companies, and those firms which dealt in stock brokerage. He was able to club around 200 billion rupees.
Using wrong weights
The Consumer Forums are flooded with cases where shopkeepers use false weight to sell their goods. The people who become victims of these frauds are the ones who are illiterate. The illiterate could not make out if their are being defrauded by the seller. This sort of crime was prevalent at a very large scale in the early times. Now that digital weighing machines are used, the rate of these crimes have reduced. Also, since the literacy has gone up over a period of time, sellers face a difficulty in befooling their customers.
In Emperor v. Kanayalal Mohanlal Gujar  Sawkar, the accused, bought certain quantity of hirda from the vendor, Savleram. ‘Adholis’ which are primitive methods of measuring weights was used to measure the hirda. Despite warning from the patil of the village to not use these weights as they didn’t give accurate measures, Sawkar agreed to use them and later on seize the adholis and filed the suit. Sawkar said that false weight have been used to measure hirda but the court said that since he had agreed to the same and also Savleram didn’t had bad intent, Savleram would not be held liable for fraud.
Common types of white collar crime in India
Bank fraud is a criminal act where a person, by illegal means, withdraws either money or assets from the bank. The fraud can also occur when a person falsely represents himself to be a bank or financial institution and withdraws money or assets from the people.
Therefore we conclude that bank fraud can be committed in two ways:
- By using illegal means to withdraw money or assets from the bank or any financial institution.
- By falsely representing oneself to be a bank or any financial institution, the person extracts money or assets from people.
Bank frauds are punishable in India under the Indian Penal Code, 1860. Various sections like Section 403 which deals with criminal misappropriation of property, section 405 which deals with criminal breach of trust, section 415 which deals with cheating, section 463 deals with forgery and section 489A deals with counterfeiting of currency, deals with the crime of fraud in banks.
Types of bank fraud
Imitating a financial institution
When one person falsely representing himself to be a financial institution, either by establishing a fake company or by creating a fake website in a manner that it would attract people and make them invest in that bank, then that person is said to have committed bank fraud.
The Times of India reported that two men were arrested for creating a fake website of State Bank of India and running a racket therein. They have been able to defraud people for rupees 1 crore. The two men were Sahil Verma and Monu from Haryana. They were alleged to have cheated against any people and made fraudulent use of the computer resources.
Defrauding by means of checks
Offenders in this case obtains a job whereby they could have access to the company’s post offices, mail boxes, corporate payrolls, etc. Once they gain access, they steal the checks and thereafter deposit it in a fake account created by them.
The timesnownews.com had published a news asking people to beware of fake emails being said to them in the name of RBI (Reserve Bank of India) lottery. The email contained the logo of RBI along with the address its head office in Delhi. Although RBI had circulated a warning against it, the id again came into circulation taking into its grip many innocent citizens.
Falsely getting loans approved
Sometimes the person who is applying for a loan fakes information on the loan application and provides wrong documents to show himself as eligible for the loan. An individual can also wrongfully claim to be bankrupt, after obtaining a loan from the bank. This would also amount to bank fraud.
Anuj Pandey was arrested by the M.P. Nagar police for producing false documents and obtaining loans from the bank.
Bank fraud using internet
People often become a victim of internet fraud. A person may create a fake website representing itself as a financial institution and advertising in such a way the it lures people to invest in that bank.
Three persons from West Bengal and Orissa were alleged for creating a fake website named, ‘Rail Vikas Nigam Limited’. The website made fake representation to people regarding job opportunities. The accused who were arrested were, Narayan Patra and Govind Sinha. The victims complained that any information regarding working of the company, its achievements, and other advertisements were being reported on the official website but no recruitments were taking place.
There has been an unprecedented rise in the number of bank fraud cases as reported by livemint.com. According to a report by the Reserve Bank of India (RBI), a total of 5,916 cases of bank fraud has been reported in 2017-18 involving a sum of 41,167.03 crores. This included high profile fraud cases like that of Nirav Modi and Vijay Mallya.
Bribery is a white collar crime where a person asks for money, or a favor, or something of value in order to get the other person’s work done. For example, if an electoral officer asks a person to offer him wine and only then will he be allowed to give vote, it would amount to bribery.
The punishment for bribery has been provided under Section 171E of the Indian Penal Code, 1860 which says that any person who commits such an offence would be imprisoned for a term which may extend to 1 year or with fine or both. Also, Section 13 of the Prevention of Corruption Act, 1988 has penalised acts constituting an offence under this head, being engaged in by public officials.
Types of bribery
Where public official bribes or is bribed
If any public official demands, or exchanges something in return for performing his duty which he is bound to perform within the power of his office, then he would be held liable for bribery under the Prevention of Corruption (Amendment) Act, 1988. ‘
Also, if a person attempts to bribe a public officer for his own advantage or for getting his work done, then that person, along with the public official, will be held liable.
Where a witness bribes or is bribed
When any witness demands, exchanges, or receives bribery in any form to give false testimony, or for bringing in a fake witness in the court, then he would be held liable under the crime of bribery.
Where a foreign official bribes or is bribed
It is illegal to bribe a foreign government official with money or gift. Government officials often indulge in this type of white collar crime to maintain important business contacts.
Bribing bank officials
It is illegal to bribe a bank official, director, manager, etc.with either meals, entertainment, or any other way, either for employment, or wages or hike in salaries.
Where a sporting official bribes or is bribed
A sporting official may ask for a bribe to ‘fix’ a match. In this case the one briefing and the one who received the bribe, both will eventually be held liable for committing a crime.
Bribing in an industry
Kickbacks are often associated with industries like, health industry, or in pension plans, etc. For example, one pension provider bribes the broker of a company to convince that company, to accept his pension offer and not offers made by other pension providers.
As the use of computer and internet is increasing, so is the crime related to it. The crimes which involves the use of computer, coupled with the use of internet are called cybercrime. It is where the computer is used as the object of the crime or as a tool to commit an offence.
