Introduction

Introduction

White collar crimes are those which are linked with people of high stature and are distinct from traditional crimes in the sense that there is a principal element of breach of trust by carrying out unethical business practices cultivated by motivation to gain financially. It is the offenders’ position that accords upon them the opportunity to perpetrate such crimes. 

“The perfect criminal, should he or she exist, would be the one who is never apprehended – indeed, the one whose crimes may be huge but unnoticed, or indeed miscategorized not as crimes at all because they are so powerful they sway the law in their favour, or so clever they discover an immoral opportunity for criminal enterprise before the legislators notice it.”

― Charles Stross, The Jennifer Morgue

A world where crime wears a coat and tie can be found behind the glossy facade of financial institutions, in the bustling halls of corporate offices, and amid the buzz of computer servers. The world of white-collar crime, where the offenders are frequently found in boardrooms, playing with figures and abusing trust rather than in dark alleys. These criminals are not like the usual criminals, they use pens instead of guns and legal documents serve as their battlefields. The intricate and subtle character of white-collar crime poses a serious risk to both public trust and economic stability. A monument to the evil side of development and technology, white collar crime is a phenomenon that ranges from high-profile corporate frauds to complex computer schemes. 

The most influential criminologist of the 20th century and also a sociologist, Edwin Hardin Sutherland for the first time in 1939, defined white collar crimes as “crimes committed by people who enjoy the high social status, great repute, and respectability in their occupation”. The five attributes of the given definition are: 

• It is a crime. 
• That is committed by an important person of the company. 
• Who enjoys a high social status in the company. 
• And has committed it in the course of his profession or occupation. 
• There may be a violation of trust.

White collar crime in India

White collar crimes are distinguished from traditional crimes by their use of dishonesty, manipulation, and abuse of trust for financial gain, as opposed to aggression or physical force. These crimes seriously threaten the integrity of our financial institutions and the confidence of our society because they are frequently committed by people in positions of power or influence. India is a developing country and white-collar crimes are becoming a major cause for its under development along with poverty, health, etc. The trend of white-collar crimes in India poses a threat to the economic development of the country. These crimes require immediate intervention by the government by not only making strict laws but also ensuring its proper implementation.

The Business Standard on 22.11.2016 published a report titled ‘The changing dynamics of white-collar crime in India’ stating that in the last 10 years, the Central Bureau of Investigation (CBI) has found a total of 6,533 cases of corruption out of which 517 cases were registered in the past two years. Statistics showed that 4,000 crores worth of trading was carried out using fake or duplicate PAN cards. Maharashtra showed a rapid increase in the number of online cases with 999 cases being registered. The report also mentioned that around 3.2 million people suffered a loss because of the stealing of their card details from the YES Bank ATMs which were administered by Hitachi Payment Services.

In 2014, India was ranked 85th which subsequently improved to 76th position in 2015 because of several measures to tackle white collar crimes. In 2018, as per the report of The Economic Times, India was placed at 78th position, showing an improvement of three points from 2017, out of the list of 180 countries

Emergence of White Collar in India

The earliest known case of white-collar crime dates back to the 15th century in England. There has been a case widely known as Carrier’s case of 1473, wherein the agent who had been entrusted to transport wool attempted to steal some of it for himself. It was during such celebrated cases that the Star Chamber and exchequer Chamber of English Court of law adopted the ‘breaking bulk’ doctrine. However, with the astonishingly rapid growth of industrial capitalism, the jurisprudence of crime came to be based on coercion and robbery. It was the Dutch Marxist, William Bonger who first put forth the contention that criminal the attitude amongst the working class under capitalism develops due to the prevailing conditions of misery while the criminal attitude develops among the bourgeoisie from the avarice fostered when capitalism strives. Such contention saw success in United States of America in 1890, when Congress passed the Sherman Antitrust Act which took the initiative to make the monopolistic trade illegal- a move which came to be replicated by other industrialized countries like Great Britain. 

While we try to comprehend how white-collar crimes emerged in India, we need to give due consideration our history. It is an undeniable truth that commission of crime has increased exponentially ever since human beings began to live together. A few kinds of crime are now deemed to be old while with the changing dynamic of our everyday lives, many new forms of crime continue to take shape in the deviant minds of the society. The concept of white-collar crime is definitely not a new phenomenon. There have numerous references to such crimes since the Vedic period in India’s ancient and medieval literature. Manu who is often accorded the title of being India’s great law-giver, held the view it was age when dharma ‘prevailed’ in perfection but later adharma progressed gradually which naturally gave way to tendencies such as robbery, wrongdoing and fraud.

