Rise in Frauds, Money Laundering & Cybercrime in India

An analysis of the various kinds of white collar crimes committed within businesses and how the onslaught of the Covid-19 pandemic has increased their occurrence in the corporate world.

The uncontrollable rise in white collar crimes has had a profound impact on not just the society in general but the idea of business and corporate finance as well. This type of a crime is also referred to as a socio-economic crime since it directly impacts the entire economy of a nation as a whole and not just one particular individual. The commission of white collar crime directly implies large amounts of losses within the business sector which happens to be the backbone of every economy and thereby has a trickling effect on the consumers within the nation’s society. There exist several categories of these kinds of frauds which can also be referred to as scams such as the 2g scam, the havala scam, the banking scam, the fodder scam and innumerable others which have plagued not just India but every country in the world.

Furthermore, the pitfalls of these crimes is that it takes eons to make good all the losses incurred as a result of these fraudulent activities which again has a direct impact over the consumers. This implies higher prices for the consumers through higher taxes, government revenue as well as increased insurance costs. Thus the impact of white collar crimes on society is greater than any other section of persons. There is loss in every field from the costs of commodities to the securities and insurance and simply one such financial fraud can affect the businessmen, the investors and the government
Common Types of White Collar Crimes committed In India:
1) Bribery: This is the most common kind of white collar crime and also the easiest to commit due to which it is resorted to by several people. Bribery simply implies giving additional money or additional goods as leverage or bait to the person at a higher position in return of a favour which would amount to a crime. Simply put, bribery occurs when one individual gives money to another person who happens t be in a position of authority. This is done to lure the person at power t provide a favour to the other which would amount to illegal means. This also happens to be the most common form of income for most of the public officials in India.
2) Tax Evasion: Tax evasion is usually committed with the primary intention of concealing the real taxable income and all real position to the authorities. This concealment of income is undertaken for reducing the applicable tax liability in the eyes of government. Basically, it implies the hiding of all the money earned from any illegal means in order to reduce a person’s liability to pay tax and to thereby produce lower income to the tax authorities. Tax evasion has a much greater impact on the social values of any community as it demoralizes every honest tax payer who also becomes much more inclined to resort to this method to attain a greater income.  
3) Bank Frauds: Fraud is one such crime which is committed with an intention to deceive and gain undue advantage. Bank frauds are basically frauds committed against just banks as the name suggests and it is usually an activity undertaken by fraudulent companies by making fake representations of their identities. This also involves activities such as the manipulation of negotiable instruments such as cheque bouncing, securities, bank deposits etc. Bank fraud is directly linked with the general public as well, since there is a clear and obviously direct link between banks and the public. This is thus the most common type of white collar crime and also a corporate crime which harms the public as well as the government of any country.
4) Money Laundering: Money laundering is the kind of crime wherein the criminals usually disguise the identity of the money in one way or another. In this sort of crime, the criminals attempt to hide the original ownership of the money and the place where they obtained that money through illegal means. Laundering is done with the intention of making that money which originated from legal sources. Basically, money laundering means to show illegitimate money as legal money for the purposes of evading the authorities and making a higher income. For example, if an individual obtains money through the means of black marketing, trafficking of illegal good etc., the money will be considered as illegitimate money which cannot be deposited into the banks since I may draw suspicion if it is directly deposited into financial institutions. Money laundering usually comprises of the following three steps:-

a) The owner of the money must obtain the money from some illegal means and deposit the same into the bank by some way.
b) Then through multiple transactions the transfer of money must be established.
c) This individual then returns the money into banks in order to make it seem legitimate.

5) Cybercrime: Cybercrime is one of the biggest white collar crimes committed in India and the latest dilemma prevalent within the cyber world. Cybercrime is the crime which is related to the internet and thus computer networks. With the rapid increase of advancement in technology there has also been a marked increase in the crime related to such technology. Cybercrime mainly involves persons who are experts within the field of computers and internet technology and it is usually committed against unsuspecting victims either directly or through indirect means with the intention of casing damage to this individual’s reputation or even to cause any physical or mental damage to this person through the means of the internet, other networks an technology.

6) Identity Theft: Identity theft is one of the easiest types of crimes committed in today’s day and age. Owing to the advancement of technology it is very easy to access the personal information of any individual. Identity theft is the crime wherein the criminal accesses unauthorized information of another person, such as the name, address, phone number etc. and uses this information to gain money. Basically, identity theft is committed through using someone else’s identity with the intention of committing fraud or to gain money through illegal sources.
How White Collar Crimes have risen during the Pandemic?
  • Owing to the much dilapidated downturn of finance and business in recent times caused by the pandemic, most businesses are under a lot of pressure to stand their ground and keep their business afloat for as long as possible in order to evade unnecessary losses or even closures. Such a situation of high pressure usually leads people to resort to easier manners of staying afloat and tiding through these turbulent times by indulging in activities such as the falsification of accounts, accounting malpractices, market manipulation, fraud and other financial atrocities as has been described above as well.
  • The fact which has further exacerbated this situation is the greater presence of opportunities to people prone to such acts, who are now keener than ever to utilise their minds to indulge in illegal activities for gaining an edge at a time where everyone seems to be losing opportunities. This is also true since a lot of the attention is now even being directed at combating the pandemic, the country’s GDP and every business’ internal policies. With priorities elsewhere, vigilance over internal controls, compliance and supervision has become very lax. Internal controls and incisive due diligences do not appear to be the top priority at this moment since the main goal is to save jobs and keep businesses running at break even if not at a profit.  
  • Moreover, governments across the world are pushing more than trillions of dollars into the economy as stimulus packages & bailouts to curb the effects of this downturn. Furthermore, the governments are procuring (especially in sectors such as healthcare) like never before and, since time is of the essence, the usual safeguards in the process in public procurement) are being bypassed. This has led to easy and corrupt practices and a steady rise in white collar crimes all over the world and not just in India.
However, there are still some new age means through which opportunists can be combated from indulging in such white collar crimes. These have been provided below:
  1. To make sure that vigilance remains at an increased level: This is the time to realize that it is foolish to drop down our guards simply due to the divergence of attention caused by the onslaught of the pandemic. Compliance departments within companies are required to necessarily work harder to ensure that frequent checks are undertaken along with necessary hygiene drives as well. This is particularly important for those organizations which are regularly engaged in the businesses involving large scale government interface along with areas which are tightly regulated and considered high-risk, such as the defence industry.  
  2. Implementation of Procedures imminent to combat such crimes: This is also the time to ensure that adequate procedures are put in place for ensuring that such corrupt practices are not undertaken so easily and that businesses remain sharp through these trying times. The newly instituted Prevention of Corruption Act (“POCA”) also ensures that commercial organizations are also prosecuted for corruption instead of just the individuals responsible otherwise. 
  3. Hotlines for ethical purposes: It has now become more important than ever to create avenues such as ethical hotlines which provide a technique of anonymous  and safe reporting of any illegal activities so as to ensure that the individual’s identity remains undisclosed, ensuring him due safety and managing to stop errant corrupt practices a the same time.
  4. Revamping of the corporate environment: A much required change within the corporate culture is also needed with a strong backbone providing for zero tolerance for high level crimes or white collar crimes.
Much required protection to the whistle-blowers: It is known that in India, private institutions do not provide for any protection to whistle blowers making it very difficult to combat crimes within businesses and also putting a threat on genuine employees wishing to divulge any corrupt practices. This is why it is high time that the Indian legal system provides the same level of protection which is accrued to a public servant whistle-blower as a private one.