The only legislation which deals with the offences related to cybercrime is Information Technology Act, 2000. The exact definition of cybercrime hasn’t been provided in any of the acts or laws as it is not possible to define such a nature of crime where computer and internet is involved.
Categories of cybercrime
This sort is similar to a real-life instance where a person illegally possess someone’s bank account or credit card details. Here the hacker intrudes into the personal details related to the account or credit card to gain access to the funds, to make purchases or to run phishing scams. Also by using malicious software one gains access to the confidential information.
Where a person illegally distributes that information which the law prohibits from publishing, like, distributing pornography. This sort also includes trafficking and stalking.
A crime against the government is called cyber terrorism. This includes crimes like hacking government websites, military websites or distributing propaganda. These criminals are usually terrorists or enemies from different nations. This crime is the most serious one, and its rate is presently very low in India.
The major types of cyber crimes prevalent in India are as follows:
It is the publishing and distributing of obscene material of children in electronic form. Child pornography is a heinous crime that occurs. It has led to various other crimes such as sex tourism, sexual abuse of the child, etc.
The rates of this crime have increased over the years because of the access to internet being so easy. According to a report published in the Times of India in 2019, there has been a total of 10% rise in the cases of child pornography, inclusing offences like rape and molestation, in 2018 as registered under teh Protection od Children from sexual Ofeences Act (POCSO).
Mumbai police presented a report stating that between January 2015 and May 2019, a total of 4,551 such cases have been reported in Mumbai. The POCSO Act which includes crimes like rape, sexual assault, sexual harassment, child pornography comprises 33% off the total crime being committed against children. The maximum crimes under POCSO Act was recorded in Uttar Pradesh.
After the amendment in the POCSO Act in 2012 several provisions have been amended to bring in stringent punishment agaisnt child pornography.
- Section 4 and 5 have made penlities more stringent and has included death penalty as punishment for crimes like sexual assult of achidl or performing penetrative sexual assualt with a with.
- Section 9 of the Act provides protection to children in time of natural calamities and where the children are made subject to injection of hormones or any other chemical substance to attain sexual maturity earlier than their age permits. This is doen for teh puprse of erforming penetrative sex assault.
- Section 14 and 15 impose penalties on those offenders who refrain from deleting or destroying those pornographic contents or reports which involves a child. They post it intentionally and then share it with others committing a crime against that child.
The growth in online sexual harassment has seen an increase in India. The harassment faced by women online, is the mirror image of the harassment faced by them in the real world. A survey conducted by Feminism in India states that 50% of women in major cities of India have faced online abuse. What is more shocking is that the instances of cyber stalking against men also show an increase. Experts have found the ratio of stalking of women and men to be 50:50.
Terrorism can be defined as, “the unlawful use or threatened use of force or violence by a person or an organized group against people or property with the intention of intimidating or coercing societies or governments, often for ideological or political reasons.”
Mark M. Pollitt defines cyber terrorism as, “the premeditated, politically motivated attack against information, computer systems, computer programs, and data which results in violence against noncombatant targets by sub national groups or clandestine agents.”
To have a clear definition of cyber terrorism is difficult as the scope of cybercrime is very broad, and sometimes involve more factors than just a computer hack.
Characteristics of Cyber Terrorism:
- Attack is predefined and the victims are specifically targeted.
- The attack made has an objective, to destroy or damage specific targets such as political, economic, energy, civil, and military structure.
- Attack may have an intention of opposing any religious group’s information infrastructure to insight religious racket.
- Destroy enemy’s capabilities to further operate within their own arena.
Major cases relating to cyber terrorism
The website of the Bhabha Atomic Research Centre (BARC) at Trombay was hacked in 1998. The hacker’s gained access to the BARC’s computer system and pulled out virtual data.
In 2002, numerous prominent Indian web sites, notably that of the Cyber Crime Investigation Cell of Mumbai were defaced. Messages relating to the Kashmir issue were left on the home pages of these web sites.
In the Purulia arms drop case, the main players used the internet extensively for international communication, planning and logistics.
In 2007, the two Indian doctors involved in the Glasgow airport attack used computers for terrorists’ activities.
Former Indian President, Dr. A.P.J. Abdul Kalam has expressed concern over the free availability of sensitive spatial pictures of nations on the internet. He pointed out that the internet could be utilized effectively for gathering information about the groupings of terrorists. According to him, earth observation by “Google Earth” was a security risk to the nation.
When a person, the launderer, converts his illegal money into legitimate money, and thereby succeeds at hiding his illegally earned money, is said to have committed the crime of money laundering. In India “Hawala transaction” is the name given to the crime of money laundering. Money laundering has been defined under Section 3 of the Money Laundering Act, 2002.
They money launderers do their job in such a manner that not even the investigating agencies are able to trace the real source of the money. This is how people who invest their black money in capital market succeed at converting the black money into legitimate wealth.
The three major steps involved in money laundering are:
As the first step, the launderers invest their illegal money into the black market via agent or banks in the form of cash. This is done either through formal or informal agreements.
Manipulating the details
The second step is to hide the details of the real income of the launderer. In order to do so, the launderers, often deposits their money in the form of bonds, stocks, etc. into a foreign bank.They prefer to invest in those bank that does not reveal the identity or the details of the account holder. This helps in manipulating the information of the owner of the money and the details regarding the source of the money.
Making what is illegal, legal
The final step is where the black money introduced into the market is finally converted into legitimate money and introduced into the financial world.
Cases of money laundering in India
- BCCI (Board of Control for Cricket in India) was alleged to have laundered dollar 23 billion by introducing itself into the market of arms and drug smuggling.
- In the case of Anosh Ekka v. Central Bureau of Investigation, Anosh Ekka was alleged to have been involved in money laundering as, after becoming the minister acquired a huge amount of movable and immovable assets in his name and in the name of his family within a short span of 3 years. The Supreme Court held the accused liable for looting and laundering huge amount of public wealth. He delayed the judgement and also manipulated the evidence against him. He was also accused of abusing the lawmaking process and contempted on the justice delivery system.
