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White Collar Crimes

Crime has been a part of our society from the very inception. Like every coin has two sides, every society has its positive and a negative side. To strike a balance between the two, it is important that the evil that is prevailing in the society should be understood and dealt with accordingly. To do so, one must be able to differentiate amongst the various crimes that are taking place in the world. Crimes are classified into various heads such as organized crimes, street crimes, political crimes, personal crimes, blue-collar crimes, white-collar crimes, etc.

White Collar Crimes (WCC) is one such branch of crime. It has been a part of our community for a long time. However, it only came to be defined in 1939.  Studies had been conducted in the year 1939 by Prof. Edwin H. Sutherland. He defined white-collar crimes as a ‘crime committed by persons of respectability and high social status in the course of their occupation.’ White-Collar Crime comprises of bribery, corruption, counterfeiting, forgery, cyber crimes, etc. Though it came to be defined in the 1900s, it cannot be said that it didn’t exist before that.

The Indian Penal Code, 1860, is the earliest overarching and codified criminal law. It too deals with White Collar Crimes though not explicitly mentioned. It provides punishment for corruption and bribery [§168, 169, 171B, 171C, 171E, 171H Indian Penal Code, 1860], counterfeiting of government stamps and coins [§ 230-263 Indian Penal Code, 1860], misappropriation of public property and criminal breach of trust [§403-409 Indian Penal Code, 1860], cheating [§ 415-420 Indian Penal Code, 1860], counterfeiting of currency [§489A-489D Indian Penal Code, 1860], etc.

White-Collar Crime, in simple words, is any crime done by a person of high status while managing their business to earn profit or goodwill by means of practising deceit. A crime of this nature increases the amount of black money circulation in the market and hampers the growth of the economy. These crimes harm not only the individuals but have a greater impact on the market. Generally, the white-collar crimes involve a huge amount of money thereby affecting the country largely. Owing to these reasons, white-collar crimes are one of the major issues that the governments around the world must deal with.

Blue Collar Crimes vs. White Collar Crimes.

The dawn of White Collar Crimes begins with knowing the difference between a blue-collar crime and a white-collar crime. The Supreme Court of India has laid down the difference between the two in the case of State of Gujarat v. Mohanlal Jitmalji Porwal and Anr. Before laying down the differentiation between the two, J. Thakker stated, ‘The crime of committing murder can take place in the heat of the moment however, committing financial loss requires planning. A strategy is required to gain personal profit.

This clearly shows the fact that a person committing such financial crimes makes a calculated choice of doing so. Settling the distinction between a personal crime and financial crime, the court went ahead to distinguish between a blue-collar crime and white-collar crime. Blue-collar crime is a crime committed by people who do physical work whereas white-collar crimes are referred to as knowledgeable works, meaning a person who uses their knowledge to commit the crime. Blue-collar crimes are traditional crimes which have been committed for a long time; however, white-collar crime is a concept which was developed in the recent past.

Mens rea and Actus reus are a must in blue-collar crime but are not an absolute requirement of white-collar crime. Unlike blue-collar crimes, white-collar crimes have no relation to social conditions such as personal conditions, poverty, etc. As people committing white-collar crimes are of high status, they have direct access to the target owing to their position and power making it easier for them to commit such a crime. People committing a white-collar crime generally do not come in direct contact with the victims meaning that their identities are veiled. These are the few of the basic differences between the two crimes that have been identified by the Court, keeping in mind the distinct characteristics so that one can easily differentiate between the two types.

Measures taken To prevent White Collar Crimes.

As per the records provided by the Netrika Consulting and Indian National Bar Association, a total of 3,766 cases of fraud were recognised which is an astounding 15% spike from that of the previous year. With such a spike, the question arises whether the government is taking adequate steps to control white-collar crimes?

Answering this question, yes, the government has taken active steps to curb such practices. One must always keep in mind that to curb such practices is not easy, as people committing these crimes have high status, connections, and many means to avoid punishments. Take an example of Mr. Vijay Mallya, a highly placed business tycoon, who committed a fraud of 9,000 crores rupees and escaped to the United Kingdom. The Government of India has been successful in the talks with the United Kingdom to get Vijay Mallya extradited. But, he cannot be extradited anytime soon. Conditions like these make it difficult to bring such offenders to justice. This, however, does not showcase the incompetence of the Indian Government. The Indian Government is taking all the steps necessary to bring such criminals to justice.