Corruption might just be one of the species of white-collar crimes but it has always been the most talked about in all spheres- social, economic and political even though not much stringent steps/actions have been taken to curb this wide spread menace. The Indian Penal Code, 1860 is perhaps the earliest and most comprehensive codified criminal law of India. It specifically does not mention the word ‘white collar crimes’ but deals with many offences which are closely linked to white-collar crimes such as bribery and corruption, counterfeiting of coins and government stamps, of offences relating to weights and measures, offences relating to adulteration of food stuffs and drugs, misappropriation of public property and criminal breach of trust, cheating, forgery and offences relating to documents and counterfeiting of currency. 

The reason for such rapid growth in white collar crime in recent decades is often attributed to the fast-developing economy and industrial growth. The Santhanam Committee Report drew a lucid picture of white-collar crimes committed by people belonging to higher social status. It includes businessmen, industrialists, contractors, suppliers and not surprisingly corrupt public officials. The Reports of the Vivin Bose Commission of Inquiry which looked into the affairs of Dalmia Jain group of companies (1963) sought to draw attention to how industrialists often indulge themselves in white collar crimes such as forgery, fraud, falsification of accounts, tampering with records for personal gains and tax evasion etc. Similar observations were made by Hon’ble Justice M. C. Chagla while dealing with the case of business tycoon Mundhra who wanted to build up an industrial empire using dubious means. There were as many as 124 prosecutions against the business magnate and companies owned or controlled by him between 1958 to 1960 and as many as 113 of them resulted into conviction. With the backdrop and scams like that of Satyam scam, fleeing Vijay Mallaya, 2G scams and many more, it was in 2018 that the Government of India passed Fugitive Economic Offenders Act, 2018.

Moreover, recent developments in technology, especially in the closing years of the 20th century, have opened up new dimensions for deviants to further white-collar crimes. According to the changing dynamics of white-collar crime in India, the Central Bureau of Investigation (CBI) has found a total of 6,533 cases of corruption over the last 10 years, of which 517 cases have been recorded over the last two years. Statistics showed a trading value of 4,000 crores using fake or duplicate PAN cards. With 999 cases registered, Maharashtra saw a dramatic increase in the number of online cases. The study also said that approximately 3.2 million people have lost their card details, which were stolen from the Bank ATMs. In the light of such staggering numbers, it is safe to say India is well within the grip of White-Collar Crimes.

White-collar crime has a significant impact on corporate India. Now, more than ever before, fraudsters are driven by ambition and financial gain, exhibiting deviant or exploitative conduct. Some of the new trends are as follows: 

• Innovative forms for kickbacks and favors 
• The average age of fraudsters is dropping- which might be the biggest cause of worry since it is the very future of the country who is willingly joining the dark side of crime. 
• Increasing incidents of informants reporting bribery or other misconduct 
• Software expansion to avoid detection, for instance, utilising instant messaging or social media networks instead of emails

A new variety of white-collar crimes, commonly referred to as cyber-crimes, has exponentially increased. Such crimes have become a global issue for law enforcement agencies. Due to the specific nature of such crimes, they can be carried out without a physical presence – anonymously and sitting far from victims. Cyber criminals have a huge advantage: they can use computer technology to cause damage to people economically and reputation without the risk of being caught or apprehended. In India, cybercrimes affect the sectors of banking and economy, energy and telecommunications, transportation, trade industry, etc. India’s white-collar crime trend poses a threat to the country’s economic development. 

Reasons for the Growth of White-Collar Crimes in India

In India, white collar crimes have become more commonplace and have become a major threat to both the country’s social fabric and economic integrity. These crimes are usually non-violent and are carried out by people in positions of trust and authority. Examples of these crimes include fraud, embezzlement, insider trading, bribery, and cybercrimes. There are a number of factors that have contributed to the rise in white collar crimes in India, and it is important to comprehend these factors in order to devise effective strategies to counteract them.