- In Arun Kumar Mishra v. Directorate of Enforcement,  five people created a fake account in the Punjab National Bank (PNB), and thereby collected money as personal gains and caused huge loss to PNB. The money laundering case was not held in this case as the offence did not fall under any provision of the Prevention of Corruption Act. And under Article 20(1) of the Constitution of India, it has been said that ex-post facto laws have no effect. Under the said Article it is a fundamental right to not be prosecuted by a law that did not exist at the time of commission of the offence. However, the court said that once money laundering has been fully established against the petitioner, the Enforcement Directorate can initiate a fresh proceeding against him under the law which in force thereafter.
Tax evasion is when a person deliberately forges his state of affairs in order for the authorities to levy less amount of tax. This can either be done by an individual, a corporation or a trust. It is a false means of escaping government taxes. In simple terms, Tax evasion and avoidance both is an offence which is used to reduce one’s tax burden. The offence of tax evasion is punishable under Chapter XXII of the Income-tax Act, 1961, which can impose heavy amount of fine or even send you to jail.
Tax evasion= (amount of income that has to be reported) – (the actual amount reported)
Situations where one could be penalised for tax evasion
Failure to file income tax returns
If a person fails to fulfil the requirement of filing the income tax returns as laid down under Section 139 (1) of the Income Tax Act, 1961, then a fine of rupees 5,000 or more could be imposed.
Parbodh Anand sold his flat which was registered in his own name. The buyer of the flat gave the amount in the name of both, Anand and his wife. Since the flat was registered only in Anand’s name therefore the capital gains that his wife had becomes taxable, which they did not pay and therefore landed up receiving a tax notice.
Not providing a PAN card or giving a fake one
If a person does not provide a PAN (Permanent Account Number) to his employer, at the time of employment or provides a fake PAN number, then, he would be subject to a penalty of rupees 10,000.
The Economic Times had published a report stating that 4 men were arrested for running 6 fake firms who were in the racket of GST evasion amount to a total of 60 crore rupees. They were alleged to have used various fake documents, including fake PAN (Personal Account Number) cards. These fake firms have been able to generate 615 crore rupees which led to causing huge loss to the general public.
Giving false information under form 26AS
Under Section 203AA of the income Tax Act, 1961 one is required to fill in Form 26AS. It is very important to look into the information which has been provided because any wrong information would lead to severe punishment. Similarly, one would be punished even if he/she has provided wrong information regarding income, expenses or investment.
Pursuant to the report published by the Economic Times it was found that around 15,000 crore rupees was tax exempted by the employers regarding the medical bills If an employee desirese tax-exempt reimbursements he is given Leave Travel Allowance and HRA by his employer. Those who have the bills or receipts of the same can only pay the sum. But those who didn’t have the bills or receipts tend to use fake documents to get reimbursements.
Punishment for not paying self-assessment tax
If a person fails to pay, either the entire sum or partial amount, self-assessment tax then under Section 140A (1) of the Income Tax Act, 1961, he would be considered as a defaulter. If not provided with a justified reason for the delay in payment, the assessing officer under Section 221(1) of the Income Tax Act, 1961, may impose a penalty.
In Galaxy Nirmaan Pvt. Ltd. v. Acit, new Delhi  The assessing officer had levied a penalty on the appellant in the case for non-payment of the self-assessment tax in the year 2010-11. A penalty of 1,09,71,691 rupees was imposed under Section 140A(3) of the Income Tax Act, 1961.
Giving a wrong account of income to escape tax payment
Section 271(c) of the Income Tax Act, 1961 states that if a person conceals his real income in order to reduce the amount of taxes, he would be liable to 100% to 300% of the amount of the tax evaded by him. Section 271AAB lays down the different situations where the penalty would apply.
The article published on livemint talks about a case where a resident of Haryana was arrested for running racket where about 90 firms presented bogus invoices to evade taxes. The Directorate General of GST Intelligence (DGGSTI) found a total of 110 debit cards and blank cheque books linked to 173 bank account.
Keeping silence on the income tax notice
The assessing officer, under Section 142(1) or 143(2), can issue a notice, asking the person to either file the return of income or asking the person to give all the details in writing, in case the person has failed to comply with the notice given to him by the Income Tax Department.
A Times of India report stated that: “Mridul stood shivering outside the magistrate court in Mumbai for he could have been given rigorous punishment for having defaulted on the notice given by the Income Tax Department for 30 days. The Notice was for not having deposited TDS which she had collected from the employee’s salary.
Cellular phone fraud
The Cellular phone fraud refers to tampering, manipulating or making an unauthorized use of cellular phones or service. The offender in this case would make a fake account in your name and get an access to your bank account details, credit card details, and make payments without your consent. The offender may even sell your cell phone to other criminals to use it in commission of illegal acts.
The use of the IMEI number of a mobile phone without taking the permission of the person who owns it is punishable with imprisonment for a maximum term of 3 years as laid down in the Mobile Device Equipment Identification Number, Rules, 2017. This provision has been made in combination of Section 7 and Section 25 of the Indian Telegraph Act, 1885. Where section 7 gives the DoT (Department of Telecom) the power to make rules for the conduction of telegraph and telecom services, section 25 says that any damages if caused to the telegraph lines, machines or any such equipment will be imprisoned for up to 3 years or fine or both.
According to an article published in the Business Standard the social media frauds, where crooks use stolen identities and credit card details to obtain illegal gains, have increased by 43% in 2018. Using mobile applications, mostly whatsapp, facebook and instagram, to defraud people have seen a rise of 680% between 2015 and 2018.
This pose a threat to the online social media users and they need to be conscious and careful while using it. This calls for taking proper protection of one’s account and credit card details while providing it online on a website.
