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White Collar Crimes: A Brief Study


White collar crime is common in almost all professions and occupations in our society. The problem is quite acute, both in terms of the variety and extent of white collar crime. The Santhanam Commission in its final report gave an evocative picture of the economic crimes committed by respectable people such as businessmen, industrialists, contractors and suppliers as well as government officials perpetrated by corruption.

White-collar crimes are common in Indian trade and profiteering in black marketing. Violation of foreign exchange regulations (FERA) and import and export laws are often used to generate huge profits. In addition, the adulteration of food products, consumable drugs causing irreparable damage to public health is another common white-collar crime in India. The complexity of tax laws in India has allowed and built sufficient scope for taxpayers to evade taxes. Avoiding paying tax refers to the failure to pay the amount of tax due and to be paid, tax evasion means organizing the distribution of one's income in a way that is not legally responsible and fiscally legal. In the medical profession, the most common white-collar crimes are: illegal abortions, forging medical certificates and many cases of unnecessarily prolonged treatment. In common legal and professional offenses lawyers perform advising on organized crime, helping with false statements, hiring professional witnesses, fabricating fake evidence, and more. In the engineering profession, the tactful treatment of contractors and suppliers, the handling of substandard work and materials, and the maintenance of false records are examples of white-collar crime.

White Collar Crime: The Concept and Definition

Sutherland defines white-collar crime as "a crime committed by a class of high-status and respectable person in the course of his or her career.

The Dutch Marxist, Willem Bonger, in his work Criminality and Economic Conditions (1916), was the first to develop a theory of crime which incorporated both "crime in the streets" and "crime in the suites". Bonger argument is that capitalism has "developed selfishness at the expense of altruism." Bonger believes that the harsh conditions suffered by the working class under capitalism will lead to criminal attitudes. Bonger view’s that poverty leads to crime. Edwin Sutherland in his speech delivered at the American Sociological Association in 1939 stated that "White Collar Criminals" contemptuously attributed traditional crime theories to poverty, broken families, and restless personalities. He pointed out that many criminals in the business world are far from being poor or faced poverty and some of are even from happy and strong mentality family.

Nature of White-Collar Crime

White-Collar Crimes are entirely different from ordinary or conventional types of crimes in several aspects:

(1) White-collar offenders are unlikely to be teenagers, and they are also unlikely to be women or poor, because they generally do not fulfill the professional roles required for white-collar crimes.

(2) Greed can be the main possible factor in white collar crime. Aristotle's philosophy explains the nature of white-collar crime that, "the greatest crime of is caused by excess rather than necessity."

(3) Due to the excessive power of the offender, a small number of unrepresentative crimes were discovered and were officially recorded.

(4) Victims of white-collar crime rarely realize they have been victimized. Sutherland stated that the community's attitude towards white-collar offenders is tolerant.

(5) White-collar offenders have the ability to create the impression of confusing responsibility and illegal behaviour. Scapegoats are easy to find, and the actual beneficiaries of crimes are rarely caught.

(6) The tentacles of white-collar crime are often scattered among the bosses in the power circle.

(7) The investigation and enquiry of white-collar crime requires well-trained professionals, and these professionals can never be used, resulting in ineffective investigation and prosecution.

(8) White-collar crime scandals often produce substantial prevention.

(9) White collar crimes are both a civil and a criminal offense. They need to solve on both sides. The civil nature of the crime is handled by the regulatory agency in the corresponding area, while the criminal part is handled by the police and other law enforcement agencies.

(10) There are deep class prejudices in the routine enforcement of the law against white collar offenders. Most white collar criminals remain unpunished.

Types of White Collar Crime:

The White Collar Crimes can be easily understood under following heads:

Bank fraud: It is considered to be a criminal act with the intention of deceiving and obtaining illegitimate profits. Bank fraud is fraud against banks. It is implemented by fraudulent companies making false statements. It is also related to the handling of negotiable instruments such as checks, securities and bank deposits. Bank fraud is a concern of the general public because of the trust relationship between banks and the public. This is the most common type of white-collar crime, and it is also called a corporate crime. It incapacitates the public and the national government.