The main factors contributing to the rise in white collar crime in India are greed, competition, and a lack of appropriate legal frameworks to deter these kinds of crimes. In a nation that is fast developing economically and technologically, these crimes have found a welcoming environment in which to grow. White collar crimes are extremely difficult to identify and prosecute because of their complexity and lack of violence, which is typically the result of the actions of those in positions of trust and power. Investigating the causes of their emergence reveals that a confluence of factors including human nature, technology breakthroughs, competitive pressures, weak legal systems, and a lack of awareness is fueling the growth of these complex crimes.

• Greed: The father of modern political philosophy, Machiavelli, strongly believed that men by nature are greedy. He said that a man can sooner and easily forget the death of his father than the loss of his inheritance. The same is true in the case of commission of white-collar crimes. Why will a man of high social status and importance, who is financially secure, commit such crimes if not out of greed?
• Easy, swift and prolong effect: The rapid growing technology, business, and political pressure has introduced the criminals to newer ways of committing white collar crimes. Technology has also made it easier and swifter to inflict harm or cause loss to the other person. Also, the cost of such crimes is much more than other crimes like murder, robbery or burglary, and so the victim would take time to recover from it. This would cut down the competition. 
• Competition: Herbert Spencer after reading ‘On the Origin of Species’ by Darwin, coined a phrase that evolution means ‘survival of the fittest’. This implies that there will always be a competition between the species, and the best person to adapt himself to the circumstances and conditions should survive. 
• Lack of stringent laws: Since most of these crimes are facilitated by the internet and digital methods of transfer payments, laws seem reluctant to pursue these cases as investigating and tracking becomes a difficult and complicated job. Why it becomes difficult to track it is because they are usually committed in the privacy of a home or office thereby providing no eyewitness for it.
• Modern technology: With modern technology ease of business is one of its expectations, in a sense, it also applies to white-collar crimes which have allowed them to reach out to a larger number of people and commit large scale crimes without being noticed by the law. Many have fallen victim to different scams such as the credit card scam, moreover, the pandemic opened up a new market for them by exploiting the medical field and creating a black market for Covid medications such as “Remdesivir” and over a hundred cases were lodged against the illegal sales and use of this medicine and in most cases, the Doctors and Hospital staff were involved. 

The need and greed of people have driven them to the extent of exploiting any possible field. It doesn’t stop there the development in technology is so rapid that people can acquire nuclear weapons with a click of a button, this was the case in Mumbai when authorise seized two people acquiring 7kgs of natural uranium which is highly radioactive and dangerous to human life. This makes us question the level of threat that these cartels and organizations impose on the nation and the level of sophistication these crimes have reached for the personal gains of their lives. 

• Lack of awareness: The nature of white-collar crimes is different from the conventional nature of crimes. Most people are not aware of it and fail to understand that they are the worst victims of crime. People who are victims of these crimes fail to comprehend the notion of the crime and understand the exact offence which has been committed and whom to approach or lodge a complaint against because most of the time it involves a large corporation and there may be little or no evidence to essentially produce a criminal and in certain crimes such as scam or fraud people may not even realise that they have fallen victim to a crime such as a bank fraud where yearly there are over thousand cases registered. And in a scam, such as a double-dip scam the victim may fall prey again because the information of the victim is stored and passed on to another scammer. Especially in metropolitan cities these cases are rising but we lack the awareness to become victims of such crimes, a wider reach is required and awareness campaigns by the government may help people understand the severity of these crimes and the loopholes these criminals use and may help reduce the rate of white-collar crimes in future.

• Competition: ‘Survival of the fittest’ is the main panacea for competition followed in the market. It implies that in a battle to succeed, there will always be a competition between the people, and only the best who is able to adapt to the conditions shall survive. White-collar crimes usually eventuate out of the same intent. To win, they do not mind committing crimes like forgery, bribery and frauds. It is often seen that professionals are monetarily compensated and elevated in the organisation for short-term superlative profits. To maximize their performance in competition to others, some don’t even hesitate to proceed to circumvent the existing laws. People who are involved in such crimes are smaller in number, higher in hierarchy, and losses incurred are huge. 
• Rationalisation: As the nature of these crimes is different from the traditional ones, people fail to define and understand them. This leads to offenders committing the crimes and later convincing themselves that the actions performed by them are not criminal in nature. Many stock traders engaged in insider trading view it as a victimless crime and does not see who is being cheated. Salespeople bribing their clients feel they are doing their job by putting the deal together, while not harming anyone.
• Work environment: Work environments can elicit both- good or bad behaviour out of individuals. The environmental indicators like poorly designed job incentives or management nonchalance toward ethics can tempt individuals to behave very differently when faced with ethical choices. Consequently, certain individuals succumb to such temptations and compromise on their ethical values, leading to criminal acts. Rarely, is there a direct order to break the law.
• Necessity: People also commit white collar crimes to meet their own needs and the needs of their family. But the most important thing that the people of high social status want to feed their ego.