When a computer is used to gain profits by defrauding people, it is called computer fraud. It is punishable under section 43 of the Information Technology Act, 2000. It penalizes the offender by asking him to pay compensation. It can be done via the internet, internet devices or internet services. The following activities amount to illegal use of computer- phishing, social engineering, DDoS, viruses, etc.
The various types of computer fraud are
- When a mail becomes widely circulated, ie. hoax mail, and thereafter is used by the crooks for illegal activities via computer.
- When a person tries to access or secure access to another’s computer, computer system or computer network without his/her permission.
- Where the computer is used to download or copy or extract any data or computer database or information from a computer or its system or its network. The information or data under this head includes those data as well which is stored in the ‘recycle bin’ folder.
- When a person tries to damage or cause disruption to a computer, or the computer system or the computer network.
- Where a person tries to stop a person who has legal or authorized access to a computer from using a computer, or computer system or a computer network.
- Where a person assists another person in gaining access to another person to operate a computer or a computer system or a computer network.
- Whereby manipulating or tampering any computer, computer system or computer network., charges another person for the services availed.
- Where a person diminishes the value of the data by tampering or manipulating the computer, computer system or computer network.
- Where a person steals, conceals, destroys or alters or causes any person to steal, conceal, destroy or alter any computer source code used for a computer resource with an intention to cause damage.
- There can be computers in a company which can be accessed only by a few technical team members. If an employee who is not authorized to use it, uses it for personal gains by illegal means and he would be said to have committed a crime.
- When a person having complete knowledge of how the system of a computer works, tries to set patterns in data set without being authorized to do so by introducing in the system any spyware or malware he is said to have committed a white collar crime.
- The news of accounts getting hacked is very common. Hackers often hack account to gain access to personal information of the user and then using that information to do an illegal act.
- It is no big deal for computer experts to introduce in the system any virus that would disrupt its working and cause loss of data to the user.
Counterfeiting is a criminal act defined under section 28 of the Indian Penal Code, 1860, where the imitation of something authentic takes place in order to steal, destroy or replace somebody’s original work. This facilitates gaining profits from illegal transactions and deceiving a person who believes that the representation is made to him is true and the imitated work is of more value.
The crime of using counterfeiting is generally related to coins and currencies and is punishable under section 489B of the Indian Penal Code, 1860. In some cases, it also relates to imitating of products like clothes, bags, shoes, watches, art, toys, etc. Counterfeit products carry fake logos and brand names and in some products, harmful chemicals have also been found leading to the death of the person using it.
The cases of counterfeiting coins have experienced a serious rise in India. On 4th July 2019, three people were caught by the Special Task Force of Kolkata upon finding fake Indian rupees with them whose total face value was rupees 6,50,000. In Rajkot, two people were caught recently with 1,080 counterfeit currency notes having a face value of 21.60 lakh, as per the Times of India report.
Extortion is a crime under section 383 of the Indian Penal Code, 1860. When one party coerces another party for payment of money, or property or services, he is said to have committed the crime of extortion. It is called a white collar crime because an officer may use his official right and make use of his higher position in the company to threaten another person for giving money, or transferring property, or for providing services.
The important elements which constitute the crime of extortion as laid down in the case of People v. Fort  are:
- There should be a communication of demands by one party to another
- In order for the fulfilment of the demands, the other party or his family should be threatened to cause some injury
- There should be an intent to extort money from the other party for some advantage. The other party should be threatened to do or not to do something.
For example, David Letterman, an American television host, was extorted for a sum of $2 million in case of involvement in sexual relationships with female employees. The suspect, Robert Halderman, was later caught and punished.
In another case, a famous actress and model, Cindy Crawford and her husband became a victim of dollar 100,00 extortion case where their daughter’s picture in which she was tied and gagged was to be revealed in the public if the couple did not adhere to the demands of the suspect.
Fake employment placement rackets
There have been many cases where a student or a person looking for a job has been deceived by offenders who claim to provide placement or jobs to them and later on run away with the money they have taken as an advance to provide them with employment. Section 66D of the Information Technology Act, 2000 states the penalties to be imposed on a person for cheating on another person through personation using computer resources.
For example, Ajay Kolla, the CEO of Wisdom Jobs was arrested along with 13 other staffs in January, 2019 on the charge of false recruitment. Wisdom Jobs was an award-winning recruitment firm which was established in the year 2009. Since then, Ajay Kolla had duped around 1.04 people, earning nearly 70 crore rupees out of fake placement promises as reported by the Economic Times.
Forgery, as defined under Section 464 of the Indian Penal Code, 1860, refers to the counterfeiting of checks or securities with the intention of defrauding the other person. It is very common in the accounting section of the company where the clerks or the staffs make false records and run away with company’s money thereby causing loss to that company.
For example, in 2019, Ravi Prakash, CEO of TV9 News Channel, was removed from his post on the charge of forgery. Based on the ABCPL press note, NDTV in its report said that, Ravi Prakash in order to misguide the Registrar of companies, had forged the signature of the secretary of the company. It was also alleged that Ravi Prakash moved by self interest and bad intention, had filed false cases against the new directors. He convinced the third parties to file false cases against the company, thereby, preventing the directors from carrying out their work.
White collar crime in other professions
White collar crime in medical profession
The problem of the relationship between the doctor and the patient had been recognized long back by the penologists. Manu said that the ones indulging in false practices, for example, where a doctor makes false diagnosis report, heavy fine would be levied on him. Removing of immature fetus was considered to be a heinous crime and such person was called to be subject to severe punishment.
There have happened many cases where the medical practitioner have had no license to practice medical profession. The doctor treating the patient had turned out to be a fake doctor who has only deceive the patients by not treating them properly and running away with their money.
Examples of white collar crime in medical profession could be- issuing fake medical certificates, facilitating illegal abortions, selling sample drugs and medicines directly to the patients or to the chemists in India. Sometimes, the professionals in the medical field are seen giving advice to criminals of how to escape the allegations using medical grounds.
