Author:- Rupashree Meher, a student at Amity University Chhattisgarh
Abstract
Have you ever wondered about the unseen criminals, the ones who can cause havoc without masks or weapons? Enter the fascinating world of white-collar crime, where deception lurks behind glossy corporate facades and the battleground shifts to the sophisticated offices of business titans. In a digital age when technology and finance are inextricably linked, unravelling the nuances of these financial wrongdoings becomes critical. This article examines a critical study on white collar crime in India, which is committed throughout the course of a person’s employment by educated individuals from affluent social classes.
This article also examined the distinctions between blue-collar and white-collar crimes. It is also known as the elites’ professional and educational criminality. The author of this article has gone into additional detail about how frequent white-collar crime categories have changed in India over the past few years. Also, how this has developed into a socioeconomic offense. In addition to this, crimes are committed in a variety of professions, including the legal, medical, and teaching fields. This covers the theories behind white-collar crimes as well as the main Indian laws that specify the offenses associated with them.
Introduction
White-collar crime is defined as crime perpetrated by people who, typically because of their jobs, exploit social, economic, or technological authority for personal or corporate profit. The phrase was first used in 1939 by American criminologist Edwin Sutherland to highlight the common clothing worn by the offenders, who were primarily politicians, businessmen, and high-ranking professions. However, since Sutherland’s time, these gangs have not been the only ones to commit atrocities of this nature. The fact that white-collar crimes mostly take place in corporate and governmental environments sets them apart from other kinds of crimes. Those in positions of trust or authority, such as managers, CEOs, and public officials, are frequently the ones who commit these crimes. In addition, the definition of white-collar crime has expanded due to advancements in technology and commerce. These include cybercrime, or crimes involving computers, health-care fraud, and crimes involving intellectual property, in addition to more conventional crimes like embezzlement, bribery, conspiracy, obstruction of justice, perjury, money laundering, tax offenses, and regulatory violations. These crimes can have far-reaching implications, affecting not only the immediate victims, but also the economy and society as a whole.
A Historical Overview
In 1939, Edwin Hardin Sutherland, a prominent criminologist and sociologist, defined white-collar crime as “crimes committed by people who enjoy the high social standard, great repute, and respectability in their occupation”.
The recognition and consequences of white-collar crime have evolved significantly over the past century. Financial fraud and other white-collar crimes became more common in the early twentieth century as firms grew in size and complexity. During this time, such crimes were frequently underreported and rarely strictly prosecuted, owing to the culprits’ high social rank and the notion that they were less destructive than violent offenses.White-collar crime awareness and prosecution increased in the later half of the twentieth century, owing to high-profile events such as the Watergate scandal and Enron’s collapse. These cases demonstrated the terrible effects of corporate fraud and corruption, prompting tougher rules and enforcement actions.
Today, white-collar crime remains a major concern around the world, with technological improvements and globalization posing new detection and prevention obstacles. Governments and regulatory authorities continue to develop and execute ways to combat these crimes, emphasizing the significance of openness, responsibility, and ethical behaviour in the workplace.
The Spectrum of White Collar Crime
- Fraud is a purposeful deception used to obtain an unfair or illegal advantage. It is one of the most common types of white-collar crime, taking several forms, including securities fraud, insurance fraud, and mortgage fraud.
- Securities fraud, often known as stock fraud or investment fraud, occurs when people or businesses defraud investors or manipulate financial markets. This can involve insider trading, in which persons with non-public information about a firm trade its stocks, as well as Ponzi schemes, in which returns are paid to earlier investors using the capital of later investors rather than profit gained.
- Insurance fraud is when an individual provides fraudulent information to an insurance company in order to get compensation or benefits. This could include overstated or manufactured claims, falsified applications, or staged mishaps. According to the association.
- Mortgage fraud happens when people falsify or omit information on mortgage applications in order to get loans that they would not otherwise qualify for. This can include exaggerating property valuations, lying about income, or assuming fraudulent identities.
- Embezzlement refers to the misuse of finances or property entrusted to someone’s care. Employees or executives with access to corporate finances are often the ones that commit this.
- Corporate fraud refers to criminal conduct committed by an individual or company to defraud stakeholders. This includes accounting fraud, which involves manipulating financial accounts to give a false picture of a company’s financial health, as demonstrated in the Enron case.
- Insider trading is the trading of stocks or other securities based on confidential, non-public information. This approach is prohibited since it erodes investor confidence in the fairness and integrity of the securities markets.
- Money laundering is the process by which individuals or companies conceal the source of illegally obtained funds, usually through a complicated series of banking transfers or commercial transactions. The ultimate goal is to make unlawful funds appear genuine. Money laundering typically comprises three stages: placement, layering, and integration.
- Tax evasion is the purposeful underreporting or failure to submit income to avoid paying taxes. This illicit practice deprives governments of funds required for public services and infrastructure. The Panama Papers revelation revealed several cases of tax evasion by rich individuals and organizations.
- Bribery and corruption are defined as providing, donating, receiving, or soliciting something of value in order to influence the behaviour of a public official or another person in a position of authority. This can happen in both the public and private sectors, undermining trust in institutions.
- Cybercrime refers to criminal activities committed via computers or the internet. This involves hacking, identity theft, and phishing scams. With the increased reliance on digital technology, cybercrime has become a major threat for both businesses and individuals. The 2017 Equifax data breach, which exposed 147 million people’s personal information, demonstrates the serious consequences of cybercrime.