Bribery: Bribery is also a very common white-collar crime. Bribery refers to offering money or goods to people of high status in exchange for favours. In short, bribery is when one person offers money to another person who is powerful. The purpose of this is to urge you to do something or to prevent you from doing something. It is the most common income of the majority of public officials in our country.

Cybercrime: Cybercrime is the main cause of such crimes in India. This is the latest common problem in the online world. Cybercrime is a crime related to computer networks. With the rapid increase in technological progress, technology-related crimes are also increasing rapidly. Cybercrime involves experts specially in computer field and cause direct or indirect damage to the reputation of the victim or physical or mental damage through the Internet or other technical sources. Cybercrime threatens the security and financial situation of the country and their people. Cybercrime has brought huge economic losses to the country. It has not only caused financial loss, but also threatens a person's privacy. Disclosure of confidential information can cause privacy problems. Furthermore, cybercrimes against women are on the rise. Through the use of telecommunications networks, there are more and more cases of mobile phone network tracing involving sending obscene information and images to women.

Money laundering: Money laundering is a crime in which criminals impersonate the identity of money. In this case, the criminals tried to conceal the original attribution of the money and the place where the money was illegally obtained. The purpose of money laundering is to make the money come from a legal source. Simply, money laundering is the display of illegal funds as legitimate funds. For example, if someone gets money from black market and illegal trade in goods, then the money will be considered dirty and you cannot deposit it in the bank, because if you deposit the money directly in a financial institution than it may be seems suspicious because the reports and records have to be created and explain the source of money. Money laundering includes three steps:

  1. First, the owner of the money obtains the money through some illegal means and deposits it in the bank in some way.

  2. Then, remit money through multiple transactions.

  3. Finally, they returned the money to the bank to legalize it.

Tax evasion: The purpose of tax evasion is to conceal the actual taxable income and original situation from the authorities. This concealment of income is to reduce the tax liability in the eyes of the government. Simply, it is to hide the illegally obtained money in order to reduce the tax liability and show low income to tax authorities. Tax evasion has a negative impact on social values ​​because it depresses honest taxpayers. They may also want to evade tax and give economic power to a few people who are not worthy.

Identity theft: Identity theft is one of the simplest types of crime today. Due to advances in technology, it is very easy to access anyone's personal information. Identity theft is a crime in which criminals gain unauthorized access to information such as names, addresses, and phone numbers and use this information to make money. In simple terms, identity theft is the use of someone else’s identity to commit fraud or to make money through illegal means.

White-Collar Crime in India

With the advancement of commerce and technology, white collar crime has become a global phenomenon. Like any other country, India is also a victim of white collar crime. The reason for the sharp increase in white collar crime in recent decades is the rapid economic and industrial growth of this developing country.

One of the biggest damages caused in recent times is the mysterious disappearance of the company, out of the 5,651 companies listed on the Bombay Stock Exchange, 2,750 have been disappeared. This means that one out of two companies enters in the stock market to raise millions of rupees from investors and after robbing them, they escape. Even "Home Trade" came up with big publicity stunts, but they escaped after raising the fund. Approximately near about 11 million investors invested Rs. 10,000 Crore for these 2,750 companies. We have the Securities and Exchange Commission of India, the Reserve Bank of India and the Department of Commercial Affairs to monitor the stock exchange transactions, but no one has recorded the whereabouts of these 2750 strange companies whose trading has been suspended. White-collar crime in Indian companies has “increased significantly” in the past two years, partly because the economic recession has put pressure on employees to reach targets, according to the Indian Fraud Investigation.

The nature of violations is diverse, with bribery and corruption accounting for 83% of cases. A large part of fraud is also related to cybercrime (71%) and asset transfer (65%). According to the survey, the industries most affected are financial services (33%) and information and entertainment (17%).

The changing dynamic of white collar crime in India:

For the first time, the Santhanam Committee’s report attached great importance to the emergence of crimes and malfeasance known as “white-collar crime”. The Santhanam Committee’s report recognizes the emergency of controlling the mass society with a small number of elites has contributed to the development of monopoly and the deviation of moral behaviour, which has led to the growth of economic crime and white-collar crime. The report expressed concern about such crimes, saying that such crimes are more dangerous, not because financially risk is high, but also it causes irreparable damage to public morals. The conscience of ordinary people for these crimes is unfathomable. The public's resentment towards these crimes is rather confused, because the illegal acts in the case can only be understood by experts.