In Karnataka, two doctors, K.H. Jnanendrappa and K.M. Channakeshava, were charged with making fake medical certification for Abdul Karim Telgi, who was involved in a multicrore stamp paper racket in order to help him get bail on the ground of health issues . Therefore, under the Prevention of Corruption Act, 1988 they both were held liable with 7 years imprisonment and with a fine of 14 lakh rupees each
White collar crime in legal profession
Legal practitioners often for money or other services by their clients, present false evidence, fake witnesses in the court. Legal practitioners with the ministerial support involves in wrongful practices and violate all their ethical standards for some amount of money. Manipulating evidences and faking witnesses by bringing in professional witnesses, gives the case another turn, because of which many times the real accused is left free and the innocent is sent behind the bars.
It was in 2006 when D.K. Gandhi, a resident of Delhi filed a case against the wrong practices of his lawyer. Gandhi had appointed the lawyer for a certain amount of money. The lawyer was supposed to dispose off the case as early as was possible. The case was settled in the first hearing itself and Gandhi was to receive the compensation amount. However, the lawyer refrained from giving the amount to is client, Mr. Gandhi, unless an extra sum of 5,000 rupees was paid to him.
So in the case of D.K. Gandhi v. M. Mathias  when referring to the what the Supreme Court had said in Jacob Mathew v. State of Punjab , held the appeal and left the matter to be decided by the State Commission based upon the law.
In the case of Jacob Mathews, the Supreme Court had said that: in law of negligence, the professionals from different professions like, legal, medical, or architecture, or any other would be held liable for negligence in practicing their profession if that either of the two given conditions are satisfied: a. He did not have the required skill that was needed to be professed and, b. Even if he has the required skills to be professed, he did not exercise the same.
White collar crime in the engineering profession
Engineers, like mining engineers, are often found to be involved in malpractices like providing substandard works and materials and also not maintaining the records or maintaining bogus records. These types of scandals are often reported on new channels and cause huge losses to the company.
In April 2019, India Today reported that an assistant engineer by the name of S.F. Kakulte was arrested for negligence because of which a bridge had collapsed. Along with Kakulte four other engineers and the chief engineers of Bombay Municipal Corporation were involved in the project. The Structural Auditor, Neeraj Desai, was also arrested for negligence in the report. He claimed that beams, pillars, metal fixtures were audited but the concrete slabs were not mentioned in the inventory given to him for the audit as a result 6 people had died and 35 were seriously injured
White collar crime in education
Many private educational institutions involve themselves in false practices like using fictitious documents to and fake details in order to obtain grants from the government to run their institutions. The teachers and staff are often seen to be working at very low wages than what was the signing amount. These false practices help the institution raise the high sum of illegal money.
It was in 2019 when the New India Express had reported that a senior railway ticket checking staff was arrested by the Central Crime Branch, for leaking out the questions papers of the exams for the post of constables and sub-inspectors in return for money.
It was in 2013 when the Time of India published an article stating that the Gujarat Technological College had been appointing engineers for lecturership were not even qualified with a B. Tech degree. Yogesh Patel, who was a lecturer of Civil Engineering at S.R. Patel Engineering College which is affiliated to Gujarat Technological university, had not even cleared his Bachelor’s degree.
He had failed in some subjects like the applied mechanical and earthquake engineering. And he even went for checking papers and also received a remuneration for his work. An inquiry into how a person who is not eligible for the post of ad hoc, that is temporary, lectureship was appointed for teaching purposes.
India is a country that are faced with various problems on a serious level, like that of starvation, illiteracy and health issues on a large scale. Moreover, India is the second largest populated country in the world, and administration of the mass becomes a problem. Despite having stringent laws, the administration often fails in implementing them, as keeping control such a large number of people becomes difficult. In such circumstances it is very likely for white collar crimes to flourish. The various other causes for the growth of white collar crimes in India are as follows:
- The white collar crimes are committed by people who are financially secure and perform such illegal acts for satisfying their wants. These crimes are generally moved by the greed of the people.
- Poverty is considered as a major cause for underdevelopment in India. Poverty is a cause for financial and physical duress among the major chunk of population. Since people are so much in need of money, they easily get attracted by the false representations made to them. They forget to look into the veracity of the representations being made to them.
- The gravity of white collar crimes are more intense than other traditional crimes. White collar crimes causes one great loss at all levels, i.e. financial, emotional, etc. Corporate mishaps, like false pharmaceutical tests, costs more lives than the crime of murder.
- With the advancement in technology, faster growth rate of industries and business, and political pressure have introduced the offenders to newer, easier and swifter methods of committing such crimes.
- With the introduction of the people to the internet and digital world, where big transactions takes place within seconds and where reaching out people from all over the world is a matter of few minutes, criminals have got an incentive to commit more crimes and hide anywhere in the world.
- Our law enforcement agency also become reluctant to deal with such crimes as these cases are very complicated and tracing a suspect is a difficult job. The investigation in case of white collar crimes is much more consuming than that in traditional crimes.
- Even when the offender of the white collar crime has been caught, the judiciary fails to punish them. The major reasons behind the failure to hold these criminals accountable for their wrongful acts are:
- The legislators and the ones implementing the laws belongs to the same group or class to which the offender belongs and therefore land up assisting these criminals instead of taking actions against them.
- The investigating officers put in less effort in doing their job as they are not able to connect the small evidences that they get. And despite efforts they don’t get major evidences in such cases as everything is done online and tracing things or person becomes difficult.
- We don’t have laws on such types of crime and therefore offenders are left free. In many cases due to loopholes in law, it becomes favourable to the offenders.
- The existing laws do not provide stringent punishment that would prevent people from being involved in such types of crimes. The suspects do not have any incentive to not participate in these types of crime.
It is disappointing to know that despite white collar crimes being prevalent in the society and many people getting under its grip, no measures are being taken to prevent the commission of such crimes. The reason behind this is that white collar crimes are committed by influential people who enjoy higher social status.