The initiative is taken by the government can be seen in the legislation being made, treaties being signed, and arrangements being made. The recent 2018 Amendment to the Prevention of Corruption Act now makes paying a bribe to a public official a punishable act. Previously, the punishment was awarded only to the public official who accepted or received a bribe. It failed to talk about the person who had given this bribe meaning such an individual would be free of any consequences. This matter has been resolved by the 2018 amendment.

Owing to the recent trends of high-value financial offenders fleeing the country to avoid punishment, the Government enacted the Fugitive Economic Offenders Act, 2018. This Act would deal with the issue of such offenders fleeing the country. Further, under this Act, relevant authority is given the power to seize the property of a person accused of such a crime, where the value of the crime committed exceeds INR 1 billion, who has fled the country and refuses to come back so they can face prosecution.

India also has signed Mutual Legal Assistance Treaties (MLAT) with 39 foreign nations, which helps ensure the service of warrants, summons and judicial processes to both individuals and entities who are accused of committing a white-collar crime. The Government of India has also signed bilateral extradition treaties with 42 countries and has made extradition arrangements with an additional 11 countries.

The recent amendment made to the Prevention of Money Laundering Act has widened its scope. It now includes a person who was involved or was knowingly a party to either one of the processes i.e. concealment, acquisition, use, possession, projecting as untainted property and claiming it as untainted property, in any manner as guilty of money laundering. As a step against money laundering, India is also a party to the Financial Action Task Force (FATF) whose primary aim is to co-operate and co-ordinate international and global anti-money laundering efforts.

Instances Of White Collar Crime In India.

  • Satyam Scandal
    The scam came to light on 7th of January 2009 when B. Ramalingam Raju through a confession letter admitted manipulating his books of accounts by means of overstating the assets and underplaying the liabilities. The scam was of a 14,000 crore rupees and is also considered as a reason behind the 2009 recession.
    SEBI punished the offenders by holding Mr. Raju and nine major associates guilty of indulging in fraudulent trade practices in addition to insider trading. Each of them was asked to pay 3000 crore rupees in the next 45 days and had further been debarred from accessing the security market in any way for the next 14 years. SEBI took all steps necessary to see to it that no such scam happens ever again. This scam had shaken the whole country and was an eye-opener to SEBI that some steps are required to stop such practices.
  • Saradha Chit Fund Case
    This was a major financial scam and allegedly had political ties too. The failure of the Ponzi scheme by Saradha Group (association of 200 private companies) was believed to be running an investment scheme widely known as the Chit Fund. Approximately they collected 200-300 billion rupees from 1.7 million depositors. Minimum 10 of the Saradha group companies were accused of committing fraud through money-pooling activities. In May 2014, the Supreme Court of India referred the case to CBI as it was possible that international money laundering and political nexus was involved in the case. Many well-known personalities were arrested for their involvement in the scam.
  • Punjab National Bank Fraud
    PNB’s preliminary investigation revealed that there were 2 officials in the bank who fraudulently issued a letter of undertaking to the respected firms without following the procedure laid down. These letters of undertakings were then transmitted across the SWIFT messaging system on the basis of which the credit had been offered to the respected firms. PNB also said that the funds raised for the purpose of purchasing and selling diamonds were not used for the mentioned cause. PNB informed the stock exchange of this fraudulent and unauthorized transaction. PNB incurred $1.8 billion in fraud. It is the largest fraud to have been detected to date in the Indian Banking Sector.

Conclusion

White Collar Crimes are a global concern and has been increasing at an unprecedented rate. Based on various studies, it can affirmatively be said that the impact white-collar crimes have on the society exceeds any other crime as it directly affects the economy of the country. India is a developing country and white-collar crime has the potential to adversely affect the growth of the country. It could take the country a few years back in terms of economic growth. It not only affects the economic growth but also taints the image of the country across the globe.

With the increase in white-collar crimes it is imperative that crimes of such nature are not only dealt firmly and expeditiously, but systems are institutionalised to prevent such crimes. The punishments of these crimes should be such that the offenders would think twice before committing a crime of such nature. However, one must understand that it is exceedingly tough to eliminate it altogether. Strict laws and special tribunals exclusively dealing with white-collar crimes might take us a long way. The governments all around the world must with legal entities, collaborate to effectively address the challenges of white-collar crimes and make every attempt to reduce it.


Editor’s Note
The article is well-researched as it talks about different categories of crimes and how white-collar crimes happens to be one of them. Further, the writer talks about the difference between blue-collar crimes and white-collar crime with the case law. The article helps us to understand how exactly the white-collar crimes, despite being so many regulations and treaties, continue to take our country back in terms of economic growth and affects the reputation globally.

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