Contrasting Blue and White Collar Crimes
Compared to regular criminals, white collar crime perpetrators tend to be more successful, intellectual, and well-educated males from higher social classes. These are non-personal crimes that are hard to identify. However, common crimes are straightforward and highly intimate. They also entail violent techniques including the use of force to carry out crimes. After committing a crime, ordinary criminals typically fear law enforcement, but white collar criminals have no fear of the law because, in the event that they are discovered, they will only face fines, transfers, or, at most, a brief jail sentence. The fact that white collar crime causes hundreds of times more financial loss than other types of crime is another distinction between it and blue collar crime. When white collar crimes are committed, the financial harm to society is greater than when crimes by low-social-class individuals are perpetrated. In contrast to blue crimes, which are typically carried out out of fury, retaliation, and other emotions, white collar crime is motivated by greed and is expertly planned and carried out. When it comes to white collar crime, the victims or money are harmed, while with blue collar crime, the harm is physical.
The Impact of White Collar Crime on India’s Economy
White collar crime is widespread in India across various sectors such as finance, healthcare, real estate, and government. Due to the rapid expansion of the Indian economy, there has been an increase in fraudulent activities, corruption, money laundering, tax evasion, and insider trading. The complex nature of white collar crimes makes it difficult to detect and prosecute offenders, leading to underreporting and a lack of accountability. These crimes has far-reaching consequences on the Indian economy, society, and governance. It undermines trust in institutions, erodes investor confidence, hampers economic growth, and perpetuates income inequality. Moreover, the prevalence of corruption and fraud contributes to a culture of impunity and fosters unethical behavior among individuals and organizations.
Corruption, fraud, and bribery are among the most widespread white-collar crimes in India and around the world. According to a 2016 Business Standards report titled “The changing dynamics of white collar crime in India,” the Central Bureau of Investigation (CBI) has discovered 6533 cases of corruption over the past decade, with only 517 cases registered in the last two years. India was ranked 85th in 2014, but because to various efforts to combat white-collar crime, it rose to 76th place in 2015. India ranked 78th out of 180 countries in 2018, up three spots from the previous year, according to a research published in The Economic Times.
High-Profile Cases: A Deep Dive
White-collar crime in India has been characterized by several high-profile instances that have had far-reaching consequences for the corporate and financial sectors. These cases demonstrate the diverse techniques used by offenders and the consequences of their actions.
Satyam scandal (2009): The Satyam scandal, dubbed “India’s Enron,” featured the manipulation of business finances by its chairman, Ramalinga Raju. The January 2009 incident exposed ₹7,136 crores in false company accounting. The discovery resulted in a major loss of investor trust and a subsequent collapse in the company’s share price. Satyam controversy: The Satyam controversy resulted in significant reforms to India’s corporate governance practices. The government quickly interfered, reconstituting the board and allowing Tech Mahindra to acquire Satyam. The incident also inspired the passage of the Companies Act of 2013, which contains strict procedures for detecting and penalizing corporate fraud.
Nirav Modi’s PNB Fraud Case (2018): This case featured fraudulent transactions totaling over ₹13,000 crores made through Punjab National Bank (PNB) by Nirav Modi, a well-known jeweller. The fraud was carried out through illicit letters of undertaking (LoUs) and unauthorised SWIFT transfers. The investigation identified serious flaws in the bank’s internal controls and regulatory monitoring. The Nirav Modi case emphasized the crucial need for strong internal bank controls and improved regulatory monitoring. The Reserve Bank of India (RBI) has implemented stricter procedures for issuing LoUs and monitoring SWIFT transactions. The Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) have seized assets worth thousands of crores, and efforts to extradite Nirav Modi from the UK are ongoing.
IL&FS tragedy (2018): Financial mismanagement and fraud led to a major financial catastrophe for Infrastructure Leasing & Financial Services (IL&FS). The group defaulted on multiple loan obligations, causing a liquidity constraint in the financial industry. The issue compelled the government to reorganize the company’s management and restructure its debts. The IL&FS crisis exposed financial sector vulnerabilities, prompting a reconsideration of regulatory oversight of non-banking financial corporations (NBFCs). The government created a new board to oversee the company’s reconstruction, and strict procedures were put in place to avoid similar disasters in the future.
Vijay Mallya, Kingfisher Airlines Case (2012): Vijay Mallya, a flamboyant businessman, was accused of financial mismanagement and defaulting on loans worth over ₹9,000 crores taken by Kingfisher Airlines. Mallya moved to the United Kingdom to avoid legal procedures in India after the company failed to repay its loans. Vijay Mallya’s case demonstrated the difficulties in extraditing economic offenders. Despite the delays in bringing Mallya back to India, his assets have been auctioned to recoup part of the unpaid funds. The case prompted the passage of the Fugitive Economic Offenders Act of 2018, which seeks to prevent offenders from dodging legal processes by fleeing the country.
Conclusion
India has a sophisticated and complicated white-collar crime problem that need for strong legislative frameworks and aggressive enforcement by agencies like the RBI, ED, CBI, SEBI, and SFIO. Robust regulatory procedures are essential, as demonstrated by well-known incidents like the Satyam scandal and the Nirav Modi PNB heist. White-collar crime poses significant challenges to India’s well-being and economic progress. White collar crime plagues the majority of the world’s poorest countries. White collar crimes have two startling characteristics: first, they are nonviolent crimes, despite the fact that the offenders tend to obtain control or have a sense of entitlement, and second, they are committed by persons in higher positions. The media plays a critical influence in reducing the pace of rising white-collar crime. It has been noticed that the majority of white-collar crimes go unreported. So, if the media becomes more active in publishing frauds and scams at higher levels and revealing how people in higher positions in a company use their powers arbitrarily, as well as making efforts to raise public awareness of white-collar crimes and prevent corrupt practices, this will help to reduce the rate at which white-collar crimes are committed.