The emergence of white collar crime in India
white collar crime in the ancient time
It is said that crimes have been taking place since the time human beings started living together. There are various crimes which have swept away with times and there are some which have found different dimensions to them with the society becoming modern. The ancient Vedic text says that the concept of white collar crime has existed in society from the very beginning.
The crime of bribery
- The concept of bribery is not a new concept in Indian society. References to these crimes can be found in the various sacred book.
- Narada had once said that if a man gives something out of fear, anger, lust, grief, in jest or by mistake or through a fraudulent act by a minor, or in an intoxicated state would be considered as a bribe.
- Yagnavalkya once had proposed that the king, the supreme authority, should kill the dishonest officer and reward the honest ones. He further adds that those people who will try to extort a person, their property would be confiscated and then transported.
- Kautilya in his Arthashastra has claimed that the functions of the ones in power will be monitored and in case of any negligence, they would be charged.
The health of the people has always been a matter of concern for the people. In the ancient time also, to prevent an epidemic from breaking out, selling of dog’s meat was made punishable. Yajnavalkya, Vijnaneswara and Kautilya proposed the different kinds of punishment one could be subject to if they get involved in the sale and purchase of dog’s meat.
It was Ashoka who established hospitals for human beings and animals taking into consideration the health of the mass. In his edicts, Ashoka, warns people to not use meat as a food material and abstain from killing birds for food.
Using of false weights in stores
To keep the economy on the right track it is essential to refrain from wrongful market tactics. In ancient times, the shopkeeper often used false weights and measures to make profits. Kautilya said that in order to avoid such wrongful market practices by the shopkeeper there should be a supervising officer who would look into the transactions happening in the market. Kautilya along with Yajnavalkya had suggested the imposition of a fine in case one is caught practising wrongful tactics in the market.
Section 8(3) of the Legal Metrology Act, 2009 defines such offences which involve the use of false measures or weights other than the standard measure or weights required. Section 25 of the Legal Metrology Act, 2009 penalises the offenders with fine with may extend up to 25,000 rupees and for subsequent offences, the punishment shall imprisonment which may extend to a period of 6 months or with fine or both.
The Indian economy was the first economy where coins were used as a medium of exchange. In ancient times it was the guild who was in charge in monetary matters. Coins were minted in silver, gold and copper which were manufactured under the control of the State authority. Kautilya introduced a rule which said that the one who counterfeits the coins would be penalised. He used the word ‘Nanaka’ for counterfeit coins and the ones who manufactured it was called ‘Kutarupa Kara’.
Growth in the modern era
In India rapid industrialization after the First World War (1914 to 1919) led to a class divide. There existed two classes of people, the capitalist, the class owing the major means of production, or say the bourgeois institution and the proletariats or the working class. The extreme business condition with the fast growing economy led to the social exclusion of the proletariat class.
The high level of competitiveness and greed for enjoying monopoly led to the growth of criminalist behaviour. The seed of white collar crimes was planted by this time. Where the nation was busy in the freedom movement, and fighting war, these criminal acts grew up posing a threat to the growth of the Indian economy.
Courts and white collar crime in India
The white collar crimes have not been defined anywhere in the law, but there exists various legislations which imply the existence of such crimes. In the recent years with the emergence of new technologies and advancement in different sectors, like the industrial sector, business sector, etc., these crimes have experienced a rapid growth.
We are well aware of the fact that more than 3 crore cases are pending before the Indian judiciary. In this case, it would be very difficult to dispose of the cases of white collar crimes as early as possible.
In order for faster disposal of the cases of white collar crimes, it is important that fast track courts and tribunals are set up in the country. Also, once the case would be decided as final by the tribunal or the fast track court, then, that decision would be binding on the parties. The parties would not be allowed to raise the same issues, in the same case again before another court.
White collar crime investigation
White collar crime investigation process
There has been a recent growth in the investigation process of white collar crimes in India. With the increase in the number of anti-corruption marches, the companies are experiencing an increase in a time-to-time investigation. These internal investigations acts as a watchdog against any unwanted activity. This further prevents the company from embarrassing raids. In India, there is no strict procedure which needs to be followed while conducting these internal investigation relating to the white collar crimes.
With the breakout of the #MeToo movement, companies have got an incentive to fasten their investigations in sexual harassment cases.
- When the CEO of ICICI Bank, Chanda Kochhar was facing charges of fraud, the bank resorted to internal investigation by Reserve Bank of India, Securities and Exchange Board of India and Central Bureau of investigation. To look into the matter an independent committee was set up which was headed by retired supreme court judge, Justice B.N. Srikrishna.
- When Binny Bansal, Co-founder and group chief executive of Flipkart, was alleged for serious misconduct, the bank decided for an independent investigation which would be carried out on behalf of Flipkart and Walmart.
White collar crime investigation techniques
There are a few basic techniques for the investigation of white collar crimes, and they are:
- There should be an informant in the team who would give the first hand information about a white collar crime taking place or had taken place in a company and keeps the investigating officers updated with all that was, is or will be going on in the company. Unless and until somebody informs the police about the crime, no investigation can take place. Therefore, the role of informants become important.
- Involvement of undercover agents. The presence of undercover agents are important as they help in tracing those evidence which are not prima facie evidence. They also help in giving information regarding people who go underground and then commit serious offences. Since tracking such people is not possible by the police officers, they appoint undercover agents who without any hint to the accused gets all the details about him.
- Introducing the examination of the physical evidence in the laboratory is very crucial for deciding a case. The medical evidences play a key role in giving a direction to a case. If not manipulated, then the medical tests are very efficient in determining who the accused would be in cases of serious offences, like rape.
- Police officers are often seen conducting physical surveillance through dogs and electronic surveillance through CCTVs, or tracking call records, etc. These surveillance helps in tracking down even the smallest of evidence against the suspect.
- Interrogation is that tool in the hands of the police which helps in taking out those information from the suspects which they would not have otherwise given.
