Finance 115 Are obliged to comply with strict ethical principles (e.g., the * international Code of Ethics or the codes of national professional and regulatory organizations), and are guided by the fundamental principles of integrity and professional behavior; and ics if. Play an important role in combating tax evasion. For example, accountants in public practice help clients comply with their legal obligations. If a client is unwilling, an accountant considers options, such as resigning from the account; in some circumstances, accountants may have a reporting obligation to revenue OF regulatory authorities. «They help to establish confidence in the minds of the stakeholders Clearly, accountants play an important role—in effective tax systems, employer and client education, business advisory, ethics, and more. e of Chartered Accountants of India (ICAI) is the al accounting body of India. It was established on 1 July 1949 as a body corporate under the Chartered Accountants Act, 1949 acted by the Parliament to regulate the profession of Chartered ‘Accountancy in India. ICAI is the second largest professional Accounting & Finance body in the world in terms of membership, after American Institute of Certified Public Accountants. ICAI is the only licensing cum regulating body of the financial audit and accountancy profession in India. It recommends the accounting standards to be followed by companies in India fo The National Financial Reporting Authority (NFRA) and sets the accounting standards to be followed by other types of organizations. ICAI is solely responsible for setting the auditing and assurance standards to be followed by practicing Chartered Accountants. It works closely with the Government of India, Reserve Bank of India and the Securities and Exchange Board of India in formulating and enforcing such standards. The Institut rational profession Members of the Institute are known as Chartered Accountants and are Subject to a published Code of Ethics and professional standards, violation a which is subject to disciplinary action. Only a member of ICAI can be ‘Pointed as statutory auditor of an Indian company under the Companies Ao, 2013, 87 CORPORATE CRIME! Corporate crime refers to crimes committed either by a corporation ersonality from the natural lie. »@ business entity having a separate legal p'116 Ethics and Governance ; persons that manage its ac’ s), or by corporation or other business entity. Much of our lives and daily routines are affected by corporate To a great extent, companies provide the food we eat, the water the necessities and luxuries of everyday living. Increasingly, Particularly with growing privatization, it is not the State that provides these amenities _ companies. Such companies generate wealth for the economy and shareholders and provide employment for much of the population. Shox of @ revolutionary restructuring of the economy and the political institutions of the country, it is certain that the power and influence of companies will g and not diminish in the foreseeable future. Activitig, We driny but theiy Tow But, with great Power comes great responsibility. Just as individuals owe a duty not to harm or injure others in society without justification, so do companies owe a duty not to poison our water and food, not to pollute our tivers, beaches and air, not to allow their workplaces to endanger the lives and safety of their employees and the public, and not to sell commodities, or Provide transport, that will kill or injure people. Let us look at the 1984 Union Carbide accident in Bhopal, India, which released a cloud of methyl isocyanate (MIC), hydrogen cyanide, and other toxins. Somewhere between 4000 and 8000 people died at the time, and victims' advocates estimate that in total over 20,000 have died as a result of this largest industrial accident ever, with 1,50,000 sufferi ing continuing injuries and medical problems. The cause was extreme corporate malfeasance. The plant was not up to minimal Union Carbide safety standards - large quantities of MIC were unwisely stored in a heavily populated area, the refrigeration unit for the MIC (which is supposed. to kept at temperatures below 32 F) was deliberately kept turned off to save $40 per day in costs, the safety systems were dismantled, and the alarm system was turned off. This was in spite of the fact that the same plant had earlier suffered potentially lethal accidental releases of gases like the deadly nerve agent phosgene, Types of Corporate Crimes Hundreds of companies routinely commit crimes that injure the publi¢ much more than street crimes in many ways: economically, socially, Physically and environmentally. Yet corporate crimes are generally dealt with by civil and administrative law, with penalties such as fines but not Prison.in Finan 117 ie. 4 fe rate crimes are often called quiet acts because people not only ie whom to blame but may not even know that they have been wot ad. TheTE are data collection problems also. ei ; : i corporate crimes: A oRPORATE VIOLENCE : ence against workers: 6 million workers injured on the job in the isotd 30,000 people die in the workplace from injuries and 10,000 from term effects of occupational diseases. Corporate executives are jon qsible for the vast majority of deaths because they have violated pational health and safety standards or have chosen not to create ds. So, workers are safer on the streets than on their job. yate standar for every person murdered by a stranger on the street, two are murdered by jr employees. ence against consumers: Thousands of unsafe products injure 000 people are permanently disabled each is Viol arkil consumers every year. 100, and 30,000 die. Another important factor to take into account dumping of products in the third world, some of which have been banned in fhe home country. Corporate poll