THE NATURE OF WHITE-COLLAR CRIMINOLOGY

Authored By: Anmol Kapoor, Law Student, St. Xavier’s Law School, St. Xavier’s University

Introduction

“White-collar crime has been marketed – billions of dollars have been put in to have us be bored by it.”- Adam McKay[1]

White-collar crimes refer to crimes that usually have occurred in the corporate sector or by other sorts of professionals which is non-violent in its nature. A crime of this category is in most cases to obtain financial gain as a result. Some common examples of the given crime can be said to be different types of fraud, embezzlement, money laundering, insider trading, etc.

White-collar crimes, the act after being described by Sutherland had its focus mainly on businessmen, politicians, and professionals in high ranks but with time these crimes have gotten more inclusive. With the development of technology and advancement in commerce, the ambit of these crimes has expanded to cybercrime (computer crime), health-care fraud, intellectual property crimes, etc. in addition to more traditional crimes like embezzlement, bribery, conspiracy, obstruction of justice, perjury, money laundering, tax crimes, and etc. [2]

White-collar crime, especially in India is at a growing pace with more than surprising statistics. The most common kinds of white-collar crimes in India are corruption, bribery, and fraud. In a report titled ‘The changing dynamics of white collar crime in India,’ by the Business Standard it was found that in the last 10 years, the Central Bureau of Investigation has found 6,553 cases; only 517 of which were reported in the last two years. [3]

The crime branch as compared to the year 2010 saw a drastic increase of crimes of this nature, with a sharp increase of 108 percentile; as a total of 108 white-collar criminals were arrested in contrary to 71 in the year 2010. 

[4]

History of white-collar crimes

One of the most famous 20th century criminologists Edwin Hardin Sutherland, in the year 1939 for the first time described the phenomena of white-collar crimes as “crimes committed by people who enjoy the high social status, great repute, and respectability in their occupation.[5]Before his finding out what this was, there existed a widespread belief that the upper class of the society lacked the very capability; that would be required in the causation of such crimes. Sutherland in his book argued that poverty and deprivation cannot be the only account for the commission of the crime; because crimes were also committed by estimable people of advanced social status.

The actual commission of these crimes dated way back and before the Sutherlands discovery. The first such case occurred in the year 1473, in England in a case known as the Carrier’s case. There existed a principal-agent relationship and the agent here being entrusted with such goods, was found to have been guilty of stealing and misappropriation. 

Another such case can be said to be series of crimes committed during the period of the industrial revolution which gave rise to the passing of the famous Sherman antitrust act in 1890. This was a stringent act that was passed to make monopolistic practices illegal. 

How does white-collar crime affect more than criminals?

Despite white-collar crimes being non-violent in nature, the impact it leaves on society is huge and the cost is way higher than organized crime. Thus, it is called a socio-economic [6]crime. Crimes of these sorts are not only limited to the businesses, but they stretch to the society at large; producers, consumers, the working population, the environment, etc. These crimes cause a big economic loss to the country. A single crime like a scam or fraud is not just confined to the loss of business and security, but reaches out to the victim; the compensation that is to be paid also affects the costs. Higher costs of commodities affect taxes, the consumers’ and governmental spending. It also lays an impact on the working force of the companies, who get laid off and firms go out of business. 

As observed, white-collar crimes; one of whose predominant effects existing are loss to the public. Ponzi schemes are one example of such white-collar crimes. Ponzi scheme, also known as investment fraud is the ruse to get people to invest, under the misconception that their money is generating high returns with little or no risk. Despite this pretense, in reality, the fraudsters pay existing investors with the capital from new investors. One such Ponzi scheme was ‘The Sarada Chit fund scam.’ As discussed in Subrata Chattoraj vs Union Of India & Ors on 9 May 2014[7], Sarada Scam was a major Ponzi scheme; organized by the ‘Sarada Group of Companies,’ affecting lakhs. This group contained a total of almost 200 private companies, which in an aggregated form ran investment schemes; which was also fashionably called chit-funds. The Sarada scam was a beautifully laid, well-planned scam where there existed a large quantum of focus on building the brand; from employing journalists to owning local newspapers and news channels to donating motorcycles to the police of West Bengal state in the name of corporate social responsibility, they did it all. As with any other Ponzi scheme’s Modus Operandi, here too the scam worked by taking funding from new investors to pay off the old ones.