- Wiretapping where the law permits to do it helps in proving the guilt by way of producing call record in the court. In some cases, call records are sufficient evidence to hold a person guilty of an offence.
Legislation against white collar crime in India
There are several provision that exists for identifying white collar crime. Government in order to ensure that the criminal committing white collar crime be punished has brought in the following legislations-
- The Companies Act, 1960
- The Income Tax Act, 1961
- Indian Penal Code, 1860
- The Commodities Act, 1955
- The Prevention of Corruption Act, 1988
- The Negotiable Instrument Act, 1881
- The Prevention of Money laundering Act, 2002
- The Information Technology Act, 2005
- The Imports and Exports (control) Act, 1950
- The Special Court (Trial of offences relation to Transactions in Securities) Act, 1992
- The Central Vigilance Commission Act, 2003
Penalties for white collar crimes
Sentencing in white collar crime in India
Punishment for fraud
Section 447 of the Companies Act, 2013 provides punishment against the commission of fraud. It states that in case a person is found guilty of an offence of fraud he would be imprisoned for a period not less than 6 months and which extend to 10 years. And he will also be subject to fine which should not in any case be less than the amount involved in fraud and which may extend to 3 times the amount involved in the fraud. In case the fraud has been committed against the interest of the general public than the term of imprisonment would not be less than 3 years.
Punishment for false statement
Section 448 of the Companies Act, 2013 states that: if a person deliberately makes a false statement, knowing it to be false or deliberately omits any material fact, knowing it to be material than he would be held liable for his wrongful act. This false statement can be made either through return, report, certificate, financial statement, prospectus, statement or any other documents required for the purpose mentioned under this Act or any rules made under it.
Punishment for furnishing false evidence
Section 449 of the Companies Act, 2013 provides for punishment for furnishing false evidence. It states that if any person gives a false evidence in a court of law:
- Either upon an examination on oath or solemn affirmation; or
- When any company is about to dissolve or otherwise also in case of any matter arising under this Act, in any affidavit, deposition or solemn affirmation,
- He shall be punished with imprisonment and fine both. The imprisonment will not be less than 3 years and may extend to 7 years and fine may extend to 10 lakh rupees.
Punishment when no specific punishment or penalty has been provided
Section 450 of the Companies Act, 2013 states that in case a punishment or penalty for a crime, which has been committed either by an officer of a company or by any other person who contravenes any of the provisions of this act, then under this section he would be penalized with a fine which may extend to 10 lakh rupees. In case the contravention continues the person would be asked to pay a fine which may extend to 1,000 rupees everyday till the intervention continues.
Punishment when the default has been repeated
Section 451 of the Companies Act, 2013 lays down that, when a company or any officer of that company commits an offence for which he has already been penalized and has also faced imprisonment, in case commits the same offence again within a period of 3 years, than that company and every one of those officers involved in the commission of the offence for the second time shall be punished with twice the amount of fine, in addition to the term of imprisonment provided in the act for that offence. But, in case the offence was committed after a period of 3 years of commission of the offence for the first time then this rule would not be applicable.
Appointment of adjudicating officers
Section 454 of the Companies Act, 2013 says that the Central Government, by an order stated in the official gazette, has the power to appoint an adjudicating officer who will have the right to adjudicate penalty under the provisions of this act. The Central Government will also decide the jurisdiction for the officers.
The adjudicating officer can impose a penalty on the company or its officers on the grounds of noncompliance with the given provision under the Act. In case an officer who has been penalised by the adjudicating officer is dissatisfied with his action, he could file an appeal to the regional director would be having jurisdiction in that matter.
Implications of white collar crime in India
The rate at which white collar crimes are increasing has become a matter of concern globally. It has been found that the detriment that white collar crimes cause to society is much more than other forms of crime. Moreover, India is a developing nation and so an unprecedented increase in white collar crime hampers its image along with being a hazard in the growth of its economy.
Moreover, white collar crimes cause emotional traumas, not only to the victims of the crime but to the society at large. Where the victim is not able to bear the expenses of white collar crime that he had evidence, the society starts losing faith in the authorities. If the authorities at higher positions, who have enormous powers, start using it in a wrongful way, then who else will the citizens trust.
Also, as these crimes are flourishing all over the country, people don’t find themselves secure anywhere, neither in the physical world nor in the virtual world. Where people were introduced to the digital world to avoid tiring jobs like standing in the queue to deposit or withdraw money from the bank and reduce other sorts of physical labour, it has not become the biggest platform for the commission of white collar crimes. Nowhere does the people find themselves safe.
Above all, despite several movements against the white collar crimes and instituting several rules and regulations via enchantments, the government has not been able to do much for the victims of the white collar crime. The complicated nature of the method of committing such crimes makes it difficult for the authority to find evidence. That is why many criminals move freely and this has become the main reason for the crime to flourish. The criminals don’t find any incentive to commit such crimes which helps them make easy money.
Also one of the major reasons for such crimes to flourish is that media coverage of very few cases takes place in case of white collar crime. Often the media person and the offenders fall under the same group or class and stars favouring them instead of showing their reality to the people.
Moreover, people sitting at a higher position, who commits such crimes, buy the media persons or threaten them to close their channel, in order to stop the media coverage of their wrongful or illegal acts which they commit or have committed during the course of their occupation.
Recent white collar crime cases in India
Before the High Court of Allahabad, the learned counsel on behalf of SEBI claimed that the company is being wrongly accused as the company was not in a position to pay its debts, including payments to its investors. When the advertisement by the company was put to question, the council said that the advertisement was given in 2003 while the order was passed in 2004, when the company was not in a position to payback its debts.
Moreover, the sum of money which the investors were claiming was nowhere cited. The main claim of the counsel made the legislatures raise the punishment from 1 year to 10 years and also increased the fine which may now extend to 25 crores by amending the laws under section 24(1) of the SEBI Act. At last, Ravi Arora, the accused, was held liable.