The reasons behind white collar criminals going unpunished are:

• Legislators and the people implementing the laws belong to the same class to which these occupational criminals belong.
• The police put in less effort in the investigation as they find the process exhausting and hard, and often these baffling searches fail to promise favourable results. 
• Laws are such that it only favours occupational criminals.
• The judiciary has always been criticised for its delayed judgement. Sometimes it so happens that by the time court delivers the judgement, the accused has already expired. This makes criminals loose in committing crimes. While white collar crimes are increasing at a faster rate, the judiciary must increase its pace of delivering judgements.

Legal Structure Addressing White-Collar Crime in India

The Indian Penal Code 1860 is perhaps the earliest and most comprehensive codified criminal law of India. It specifically does not mention the word ‘white collar crimes’ but deals with many offences which are closely linked to white collar crimes such as bribery and corruption, counterfeiting of coins and government stamps, of offences relating to weights and measures, offences relating to adulteration of food stuffs and drugs, misappropriation of public property and criminal breach of trust, cheating, forgery and offences relating to documents and counterfeiting of currency. 

The POCA is the key legislation against anti-corruption in India, penalising actual or attempted ‘promise’ or acceptance of any ‘undue advantage’ for performing any public duty improperly or dishonestly. The legislation also covers those circumstances in which an individual causes or induces another public servant to commit these offences. Within the context of the POCA, the term ‘undue advantage’ is not restricted to bribes in the form of cash or cash equivalents, but covers any form of gratification, including gifts, favours and any form of quid pro quo in a manner that amounts to corruption.

The POCA primarily covers public servants. Broadly speaking, public servants are defined as any individual in service or pay of the government for the performance of any public duty. The Supreme Court of India included employees of private banks and deemed universities, as well as trustees of charitable trusts established to operate these deemed universities, within the definition of ‘public servants’, in its 2016 judgment in CBI v Ramesh Gelli.The Supreme Court has also included hospital workers and doctors of private hospitals within the ambit of the POCA.

The Prevention of Corruption (Amendment) Act, 2018, specifically brought commercial organisations within the purview of the POCA. As a result, the law treats the act of giving bribes by corporate organisations through agents and third parties as a specific offence under the POCA.

The PMLA seeks to prevent money laundering and authorises the Indian government to confiscate any earnings or property accrued from illegal proceeds. The scope of the PMLA is to prohibit and penalise money laundering and regulate the freezing or seizure of illegally acquired wealth, as well as to specify the procedure for adjudication of money laundering-related offences.

While some laws, such as the Indian Penal Code, 1860 (IPC) and the Indian Contract Act, 1872, cover various offences that involve fraud, the CA, India’s primary legislation governing the corporate sector, sets out the concept of corporate fraud in India and empowers the Serious Fraud Investigation Office to investigate allegations of fraudulent conduct in relation to companies and their officers. The Companies Act defines fraud as any attempt by an individual to gain undue advantage from, and significantly disadvantage the interests of, the company in question.

In addition to the laws set out above, the IPC is also used to charge white-collar crime offenders with various charges such as cheating and criminal breach of trust. Various ancillary laws and regulations govern financial crimes, such as the Foreign Contribution Regulation Act, 2010, the Lokpal and Lokayuktas Act, 2013, the Central Vigilance Commission Act, 2003, the Prohibition of Benami Property Transaction Act, 1988, the Fugitive Economic Offenders Act, 2018 and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Companies with overseas operations alongside their Indian presence may fall under the extraterritorial reach of the laws of the jurisdictions in which they carry out business, such as the United Kingdom Bribery Act (UKBA) and the United States Foreign Corrupt Practices Act (FCPA).

• Fraud: Section 447 of the Companies Act, 2013provides punishment for fraud commission. This specifies that if a person is found guilty of a crime of theft, he will be imprisoned for a term of not less than six months, expanding to ten years. And he will also be subject to a fine that, in any event, should not be less than the amount involved in the crime and which could stretch to three times the amount involved in the fraud. In the case that the crime was conducted against the general public’s interest, the prison term would not be shorter than three years. 