Who are ‘meat-eaters?’

Researchers through various articles and papers have written about and found out that people who commit white-collar crimes, spread through any and almost every business and profession are known as ‘meat eaters.’ [8]White-collar crimes can be said to be increasing rapidly with the advent of technology. These professionals who commit such crimes are often the same people who find various loopholes in the system and get assistance indirectly from the government. Therefore, people from different kinds of professions carry out these acts, and in turn, also form a link with each other. 

CASE STUDY:

United States V. Bernard L. Madoff[9]

Bernard Lawrence “Bernie” Madoff is said to have organized one of the largest Ponzi schemes in history in late 2008. He claimed that he used the split-strike conversion, an investive strategy to generate large sums of money when in reality he just deposited money from the clients in a single bank account, which he also used to cash out his clients.  He was a former NASDAQ chairman, financier, and founder of a Wall Street firm, which he founded in 1960. He was under The US Securities and Exchange Commission’s investigation for a long time before he pleaded guilty to 11 felonies, at the age of 71. He was charged for securities fraud, investment fraud, wire fraud, money laundering, perjury, among other crimes as he defrauded almost thousands of investors over the course of more than 15 years, of millions of dollars. He was sentenced to 150 years in prison. 

In the case of Noormohmed Jamalbhai Latiwala vs State Of Gujarat on 25 March 2004, the court observed “383 unfortunately in the last few years, the country has seen an alarming rise in whitecollar crimes which has affected the fibre of the country’s economic structure. These cases are nothing but private gain at the cost of public, and lead to economic disaster.” [10]The given case law is of crime related to banking in the cooperative field, where spurge in rising cases of white-collar crime is observed. There exists an unfortunate amount of negative effect on the economy due to white-collar crimes; this affects both the depositors who might have deposited a large sum of money or even their life savings; and also the public at large. It is also noted the investigation of crimes of this nature requires an officer who is prudent to investigate in scenarios of this grave nature, and possesses the required skills to do so. The officers need to be well conversed with the system and the government needs to be prepared to adapt to the machinery of modern times, like; narcotic tests, lie detector tests, etc. 

Laws relating to white-collar crimes in India

In India, there are various laws dealing with white-collar crimes. These laws date back to the time of the Santhanam Committee; which in the 29th Law Commission Report[11] was the first to encompass the degree of threat that white-collar crimes possess.  In this report, a huge emphasis was paid on malpractices and offences known as ‘white-collar’ crimes. 

The Indian Penal Code of 1860 contains several different provisions to tackle white-collar crimes of various sorts. 

Besides this, the government by various legislations tries to prevent these from happening. Some of these are-

  • The Companies Act of 2013
  • Essential Commodities Act of 1955
  • Prevention of Corruption Act of 1988
  • Income Tax Act of 1961
  • Prevention of Money Laundering Act 2002
  • Negotiable Instruments Act of 1881
  • Central Vigilance Commission Act, 2003
  • Foreign Exchange Act of 1974
  •  The IT Act can be said to be containing provisions like Section 43 and 44, to deal with crimes committed over the internet using means of electronic devices, the most recent addition traditional crimes and the most frequent in recent times. [12]

In the case of Mphasis BPO Fraud in the year 2005[13], we can observe Section 43 of the IT Act in use. Here four employees working at a call centre outsourcing faculty which was owned by Mphasis, committed the act of obtaining PIN codes from customers. This act was not authorized; in furtherance of this, they used the personal information of these customers to open bank accounts with false identities. They used these accounts in order to transfer the money belonging to these customers from their pre-existing bank accounts to the newly opened bank accounts opened by the fraudsters. When they attempted to withdraw money from the falsified accounts, they were caught by the police and booked under section 43 of the IT Act.