There were two appellants in the present case against whom a charge sheet was filed for committing an offence under Section 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988 read with Section 109 of the Indian Penal Code, 1860 in separate trials. It was alleged that both the accused had accumulated disproportionate wealth as per their income when they were they members of the Legislative Assembly.
When the Central Bureau of Investigation (CBI) initiated its investigation it was found that the father of the appellant had acquired huge properties and same as the case with the appellants. The High Court held that the appellant had provided a totally different office(s) of the accused than they were actually holding at that time. Thus the sanction under Section 19 of the Prevention of Corruption Act, 1988 was held to be without any merit.
This case was filed against several ministers of the State of Jharkhand along with the Chief Minister for having the possession of unaccountable money. The High Court had requested the Central Government to transfer the case from Enforcement Directorate to CBI by way of power given to it under Section 45 (1A).
It was alleged that the ministers were in possession of hefty amounts of money and though no evidence was found to charge them with money laundering case, a strict investigation was proposed.
The ministers were said to be the owners of property not only in India but abroad as well. Therefore, the court asked for an investigation to determine this wealth was acquired by making use of the official position. It was to be clarified if a white crime has been committed under the Prevention of Corruption Act, 1988 and under the Indian Penal Code, 1860.
The CBI started its investigation under Prevention of Corruption Act, 1988 and the Indian Penal Code, 1860 as the power to carry on investigation under Prevention of Money Laundering Act was only with the Enforcement Directorate, which is of course subjected to the power given to the Central Government under Section 45 (1-A) of the Prevention of Money-laundering act.
The measures that can be adopted to prevent the commission of white collar crimes are:
- The top investigating agencies of the country like the Central Bureau of Investigation, the Enforcement Directorate, the Income-tax Department, The Directorate of Revenue Intelligence and the Customs Department, needs strengthening, by way of implementing strong regulating policies. The Central Vigilance Commission should monitor the working of the officials sitting at top positions and also cross-check their works, so as to ensure transparency in the system.
- As the method of commission of such white collar crimes is advancing, so should the training of the investigating officials. It often happens that ageing officers are well experienced to understand the nature and techniques, but are not able to utilise the technology for tracking the suspect. This happens due to lack of training. So, every investigating officer must be trained in such a manner that, no matter how complicated the case is, they would be able to easily resolve it.
- To uproot the existence of such crimes, it is very important to include strict laws into the system. Less amount of fine and shorter period of imprisonment makes it very casual for the offenders to commit such crimes.
- Fast track courts and tribunals should be set in all the parts of the country for the early disposal of these cases. The tribunal should be provided with the power to fine or imprison someone who has been held guilty. Such measures would lower the rates of occurrence of white collar crimes.
- The electronic and print media should be utilized in the right way to spread awareness about white collar crimes. The general people need to be aware of such crimes and that they are taking place everywhere, from a small cafe to big multinational companies. Also, they need to be aware of the remedies they could seek in case they become victim to such crimes.
- Stringent laws and hefty fine and long term imprisonment should be given to the offenders for committing such crimes. And for this to happen, the Indian Penal Code, 1860 should be amended and include provisions for the white collar crimes. For example, the IPC could have a separate chapter dealing with white collar crimes.
- The government may establish a separate body which would look into the matter of crimes and criminality prevailing in the country. The independent body could be named as the National Crime Commission. Since their entire work would be related only to the crimes and would be an independent body, it could work more efficiently towards reducing criminality in the country.
white collar crimes have two surprising features, first, that they are non-violent crimes, though the criminals have the tendency to gain control or have a sense of entitlement, and, second, that they are committed by people in the higher profession.
However, these crimes are also committed by poorly paid underlings, although the mastermind behind the commission of such crime could be a rich person enjoying a higher social status in his occupation. white collar crimes are often committed because of peer pressure or are dependent on the culture of the company.
As our society is growing towards modernity and the world is experiencing new technological advancement, the rate of crime is also increasing at a faster rate. Particularly the growth in white collar crimes has been enormous. From the medical profession to educational institutions, these crimes are being committed everywhere.
The cases of online fraud are also increasing at an alarming rate. India, as a developing nation, has faced difficulties in leading its economy towards growth because of these crimes in general and corruption in particular.
The investigating officials are in need of training where they could acquire the skill to trace these criminals, otherwise tracking of whom is difficult, complicated and tiresome job. The investigating officials’s work should be scrutinized to ensure transparency in the work as the white collar crimes are committed by people enjoying higher social status in their occupation.
The government must make laws that are strict enough to reduce the commission of such crimes. And the system should be such that not only there exist laws giving strict punishment to the accused but also dispose off maximum cases in a short while. If not done so then people will soon lose complete faith in the system, as these crimes are committed by people who should act as a role model for the society.
The media has a key role to play in reducing the rate of increasing white collar crimes. It has been noted that most of the white collar crimes go unreported. So, if the media becomes more active towards publishing frauds and scams at higher levels and revealing how do the people at higher position in a company use their powers arbitrarily, and also make efforts in making people aware about the white collar crimes, and avoid corrupt practices, then this would definitely help in reducing the rate at which the white collar crimes are being committed.
- Para 4; A.I.R. 1987 SC 1321
- 1964 A.I.R. 295 SCR (4) 224
- Anosh Ekka v. Central Bureau of Investigation
- Arun Kumar Mishra v. Directorate of Enforcement
- People v. Fort , 138 Mich. App. 322 (Mich. Ct. App. 1984)
- SEBI v. Burman Plantation and Others, (2013)
- Abhay Singh Chautala v. C.B.I., (2011)
- Binod Kumar v. State of Jharkhand and Others, (2011)
- D.K. Gandhi v. M. Mathias, 6th August, 2007
- Jacob Mathew v. State of Punjab, (2005) 6 SCC 1 (para 18)
- Galaxy Nirmaan Pvt. Ltd. v. Acit, new Delhi, 19th May, 2017
- Emperor v. Kanayalal Mohanlal Gujar, (1939) 41 BOMLR 977