Another fact worthy attention is that white-collar crime being characterised as a wealthy and greedy society, does not exist in India at such extinct as compared to England and the United States, but it is not completely absent also. With the progress of mankind, all aspects of society have been improved and developed. Even a person's unfathomable greed since ancient times is also an animal, he is eager to gain more power and wealth through all meticulous and unbridled methods. This is a crime-filled era where a CEO sits in his air-conditioned room and breaks the trustworthy relationship between his company and his customers by embezzling certain information or embezzling public funds. This man is very different from our traditional blue collar criminals as he is an intellectual and a godsend, despite this he dared to do actions that can have consequences. The economy was commissioned by its shareholders to commit suicide.

As per the new report, between 2004 and 2016, the Serious Fraud Investigation Office was asked to investigate 469 cases, of which only 184 companies were investigated in 2015-2016. The Changing effects of white collar crimes in India shows that in the past 10 years, the Central Bureau of Investigation (CBI) has piled up a large number of cases corruption cases in which out of 517 cases were came up in last two years. In addition, it is estimated that Rs 4,000 crore transactions were conducted on BSE using counterfeit or copied PAN cards. Online fraud is on the rise with Maharashtra has reported 999 cases. India's share in black money, hidden in the global tax is estimated to be $ 181 billion, and the situation is grim.

For its part, the government has initiated a series of initiatives to combat fraud, bribery, corruption and other white-collar crimes. Recent data shows that some forms of crime have been reduced. In 2015, India ranked 76th on Transparency International's Corruption Perceptions Index (CPI). This rise in ranking reflects the decrease in the number of reported corruption received by chief vigilance commissioners, from 64,000 in 2014 to 29,838 in 2015. But despite the improvement, India ranks low in the CPI.

Perception of the level of corruption in India also seems to have improved in 2016. 58% of the survey respondents believe that bribery and corruption are continuing with challenges in India, which is lower than the 70 in 2012. The global average in 2016 was 39%.

Famous Cases Related to White-Collar Crimes

Some of the famous and leading cases of White-Collar Crime are:

Mundhra scam: This was first scam in India after Independence. Haridas Mundhra, an industrialist and stock speculator, sold fictitious shares to a life insurance company (LIC) and committed a fraud of Rs 125 Crores to LIC. Mr. Jawahar Lal Nehru (the Prime Minister at the time) established a personal committee headed by Judge Chagla to investigate. Justice Chagla ended the matter and Haridas was found guilty and was sentenced to 22 years of imprisonment, the Finance Minister of that time T.T. Krishnamachari had to immediately resign from his post.

Harshad Mehta scam: shocked the entire Indian economy. He used loopholes in the system to mislead many investors.

Details of the scandal:

Harshad Mehta obtains a false bank receipt from a small bank. The aforementioned bank receipt is forwarded to other banks as collateral for cash. The money was used to drive up stock prices in stock market. Stock market manipulation bubbled and fake bank receipts busted. Severely impacted the stock market including the economy and national progress. The banking system was defrauded up to Rs.5000 Crores and the chairman of the bank committed suicide due to scam.

This scam can be classified as one of the largest white-collar crimes, because the case mainly involved manipulation of accounts and providing misleading information.

2G Spectrum Scam Cases: 2G scam or fraud was basically a telecommunications and political scandals. Many politicians and governments were involved in this scandal. This scam is about the distribution of unified access services licenses. Former Telecommunications Minister A Raja circumvented all levels of regulation and implemented a suspicious 2G scam in 2008.

The Supreme Court of India ruled on a public interest litigation (PIL) related to the allocation of 2G spectrum and the court declared that the assignment was "unconstitutional and arbitrary" and cancelled 122 license issued by A. Raja the Minister of Communications and Information Technology from 2007 to 2009 (as per stated by primary officials).

Sahara vs. SEBI: This case is a case of misleading information and terms published in the company's prospectus.

  • The question that arises here is whether private equity shares can be treated as an offer.

  • In these cases, Sahara India Real Estate Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL) introduced Option of fully convertible debentures (OFCD) to more than 1 million investors and named the bonds issued by them as private equity, And argued that the company does not intend to list its OFCD because the securities issued are hybrid securities.

