White- collar Crime: A rapidly increasing crime in India

White-collar crime is not new to India. The scale is.

–R.V. Raman

Introduction:

For the first time in 1939, Edwin Hardin Sutherland, the most famous criminologist of the twentieth century and also a sociologist, characterized white collar crimes as “crimes committed by people who enjoy high social standing, considerable renown, and legitimacy in their employment.” With the globe moving at such a fast speed and the rate of technological and commercial development, it’s reasonable to argue that India is unable to cope with the unprecedented levels of growth that are leading to white-collar crimes like cybercrime. This also implies that criminal activity can take place beyond national borders. Because it is easier to commit these crimes, fraudsters have become greedier, which has resulted in a lower average age of these fraudsters, and because it is easier for them to access and optimize technology, the number of white-collar crimes is increasing, indicating that our country’s future is turning to the dark side.

White-collar crimes:

White-collar crimes are nonviolent crimes done primarily by businesses and government officials and are associated with the corporate sector. White-collar crimes are defined as crimes executed by those who hold positions of authority in a company. White-collar crimes can be committed in a variety of methods, ranging from small amounts to large sums. The following are examples of white-collar crimes:

• Bank fraud refers to actions taken or not taken in order to defraud a financial institution.

• Bribery—Acts committed with the goal of exerting undue influence over a party in a position of power or to hasten and hide specific acts with the intent of defrauding others.

• Black marketing—Acts involving the sale of unlawful goods or the sale of legal goods in an illegal manner in order to make money.

• Corporate fraud refers to actions taken by corporations that involve accounting schemes designed to deceive investors, auditors, and analysts about a corporation’s or business entity’s genuine financial state.

• Insider trading is defined as trading in a public company’s stock by someone who, for any reason, has non-public material information about that stock.

• Money laundering entails disguising huge sums of money obtained through illicit conduct, such as terrorist funding or drug trafficking, as coming from a legitimate source.

• Mortgage fraud refers to intentional misrepresentation and deception in lending practises that target specific borrowers.

• Pump and dump scheme- The deceptive technique of urging investors to buy stock in a firm in order to artificially boost the price, then selling their own stock while the price is still high.

• Wire fraud is a type of fraud in which a person devises a strategy to defraud or get money through false representations or promises. This criminal crime is carried out through the use digital electronic communications.

According to a report published by the Business Standard on November 22, 2016, titled “The changing dynamics of white collar crime in India,” the Central Bureau of Investigation (CBI) has found a total of 6,533 cases of corporate fraud in the last ten years. According to statistics, 4,000 crores worth of commerce was done with fraudulent or duplicate PAN cards. With 999 cases registered, Maharashtra saw a dramatic increase in the number of online cases.

Laws regulating White Collar Crimes:

Several laws have been passed in India in this regard. The Essential Commodities Act of 1955, the Industrial (Development and Regulation) Act of 1951, the Import and Exports (Control) Act of 1947, the Foreign Exchange (Regulation) Act of 1973, the Companies Act of 2013, the Prevention of Money Laundering Act of 2002, the Indian Penal Code of 1860, and the Information and Technology Act of 2000 are a few examples. Not only the government, but also the Reserve Bank of India, has been working hard to eliminate white-collar crimes (banking and insurance scams) from society. The RBI’s KYC (Know Your Customer) initiative has been a game-changer in terms of preventing white-collar crime. The Securities Exchange Board of India has also been instrumental in reducing such violations. It has enacted strong rules and regulations in the area of white-collar crime, as well as imposing severe and harsh punishments on those who violate them. The Securities Contract and Regulation Act (SCRA) has also made significant contributions to making markets safer and preserving investors’ rights.

Case laws:

  1. Harshad Mehta Securities[i]:

The story of India’s white-collar crime began in 1988 and has been steadily increasing since then. The case of Harshad Mehta is an excellent example of the “pump-and-dump” plan in white-collar crime. He was known as the ‘Sultan of Dalal Street,’ and he made money by manipulating and misappropriating the stock prices of several companies. As a result, money was pumped into the stock markets in an unnatural manner, creating a sharp and rapid spike in the price of these stocks or securities. When the hoax was discovered, the stock market dropped by 0.1 million per day, the largest drop the stock market has ever seen. The Securities and Exchange Board of India (SEBI) has issued guidelines to govern such behaviour.

  • Punjab National Bank Fraud or the Nirav Modi Case:

Nirav Modi, the accused, is a diamantaire and an elite jewelry designer. It was alleged that Nirav Modi and corporate entities linked to him colluded with officials to obtain Guarantees or Letters of Undertaking (LOUs) to help fund buyer’s credit from other overseas or international banks/financial institutions. Following the necessary investigation into the case, it was discovered that two bank officials had fraudulently issued LOUS to the aforementioned firms without following the proper procedure. These Lou’s were then transferred across the SWIFT messaging system, relying on which the credit was offered to the aforementioned firms. PNB had already reported the fraud to the stock exchange and had gone through a $1.8 billion fraud, one of the largest of its kind to be discovered in the Indian banking sector to date.

Remedial measures:

In India, where widespread hunger and illiteracy are major issues, the administration of criminal justice is a major concern. However, several actions should be taken to combat white-collar crime:

  • Using the media, the press, or other audio-visual aids to raise public awareness about white-collar crime.
  • Establishment of special tribunals with the authority to convict white-collar criminals.
  • For these offences, harsh penalties should be imposed.
  • White-collar crime should be given its own chapter in the Indian Penal Code.
  • The severity of the harm inflicted to society by white-collar crimes should be considered while determining the appropriate punishment.

Conclusion:

White-collar crimes are unique in two ways: first, they are nonviolent crimes, notwithstanding the culprits’ desire for power or a sense of entitlement, and second, they are committed by those in positions of higher authority. As our civilization progresses toward modernity and the world gains new technical advancements, the rate of crime rises at a faster pace. The increase in white-collar crime, in particular, has been significant. These crimes are done everywhere, from the medical profession to educational institutions. White collar crime, along with poverty, health, and other problems, is becoming a major contributor to India’s underdevelopment. In India, white-collar crime is on the rise, posing a threat to the country’s economic growth. These offences demand immediate government intervention, not only in the shape of harsh legislation, but also in ensuring that they are properly implemented.

References:

1. Snehal Asthana, White Collar Crime: A Crime under Invisibility Cloak, Niti manthan,  https://nitimanthan.in/blog-posts/blog-niti-manthan/2020/07/28/white-collar-crime-crime-under-invisibility-cloak/

2. Aayushi Swaroop, White-collar crimes in India, Blog iPleaders, https://blog.ipleaders.in/white-collar-crimes/

3. White Collar Crimes – A detailed analysis, B&B legal blogs,  https://bnblegal.com/article/white-collar-crimes-a-detailed-analysis/


[i] Harshad S. Mehta vs Central Bureau of Investigation, 1992 (24) DRJ 392, ILR 1993 Delhi 274.

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