White Collar

Crimes In India

Dated: Nov 29, 2020 Anupam Sharan

Manav Rachna University
LL.M., Faculty of Law
Agenda
 What is “White Collar Crime”
 Classification of White Collar Crimes (enlisted)
 Components of White Collar Crimes
 Occurrence of White Collar Crimes
 Causes of White Collar Crimes
 Indian Perspective
 Legislation in place (India)
 Agencies Handling White Collar Crimes (India)
 Challenges in dealing with White Collar Crimes
 Remedial Measures
 Famous Cases (Indian prespective)
 What is a “White Collar Crime”?
American Sociologist Professor Edwin H. Sutherland
coined the phrase ‘White Collar Crime’ as “the crime
committed by a person of respectability and high social
status in course of their occupation”.
Definition (FBI): the term white-collar crime is now synonymous with the full range
of frauds committed by business and government professionals. These crimes are
characterized by deceit, concealment, or violation of trust and are not dependent on
the application or threat of physical force or violence. The motivation behind these
crimes is financial—to obtain or avoid losing money, property, or services or to
secure a personal or business advantage.
The threats have become more complex over time, with fraudsters becoming savy
and sophisticated. Technology is changing the risk landscape and has been
challenging the boundaries of white collar crime. Hence, it is important for both the
Government and companies to be in tandem through this continuous state of
evolution and adopt various techniques to battle such risks through enhanced
compliance.
Common definition” “a non-violent crime, which is breach of trust, confidence
or duty”
This particular type of crime is definitely not new; rather, it has existed for many
centuries and can be found in all types of businesses, professions and industries
 continued.,
Money Laundering

Cyber Crime Bribery

Bank Fraud
Identity theft

Tax Evasion
Some of the common White Collar Crimes are bribery, money laundering, cyber crime, identity theft, corporate fraud,
securities and commodities fraud (Ponzi schemes, promissory note fraud, investment fraud, trading fraud, market
manipulation etc.) mortgage fraud, financial institution fraud, bank fraud and embezzlement, fraud against the
government, election law violations, mass marketing fraud, and health care fraud, tax evasion – the list is long.,,,
 continued.,

In the State of Gujarat vs. Mohanlal Jitamalji Porwala and Anr. AIR 1987 SC
1321, Justice Thakker stated that murder could be committed in the heat of the
moment, but economic offences were committed with cool calculation and
planned motive in order to gain personal profits.
These are not victimless crimes. A single scam can destroy a company, devastate
families by wiping out their life savings, or cost investors billions of dollars (or
even all three).

Characteristics that set it apart from other crimes are

Victims in majority of cases unaware of the offending's
Direct access to the victim because of the offender’s elite position.
No information about the offender in most cases because of failure to ascertain
identity.
Injection of politics and relevant stakeholders.
Reputational harm to institutions and organizations.
 Classification of White Collar Crimes (enlisted)
In generic, White Collar Crimes are classified as below; however this classification
changes based on the study by various jurist and is not an exhaustive list.

Ad-hoc Breach of Trust

White
Collar
Crimes

Opportunist Part of Business

 Components of White Collar Crime
Stings and Swindles
Stings as in a white collar crime in which people use their institutional or business
position to bilk people out of their money
Swindlers often target elderly and religious organisations
Welfare and Religious Swindles
Use of religion and creation of fake religious organizations to bilk those out of
money
Welfare Fraud: Use human emotions and fear to derive money and favor
Chiseling
Involves cheating an organization, its consumers or both on a regular basis.
Professional Chiseling: use of position to chisel clients (doctors and pharmacist)
Securities fraud: Commodity and Stock market deception
Churning (repeated unnecessary buying and selling)
Front running (placing personal orders ahead of client)
Bucketing (skimming profit)
Insider trading (information giving the trader unfair advantage)
Weight and Measures
 Act of placing an item for sale at one price yet charging a higher price at the time
of sale / short weighing an item
 continued.,,
Individual exploitation of Institutional position
To take advantage of other people who have an interest in how the power is used
Occurs when the victim has a clear right to expect a service and offender threatens
to withhold service unless an additional payment or bribe is forthcoming
Influence Peddling and Bribery
Taking of “kickbacks” in return for contracts or favor
Influence peddling in government: acceptance of bribes for favor
Influence peddling in business: payoff for business contracts
Employee Fraud
Converting company asset for person profit
Fraudulently receiving bonus
Fraudulently increasing personal holding of company stocks
Manipulating of accounts
Concealing unacceptable performance from stockholders
Client Fraud
Bank Fraud: includes forgery, illegal transactions check kiting etc.
Tax evasions: fraud by underreporting taxes
Health care fraud
 continued.,,
Corporate Crime (Organizational Crime)
Actual Authority: Occurs when a corporation knowingly gives authority for an
employee to act
Apparent authority: Occurs when third party reasonably believes the agent has
the authority to act.
Illegal restraint of trade and price fixing: Involves a scheme stifle competition
and create a monopoly
Trying Arrangement: Requiring customer to use other services connected to
corporation
Group boycotts: Of retail stores not complying with rules or wishes
Price fixing: Conspiracy to set and control prices
Deceptive pricing: Occurs when corporation use incomplete or misleading
information to fulfil contracts (eg: defence contracts)
False claims and advertisings: Involves unjustified claims about a product
(telemarketing)
Worker Safety / Environmental Crimes: Includes unsafe working conditions or
pollution
 Occurrence of White Collar Crimes
Corporate and Business: The Sanathanam Committee Report on Prevention of
Corruption raised great concerns about businessmen and tycoons engaging in
hoarding, profiteering and black marketing along with facilitation of unfair trade
practices, bribery, money laundering, bank fraud, insider teading, insurance
fraud, tax evasions, illegal contracting etc.
Medical Profession: Offences include providing false medical certificates, illegal
abortions, selling of banned/illegal drugs and medicines, making misleading
advertisements and propagating it on all forms of media.
Education: The industry status quo is making money and not providing education
and in that regard, the professionals are engaging in corruption and facilitating
fake degrees, getting government aid by submitting fake details
Information Technology: Internet fraud is the most common type of fraud these
days where the offender is mostly unidentifiable and prey on those who use
internet and mobile banking services on a daily basis. Examples are cellphone
fraud (cloning), computer fraud (hacking, fake website), telemarketing etc.
Legal: Fabricating false evidence, engaging professional witness, violent ethical
standards of legal profession
Others: White Collar Crimes spreads to other fields as well.
 Causes of White Collar Crimes
Can a unemployed person commit White Collar Crime???