vironment for the sake of cost cutting are also to be con + ECONOMIC CORPORATE CRIMES Price fixing: Tacit price fixing occurs when a limited number of controlling companies in a particular market follow the lead of their competitors in price increases. Overt price fixing involves secret meetings and subtle communications between competitors in given industries. Most common forms: (i) setting prices at predetermined, similar levels, (ii) dividing the market into regions, with each firm agreeing to stay out of the other's territory, and (iii) agreeing to take turns submitting winning competitive bids for contracts, often from government agencies se false advertisements to entice at offer few, if any, of the Ise and (ii) puffery, which is a cally involves making ¢ violate criminal or jution:. Green crimes in the form of pollution of the sidered. False advertising: When companies u me to buy products or ‘services th bpa ized benefits, Two forms: (i) blatantly fal S ; More subtle form of false advertising that typi ae claims for a product or service. It does noi Ws, but it is designed to mislead consumers.118 Ethics and Governance , 8.8 WHITE COLLAR CRIME White-collar crime refers to financially motivated, Non-Violent crim committed by business and government professionals. Within criminolo, . was first defined by sociologist Edwin Sutherland in 1939 as % Sing committed by a person of respectability and high social status in the Course of his occupation". Typical white-collar crimes could possibly include fraug bribery, Ponzi schemes, insider trading, labor racketeering, embezzlemen;, cybercrime, copyright infringement, money laundering, identity theft, and forgery. ‘Types of White Collar Crime White-collar crime generally involves financially motivated offenses Perpetrated by business and government employees or officials. The crimes are not violent, and are usually committed by persons in whom some level of trust or autonomy is place. They frequently cause significant losses for companies, investors and employees. 1. Fraud By far the most cammon type of white collar crime, fraud involves the intentional misrepresentation or omission of @ material fact. That misrepresentation must be reasonably relied on, and someone must suffer a monetary loss as a result. The most prevalent types of fraud include: @ Computer fraud: Stealing bank, credit card or proprietary information from a computer. *® ~~ Bankruptcy fraud: Concealing assets, misleading creditors or illegally pressuring debtors. © Health care fraud: Accepting kickbacks or billing for services not performed, unnecessary equipment and/or services performed by a less qualified person; applies to all areas of health care, including hospitals, home health care, ambulance services, doctors, chiropractors, psychiatric hospitals; laboratories, pharmacies and nursing homes, Telemarketing fraud: Using the telephone as the primary means of communicating with potential victims. : if Credit card fraud: Using someone's credit card information make unauthorized purchases, e Insurance fraud: Falsifying, inflating or “padding” claims.119 Government fraud: Engaging in fraudulent activities in relation to © ublic housing, agricultural programs, defense procurement, educational programs or other government activities, including pribery in contracts, collusion among contractors, false or double billing. false certification of the quality of parts and substitution of pogus parts. Financial fraud: Engaging in fraudulent activities relating to commercial loans, check forgery, counterfeit negotiable instruments, mortgage fraud and false applications. Securities fraud: Manipulating the market and stealing from securities accounts. Counterfeiting: Printing counterfeit money or manufacturing counterfeit designer apparel or accessories. 1, Theft «Embezzlement or Misappropriation of Property: Theft of money, goods or services by an employee e Blackmail: Demanding money in exchange for not causing physical harm, damaging property, accusing someone of a crime or exposing secrets. 3. Violation of Statutory Law ® Anti-trust violations: Fixing prices and building monopolies, * Environmental law violations: Discharging a toxic substance into the air, water or soil that harms people, property or the environment, including air pollution, water pollution and illegal dumping, * Tax evasion: Filing false tax returns or not filing tax returns at all. Kickbacks: Compensating an individual or company in order to Thfluence and gain profit. Kickbacks result in an unearned advantage, benefit or opportunity, even if others are more Qualified or offer better prices. Kickbacks hurt business by interfering with competition in the marketplace. Insider trading: Trading stock or other securities with knowledge of confidential information about important events that is Unavailable to the general public. Bribery: Offering money, goods, services or information with the 5 ig Vy, g intent to influence the actions or decisions of the recipient.120 Ethics and Governance e@ Money laundering: Concealing income raised through activity in order to evade detection. Illicit proceeds are ie illegy to appear as though the funds were generated through leit Steg mi means. ate @ Public corruption: Breaching the public trust and/or abusin, government position, usually in connection with private. Sect; accomplices, A government official violates the law when ~ he 7 ; . or she asks for or agrees to receive something of value in return fo 3 being influenced in the performance of official duties. 8.9 ORGANIZED CRIME Organized crime is a crime that may be viglent or non-violent in nature, committed by a group of individuals, local, national or international, tha engage in criminal activities for profit. The rationale behind why they are formed varies because they may be politically motivated, financially motivated or an organized criminal ‘gang.’ There are three ways in which networks are formed within organized crime. The first is within a family, what we often refer to as a mafia, This form of organized crime operates based on the hierarchies of the related families, training of family members, reliance on religion, tradition and culture. The second way in which a network is formed is through a business. These organized crime groups are rigid, have a complex authority hierarchy and are impersonal. These tend to be particularly dangerous for the members due to the impersonal nature of the organizational members, the lack of familial or interpersonal loyalties to other members, and the importance of power relationships rather than protection of family members as in the prior network, An example of a business that has incorporated organized crime would be to conduct illegal activities, such as insider trading, racketeering or dmg trafficking. These legal corporations incorporate illegal organized crimé methods in order to help them succeed and earn more money. An infamous example would be Bernard Madoff and his corporate associates wh? orchestrated a $65 billion Ponzi scheme, which was considered one of th? biggest frauds in U.S. history, taking the life savings of over 1,000 investo® The third way in which a network is formed is through a ‘gang.’ ua members are often recruited through members’ involvement in ee youths and the connections made in the correctional facilities. Membsit finance s ee na gang for protection or the need to belong, typically due to their port system in their homes. Some gangs have a loose hierarchy, jo oft fa suPl : . : . sly when dealing with drugs, firearms or sex trafficking. anized crime typically uses extortion, which is the practice of omething, especially money, through force or threats to get what ities Between White-Collar Crime and Organized Crime while there are myriad differences between the two, similarities do exist en the two types of crime. Both terms refer to crimes that are d within the guise of a legal operation, whether as a corporation or siness such as garbage hauling. Both terms include crimes e individual victims so much as they have richer victims like gommitte' legal cover bu: shat may not hav defrauding businesses or embezzling government funding. And both terms generally refer to an extended series of crimes committed together in furtherance of profit, such as a combination of extortion, fraud and embezzlement. Differences Between White-Collar Crime and Organized Crime There are marked differences between white-collar crime and organized cime. White-collar crime rarely includes any violent offenses, while aganized crime often does. White-collar crimes are generally each punishable individually but not in the aggregate; however, organized crimes can be punished separately but also together as racketeering, the legal term for certain illegal activities committed as part of an ongoing criminal enterprise, Racketeering is punishable under federal law by the Racketeer Influenced and Corrupt Organizations Act, known as RICO. Finally, white- collar crimes are generally masked behind corporations or other high-level business, while organized crime is generally hidden behind less esteemed fonts such as garbage hauling, licensed gambling and auto repair shops. Twes of d Crimes * Drug Abuse & Drug Trafficking It is the most serious organized crime affecting the country and is transnational in character. India is geographically situated between the Sountries of the Golden Triangle & the Golden Crescent and is a “onvenient transit point for drugs produced in these regions to the est. India is also a major producer of opium. Smuggling Clandestine Operations leading to unrecorded trade is another major "ganized crime. With its vast coastline of around 7,500 kms. and open ies with Nepal & Bhutan, India is prone to large scale smuggling of Mtraband items.122 e Ethics and Governance Money Laundering & Hawala ae This refers to conversion of illegal and ill-gotten money into legal money so as to integrate it into the legitimate economy, Thing, of drug trade, tax evasions and foreign exchange violations are "tee, of money laundering. SOutce, Terrorism Although conceptually, terrorism does not fall under the cate 3 organized crime as the dominant motive behind it is political/idegy, vy of and not acquisition of money power, the Indian experience shows the criminals are perpetrating all sorts of crimes (killings, kidnapping, gunrunning, drug trafficking) under the umbrella of te outfits. Contract Killings This refers to engaging a professional gang to murder for a monet consideration. Although murder is punishable under section 302 of thy Indian Penal Code by life imprisonment or death sentence, the chang of detection in contract killings is rather low. Kidnapping for Ransom This is a highly organized crime in urban conglomerates with severd local and inter-state gangs involved in it. Illegal Immigration Unemployment in India and the lure of higher wages in foreign land gets people to fall into the trap of unscrupulous travel agents and employment bureaus. Prostitution Sex trade is a profitable business in which the underworld plays an important part. thay i oT 8.10 MAJOR CORPORATE SCAMS IN INDIA Corporate Scams in India are growing in the recent times. It is ver essential for the businesses to carry out business in ethical manner. Scams are the result of unethical business practices carried out by warious companies in order to earn more profits. Some of the corporate scams in India are mentioned below: Soe ep oe Reebok India Case Vodafone wins $2.2 Billion Tax Bill Battle Diageo's $2.1 billion deal for Mallya’s United Spirits Emkay Global's bad orders trigger brief halt on NSE. Kingfisher Airlines Loses License to fly