The World Of White-Collar Crime & Its Impact On The Economy

The laws concerning white-collar crimes vary, depending on

the exact nature of the crimes committed, though many fall

under federal authority (US)...

White-collar crime refers to non-violent

crimes committed through deceptive

practices for the purpose of financial

gain. Following is

the white-collar

crime dictionary definition. The actual

term "white-collar crime" was coined

by Edwin Sutherland, Professor

of Sociology and 29th President

of American Sociological Society.

Sutherland described such crimes as

"a crime committed by a person of

respectability and high social status

in the course of his occupation."

White-collar crimes cover a wide

range of activities, but generally, the

crimes are committed by people who

are involved in otherwise lawful

businesses. The perpetrators often

hold respectable positions in their

communities or businesses, until their

illegal activities are discovered. The

laws concerning white-collar crimes

vary, depending on the exact nature of

the crimes committed, though many

fall under federal authority.

Types of White-Collar Crimes and the

relevant acts regulating the same

The common examples of white-collar crime include fraud,

insider trading, and bribery, etc. White-collar crimes can

often be difficult to prosecute, as the perpetrators take

sophisticated steps to ensure that their illegal activities are

difficult to detect. The most common types of white-collar

crimes are explained below:

Fraud: Fraud is committed by misrepresenting facts in

order to gain something in return. Fraud under the Indian Penal Code is defined as "any behavior by which one person

intends to gain a dishonest advantage over another". In

other words, fraud is an act or omission which is intended

to cause wrongful gain to one person

and wrongful loss to the other, either

by way of concealment of facts or

otherwise. Fraud is defined u/s 421

of the Indian Penal Code and u/s 17

of the Indian Contract Act. There is

no separate legislation dealing with

fraud as in the United Kingdom or

the USA. The expression fraudulently

occurs in Sections 206, 207, 208, 242,

246, 247, 252, 253, 261, 262, 263 and

Sections 421 to 424. Sections 24 and

23 define expressions 'dishonestly'

and 'wrongful gain and wrongful loss.

'Wrongful gain' is gain by unlawful

means of property to which the person

gaining it is not legally entitled.

'Wrongful loss' is the loss by unlawful

means of property to which the person

losing it is legally entitled. Whoever

does anything with the intention of

causing wrongful gain to one person

or wrongful loss to another person is said to do that thing

'dishonestly'. Indian Penal Code recognizes the following

acts as fraud:

• Impersonation

• Counterfeiting

• Wrong weighing and measurement

• Misappropriation

• Criminal breach of trust

• Cheating

• Dishonest dealing in property

• Mischief

• Forgery

• Falsification

• Possessing stolen property

• Concealment

Some examples of recent banking frauds in India are:

• On 14th February 2018, PNB noticed fraudulent

  transactions worth '11,346 crore at one of its branches

  in Mumbai. Apparently, the branch staff issued fake LoUs

  (Letters of Undertaking) for buyer's credit to companies

  of Nirav Modi and Gitanjali Group. Companies like

  Gitanjali Gems, Gili India, Nakshatra and Nirav Modi are

  said to be involved in this scam.

• On 13th June 2017, the promoters of a mining company,

  Abhijeet Group, were arrested for being defaulters in loan

  payment of over '11,000-15,000 crore from 20 banks

  and financial institutions through 132 shell companies

  of the group. Abhijeet Group created vehicle company

  Jas Infrastructure to provide contract for erection,

  procurement and construction of a power plant at Bihar

  to its group company Abhijeet Projects and misusing

  loan amounts worth '790 crore from Canara Bank and

  Vijaya Bank.

Insider Trading: In India, SEBI (Insider Trading)

Regulations, 1992 framed under Section 11 of the SEBI

Act, 1992 are intended to prevent and curb the menace of

insider trading in securities. Insider trading is against the

law if a securities transaction, which is the sale or purchase

of stocks, is engaged in by a person, or small group of

people, inside the company, who have special knowledge

not available to others. The aim of insider trading laws and

regulations is to assure that no one would gain by trading

on 'insider' or 'unpublished' information - information that

is not available to all market participants. The ultimate

goal is to create a level playing field by making information

accessible to all market participants.