Ease of doing a crime: White collar crime does not

require a gun, don’t need to have direct access to victim,
can be easily covered up, can be done remotely without
the victim knowing of the same.

Greedy and Needy: Motivation includes a need to keep or

improve a job, satisfy ego or keep up with the inflation.

Corporate Culture Theory: Excessive demand from employees

and shear completion to reach the top level.

No Eyewitness: Difficult to detect as generally committed in

privacy of an office, home and has usually no eye witness

Self Control View: Quick and huge benefits with minimal efforts
 Indian Perspective
The rapid advance of technology and the modernization of the Indian economy
has led to a steep rise in white collar crimes.
Factors such as speedy development of economy and industrial growth has
created the upsurge of white collar crimes in India. Post independence, there
arose an era of welfare activities which needed to be regulated efficiently by the
government. The absence of such regulation gave rise to White Collar Crimes.
The first instance of white collar crime in India was the Mundhra case where
Haridas Mundhra, the accused, had defrauded LIC by selling them imaginary
shares; causing losses of almost Rs.1.26 Crore. Mundhra was consequently
sentenced to 22 years in prison.
Corruption happens to be a big reason which aggravates the rise of white collar
crime. In the last three years, the Central Bureau of Investigation (CBI) has filed
cases of corruption on more than 4000 government employees under the
umbrella of the Prevention of Corruption Act, 1988.
The present legal framework is neither comprehensive nor competent to deal
with this pertaining type of crime. Lack of strict laws, involvement of politicians
and delayed justice via judiciary are crucial reasons why the legal framework
should be upgraded and strengthened appropriately thus giving a voice to the
ones who suffered.
 Legislation in place for White Collar Crimes in India
Government has introduced various legislation, the breach of which will amount
to white collar crimes. These legislation contains punishment regarding these
crimes.
Prevention of Money Laundering Act, 2002
Indian Companies Act, 2013
Indian Income Tax Act, 1961
Consumer Protection Act, 2019
Indian Penal Code, 1860 (check crimes such as bank fraud, credit card fraud,
insurance fraud etc.)
Commodities Act, 1955
Prevention of Corruption Act, 1988
Information and Technology Act, 2000
As anti-corruption laws have become more stringent in India, it has become
incumbent on the directors of companies to put in place a mechanism to
prevent fraud and corruption.
 Agencies handling White Collar Crimes in India
 Central Bureau of Investigation (CBI)
 Enforcement Directorate (ED)
 Cyber Crime Department
 Serious Fraud Investigation Office (SFIO) - statutory corporate fraud
investigating agency in India
 Appellate Prevention of Money Laundering Authority (PMLA)
 Economic Offence Wing (EoW)
 Special Investigation Team (SIT) – For fake insurance fraud in Gujarat and
Haryana
 Challenges in dealing with White Collar Crimes in India
 High Profile involvement
 Politically Motivated
 No free hand to Investigating Agencies
 Non- interest of Enforcement Agencies
 156(3) of Code of Criminal Procedure, 1973 (CrPC) is a long and
cumbersome process and discourage speedy remedy
 One cannot deny the involvement of local authorities
 Corruptions are increasingly exposed to investigations under the Foreign
Corrupt Practices Act, 1977 and UK Bribery Act, 2010
 Misuse of loop holes provided in the criminal legal system – Recently, in the
case of Shiv Kumar Jatia vs. State of NCT of Delhi, Hon’ble Supreme Court
of India held that Director of the Company can be made an accused along
with it only if there is sufficient material to prove his active role and criminal
intent.
 Remedial Measures
Current Remedial Measure:
 Legislation in place (discussed in previous slide)
 Corporate check-point in place
 Background checks
 Forensic monitoring (Email and lap-top)
 Compliance to Company Code of Conduct and other Policies
 Regular training and certification

Way Ahead:
 Public Awareness.
 Constitution of Special Tribunals
 Severe Punishment
 To be made Specific Offence under IPC
 Heavy fines to be imposed
 Constitution of National Crimes Commission
Famous Cases (Indian perspective)
 INX Media Case
 IL&FS: The Crisis that has India in panic mode
 Satyam
 AgustaWestland VVIP chopper scam – UPA Government and former IAF
Chief Shri. S.P. Tyagi, Kamal Nath's nephew Ratul Puri arrested in Rs 354
crore bank fraud case.
 Vijay Mallaya Case
 Lalit Modi and Nirav Modi Case
 Videocon Fraud – Chanda Kocchar
 Common Wealth Games Scam
 Fodder Scam
 2G Scam
 Fake Job Call Centre
Thank You!