• False statement/Claim: Section 448 of the Companies Act, 2013 provides that: if a person deliberately makes a false claim, believing that it is false and intentionally omitting some material fact, knowing that it is true then he is liable for his misconduct. Such false statement can be created by return, report certification, financial statement, prospectus, statement or any other documents required for the reason stated in this Act or any rules made under it.

While white-collar crimes can trigger consequences under various laws, the Indian regulatory framework comprises three principal pieces of white-collar crime legislation: the PMLA, the POCA and the CA. These laws have been amended routinely, and Indian courts continue to develop the jurisprudence arising out of them.

• Money Laundering: In the case of money laundering, the Indian government has taken many steps to address this problem. The Reserve Bank of India has given guidance under the rules of KYC (Know Your Customer) to be strictly implemented by the banks. Banks and financial companies are required to keep transaction records for a 10-year term. 

• Cyber Crimes: To counter computer-related crimes, the Information Technology Act, 2000 is implemented to provide legal recognition for the encryption of information shared in commercial transactions.

The punishment for the following offences is laid out in Sections 43 and 44 of the Information Technology Act:

• Introduction of viruses or malicious programmers. 
• Unauthorised access and downloading files.
•  Unauthorised copying of an extract from any data. 
• Damage to computer system or computer network. 
• Helping any person to facilitate unauthorised access to a computer. 
• Denial of access to an authorised person to a computer system. 

While the Information Technology Act does not dwell on cyber-crime as such, there are some clauses in this Act that deal with white collar crimes. Chapter XI deals with the offence of cyber-crime and chapter IX deals with penalties and adjudication of crime. Apart from this, many issues are unresolved due to lack of focus. Some of them are: 

• Inapplicability 
• Qualification for appointment as adjudicating officer not prescribed 
• Definition of hacking 
• No steps to curb internet piracy 
• Lack of international cooperation 
• Power of police to enter and search limited to public places Absence of guidelines for investigation of cyber-crime

• Fugitive Economic Offenders Act, 2018: With such backdrop and scams like that of Satyam scam, fleeing Vijay Mallaya, 2G scams and many more, it was in 2018 that the Government of India passed Fugitive Economic Offenders Act, 2018 which seeks to punish on economic offenders who commit white collar crime in India and flee to other country in order to escape from their criminal liability and recuse themselves from the jurisdiction of Indian Courts. The Act provides provision which empowers the Government to confiscate any property of economic offender in India who flees to other country. It contains a variety of provisions including, but not limited to, declaration of a “fugitive economic offender” in respect of a person, attachment of the property of such person and bar over civil claims. 

The statute defines ‘fugitive economic offender’ as any individual against whom a warrant for arrest in relation to a Scheduled Offence has been issued by any Court in India, who

1. has left India so as to avoid criminal prosecution, or 
2. being abroad, refuses to return to India to face criminal prosecution. 

The Act also defines ‘benami property’ and provides it the same meaning as given under the Prohibition of Benami Property Transactions Act, 1988. This implies that this Act, 2018 applies to any property which is the subject matter of a benami transaction and also includes proceeds from such property. Further it also seeks to cover within its ambit the transactions which are in nature of benami transactions under the Prohibition of Benami Transactions Act, 1988. Such move is definitely welcome and might successfully curb white-collar crimes or atleast act as a deterrent to such criminal minds. 

• Enforcement agencies: When India is moving steadily up the growth scale, enforcement agencies such as the Central Investigative Agency (CBI), Serious Fraud Investigation Office (SFIO), Enforcement Directorate (ED), Income Tax (IT), Department of Vigilance DFS of Ministry of Finance, SEBI, RBI and IRDA are duly motivated to improve their capabilities to meet the challenges of the changing scenario though reactive in nature. These departments which are the eyes and ears of the Govt for combating white-collar criminals are trying to revamp their capabilities in terms of manpower, technical capabilities and the spear of their activities. They either thinking or some have already of the way forward to cope with the rise in white collar crimes to defend the greater economic interest of various investors.

Project report on white collar crime in India 

Various committees were formed to look into white collar crimes and set up rules and regulations to prevent them and ultimately eliminate them. 