  • During this period, the company's total collections exceeded Rs. 176.56 billion rupees. The funds were raised from 30 million investors.

  • On August 31st 2012, the Supreme Court ordered the Sahara Group and its two group companies, SIRECL and SHICL, to reimburse approximately Rs 17.4 billion to the investors of their company in 3 months.

  • The Supreme Court also ruled that SEBI has numerous powers to invest in listed and unlisted companies to ensure the interests of investors. This was the landmark judgment in the field of India’s corporate law.

Punjab National Bank Fraud: In 2018, the Punjab National Bank (PNB) disclosed that one of the richest person of India and a diamond merchant Nirav Modi has done a fraud Rs. 11,000 crores. During the period from 2011 to 2017, the alleged PNB employee provided Nirav Modi with many letters of Counterfeit, namely Commitments (LOU), without any guarantee. The bank claimed that these individuals bypassed the lender's internal messages to avoid any kind of detection. Then, instructions were issued through the Swift global payment system to request the overseas branches of Indian banks to pay loans in cash.

Laws Relating to White-Collar Crimes:

The Indian government has promulgated various regulatory legislations, and violating these legislations will constitute a white-collar crime. Some of these laws are the Essential Commodities Act of 1955, the Industrial (Development and Regulation) Act of 1951, the Import and Export Control Act of 1947, the Foreign Exchange Control Act of 1974, the Company Act of 1956, the Prevention of Money Laundering Act, and the Indian Penal Code of 2002. Provisions to control bank fraud, insurance fraud, credit card fraud and other crimes. In the case of money laundering, the Indian government has taken various measures to solve this problem. The Reserve Bank of India has issued instructions that banks must strictly follow the KYC (Know Your Customer) guidelines. Banks and financial institutions must keep transaction records for ten years. In order to deal with computer-related crimes, the Information Technology Act of 2000 was promulgated to legally recognize identity verification for the exchange of information related to commercial transactions. Articles 43 and 44 of the Information Technology Act provide penalties for the following crimes:

 Unauthorized copying of extracting from any data.

 Unauthorized access and download files.

 Launching viruses or malicious programs.

 Harming or damaging computer system or computer network.

 Provide assistance to anyone to facilitate unauthorized access to the computer.


In past three decades the corporate scams have shaken the Indian financial industry and also shocked and traumatized the investors and stakeholder communities. The Indian government has taken a number of measures to protect the interests of community stakeholders. The new Companies Act, 2013 stipulates a clear obligation for auditors, company secretaries and cost accountants to report fraud cases, and emphasizes the active role of independent directors in the normal operation of companies. As a wake-up mechanism, the "Director's Responsibility Letter or Statement" has become a mandatory part of the report of Board of Directors. In addition, according to the new law, the Serious Fraud Investigation Office has been actively investigating corporate fraud cases and has given the power to make arrests. Committing in India White-collar criminals has escaped the jurisdiction of Indian courts for many times. Certain economic criminals involved in bank loan defaults, such as Vijay Mallya (unpaid loans of defunct Kingfisher Airlines) and Nirav Modi (PNB fraud case) after eroding the Bank have fled from the country. The absence of such criminals exacerbated the importance of the Indian judiciary. It also hinders the investigation of various criminal cases. As the current laws are not enough to deal with the depth of the problem, Indian Union Cabinet recently approved the promulgation of the Fugitive Economic Offenders Ordinance in 2018. The ordinance provides for the existence and powers to courts (under prevention of Money Laundering Act of 2002) in declaring someone as a fugitive economic offender. "Economic offenders escaping away from the country are those defaulters against whom the arrest warrants has been issued for predetermined crimes, and to avoid facing such criminal prosecution they are fleeing outside the country and the jurisdiction of Indian government authority. The decree establishes provisions authorizing the Indian authorities not only to seize but also to confiscate the proceeds of crime related to fugitive economic offenders and the property of these defaulters and will also force them to return to India for the proper trail.

The Fugitive Economic Offenders Ordinance 2018 is expected to help financial institutions and banks in India to gain further recovery from defaulters.

By Vinayak Sonkar

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