The Reserve Bank of India also acts by providing stringent instructions to the banks in order of maintaining records and also by the KYC (Know your customer) regulations. 

Conclusion

“It was a white-collar crime.” Illium gave her an odd look. “In the human world, such crimes are lightly punished, though they harm hundreds, leading some to choose death out of despair, while the man who beats a single person is considered the worse criminal.”Nalini Singh[14]

White-collar crimes, non-violent and unreported, almost always; pass through the shackles of a punishment without any marks. It is not an unknown fact of the matter that the increasing development of technology and modernity in that sphere does unfortunately also have its adverse negative effects too. White-collar crimes being one of those. Thus with an increase in technology, there exists an increase in the crime rate of this nature. 

As for the sharpened increase in casualties of this character, and the surpassing of crimes of other sorts; it is detrimental for government to make stricter laws while dealing with perpetuates of white-collar crimes. The Indian Penal Code does not have the mention of white-collar crimes but has crimes in close proximity of those. As it is given that white-collar crime is one that affects the society as a whole and large along with the economy of the country, it is more than essential that the provisions of the IPC are amended to interpret the problems arising out of such crimes. [15]

Further, there exists very little awareness as to what constitutes a white-collar crime; such ghastly crimes need to be defined so that the common public is of the understanding, that if they are victims of such, they are cognizant and not unwary[16]. The media acts as an essential tool here; it has an overriding hand to help the people at large. The media can report the cases left unreported and help end the cycle of corruption. 


[1]Adam Mckay, AZQuotes.com , September 15, 2021

[2]Levenson, Laurie L, White-collar crime, Encyclopedia Britannica, September 15, 2021

[3]Subodh Asthana, White Collar Crimes in India, iPleaders, July 31, 2019

[4]Richa Tiwari, An Analysis upon Concept and Legal Theory of White Collar Crimes: A Review, Journal of Advances and Scholarly Researches in Allied Education [JASRAE], Volume number:16  , Issue number:4 , Page cited: 1011 – 1015 (5)

[5] Subodh Asthana, White Collar Crimes in India, iPleaders, July 31, 2019

[6] Prakash, White Collar Crime: Detail Study, Legal Service India

[7] T.S. Thankur., Subrata Chattoraj vs Union Of India & Ors on 9 May, 2014, Indian Kanoon, March 25, 2004

[8]Richa Tiwari, An Analysis upon Concept and Legal Theory of White Collar Crimes: A Review, Journal of Advances and Scholarly Researches in Allied Education [JASRAE], Volume number:16  , Issue number:4 , Page cited: 1011 – 1015 (5)

[9] United States Department of Justice, (last updated June 5, 2020)

[10]Jayant Patel, J., Noormohmed Jamalbhai Latiwala vs State Of Gujarat on 25 March, 2004, Indian Kanoon, March 25, 2004

[11] Twenty-nineth report on Proposal to include certain Social and Economic Offences in The Indian Penal Code, Law Commission of India, March 25 1966

[12]Richa Tiwari, An Analysis upon Concept and Legal Theory of White Collar Crimes: A Review, Journal of Advances and Scholarly Researches in Allied Education [JASRAE], Volume number:16  , Issue number:4 , Page cited: 1011 – 1015 (5)

[13] Lionel Falerio, IT Act 2000- Penalitiers, Offences with Case Studies, Network Intellegence, June 24, 2014

[14]White Collar Crime Quotes, Quotlr

[15]Subodh Asthana, White Collar Crimes in India, iPleaders, July 31, 2019

[16]Prakash, White Collar Crime: Detail Study, Legal Service India

Related posts