Duties and Obligations of the Company

Every listed company has the following obligations under

the SEBI (Prohibition of Insider Trading) Regulations, 1992:

• To appoint a senior-level employee, generally the

  Company Secretary, as the Compliance Officer;

• To set up an appropriate mechanism and to frame and

  enforce a code of conduct for internal procedures;

• To abide by the Code of Corporate Disclosure practices as

  specified in Schedule ii to the SEBI (Prohibition of Insider

  Trading) Regulations, 1992;

• To initiate the information received under the initial and

  continual disclosures to the Stock Exchange within 5

  days of their receipts;

• To specify the close period;
• To identify the Price-Sensitive Information;
• To ensure adequate data security of confidential

  information stored on the computer;

• To prescribe the procedure for the pre-clearance of

  trade and entrust the Compliance Officers with the

  responsibility of strict adherence of the same.

Penalty

The following penalties/punishments can be imposed in

case of violation of SEBI (Prohibition of Insider Trading)

Regulations, 1992:

• SEBI may impose a penalty of up to '25 Crores or three

  times the amount of profits made out of insider trading,

  whichever is higher

• SEBI may initiate criminal prosecution
• SEBI may issue orders declaring transactions in securities

  based on unpublished price-sensitive information

• SEBI may issue orders prohibiting an insider or refraining

  an insider from dealing in the securities of the company

Bribery

Bribery is the practice of offering, giving, receiving, or

soliciting something of value for the purpose of influencing

the action of an official in discharge of his/her public or

legal duties. Bribery is a gain to an illicit advantage.

The Parliament on July 24, 2018 passed the Prevention of

Corruption (Amendment) Bill 2018 to enhance transparency

and accountability of the government. The Bill amends

various provisions of Prevention of Corruption Act (PCA),

1988. The Provisions of the Bill included:

• The introduction that the offense of giving a bribe is a

  direct offense. However, a person who is compelled to

  give a bribe will not be charged with the offense, if he

  reports the matter to law enforcement authorities within

  seven days

• The Bill makes specific provisions related to giving a bribe

  to a public servant and giving a bribe by a commercial

  organization

• The Bill redefines criminal misconduct to only cover

  misappropriation of property and possession of

  disproportionate assets. It does not cover circumstances

  where the public official uses illegal means, abuses his

  position, or disregards public interest and obtains a valuable thing or reward for himself or another person

• The Bill modifies the definitions and penalties for offenses

  related to taking a bribe, being a habitual offender and

  abetting an offense

• It introduces the powers and procedures for the

  attachment and forfeiture of property of public servants

  accused of corruption

Forgery

The altering, making, possession, or use of a falsified

document, such as a check, contract, or other document,

with the intent to defraud or injure the recipient of the

document. This includes such crimes as passing forged

checks and creating, possession, or selling falsified art.

Other Types of White-Collar Crimes include

Telemarketing scams, Tax evasion, Ponzi schemes, Pyramid

schemes, Bank fraud, Racketeering, Healthcare fraud.

The Indian Government over the last few years has been

implementing changes in various acts to bring these crimes

under scrutiny. Some examples of the changes are:

• Prevention of Money Laundering Act, 2002
• Central Vigilance Commission Act, 2003
• Right to Information Act, 2005
• Companies Act, 2013
• Lokpal and Lokayuktas Act, 2013
• Whistle Blowers Protection Act, 2011
• Black Money (Undisclosed Foreign Income and Assets)

  and Imposition of Tax Act, 2015

• Insolvency and Bankruptcy Code

Penalties for White-Collar Crime

The criminal penalties for white-collar crimes vary

greatly, depending on the type of crime committed and the

circumstances surrounding the case. Most individuals facing

criminal charges for a white-collar crime have never faced

the criminal justice system, and the process is frightening.

Typically, penalties for white-collar crimes include any

combination of imprisonment, restitution, fines, probation,

and community service. Such crimes that are serious enough

to face prison time may place the perpetrators behind bars

for many years. In fact, US Congress passed the Sarbanes-

Oxley Act of 2002, which increased oversight in corporate

responsibility and mandated financial disclosures, in an

attempt to stem large-scale white-collar crimes. As a result

of the Act, penalties for white-collar crimes involving wire

or mail fraud increased.

In addition to any criminal penalties imposed on a

perpetrator, civil penalties may be imposed for white-collar

crimes, as the victims can file a civil lawsuit against the

perpetrator.

Disclaimer - The views expressed in this article are the personal views of the author and are purely informative in nature.