• The Report on the Commission on the Prevention of Corruption, 1964

On the recommendations by the Committee on Prevention of Corruption, headed by Shri K. Santhanam, the Central Vigilance Commission was created in 1964. The Central Vigilance Commission is now the apex institution for vigilance, independent of any executive authority. Its function is to address corruption in government offices and to monitor all vigilance under the Central Government. This organization seeks its advice in planning, executing and reviewing their vigilance work. 

The role that the Central Vigilance Commission plays is: 

1. To supervise the work of Delhi Special Police Establishment in only those matters which relate to the offences which have been committed under the Prevention of Corruption Act, 1988. 
2. To direct the Delhi Special Police Establishment in discharging their responsibility given to them under sub-section (1) of section 4 of the Delhi Special Police Establishment Act, 1964.

• The Report on the Commission of Inquiry on the Administration of Dalmia Jain Companies, 1963 

In the 1930s Dalmia Group run by brothers, Ramkrishna Dalmia and Jaidayal Dalmia, merged with Sahu Jain Family to form Dalmia-Jain Group. This business was ultimately split between the two families and again between the two brothers in 1948. On the allegations of corruption against the group, Vivian Bose Commission of Inquiry into the affairs of Damila-Jain group of companies was set up in 1963. 

The committee said that because of the group’s collection of black money, undisclosed assets and undetermined income tax liabilities, the dissolution or split had become so complicated that it could not be officially said that the groups had split. The Commission headed by Justice S.R. Tendulkar and after his death by Justice Vivian Bose, sentenced Ramkrishna Damia on charges of tax evasion, perjury and criminal misappropriation of funds in 1962.

• The Report on L.I.C. Mundra affairs 

It was in the 1950s when, Haridas Mundhra, a stock speculator was arrested and imprisoned in the case of the first big financial scandal of newly independent India. At that time, Jawaharlal Nehru was the Prime Minister of India. His daughter Indira Nehru was married to Feroze Gandhi, who was also a Member of Parliament. Feroze Gandhi was the driving force behind the anti-corruption movement which led to the imprisonment of Ramkrishna Dalmia. 

When Feroze Gandhi finally came to power, he questioned whether the newly established Life Insurance Corporation had used premiums from the policyholders. Ultimately a committee was set up which was headed by the retired judge of the Bombay High Court, Justice M.C. Chagla which came to the conclusion that Mundhra be sent to jail on the ground of, as many as 124 prosecutions against him and 113 of them resulting in convictions. 

• Das Commission Report, 1964 

In the case of R.P. Kapoor v/s Pratap Singh Kairon, Pratap Singh Kairon, who was the Chief Minister of Punjab was accused of using wealth to boast his high status of and also of his family at public expense. The Commission exempted him on the ground that a father could not be held liable for actions of his grown-up children. The Commission clarified that a son cannot be stopped from carrying out a business of his choice except that the son cannot use his father’s political position and power to exploit others. The petition was therefore dismissed by the court. 

• Administrative Reforms Commission on Reports 

Administrative Reforms Commission’s 4th report titled ‘Ethics in Governance’ had made amendments and included new provisions in order to reduce the number of white-collar crimes in India.

1. The report introduced a new provision stating that partial funding by the state is allowed in elections so as to avoid illegitimate and unnecessary expenditures by the political parties. 
2. It suggested an amendment to section 8 of the Representation of the People Act, 1951, keeping people facing charges in case of a grave or heinous crimes and corruption out of participating in elections. 
3. The report on the election of the Chief Election Commissioner and other Election Commissioners decided to form a collegium in order to select them. The collegium would consist of the Prime Minister of India, the Speaker of Lok Sabha, the Law Minister and the Deputy Chairman of the Rajya Sabha as its members. This would prevent in wrongful exercise of power and prevent manipulation by the authority’s enjoying dominance. 
4. It was proposed that an office of ‘Ethics Commissioner’ be formed by each House of the Parliament. This office would be regulated by the Speaker or the Chairman to follow the code of ethics, to advise the body whenever required and maintain records of the office. 
5. Most importantly the Commission asked the Government to recognize ‘collusive bribery’ as a special offence. The Commission advanced that section 7 of the Prevention of Corruption Act needs an amendment for the inclusion of ‘collusive bribery’ as an offence. This would prevent the public servants from performing such acts which leads to loss to the public. 
6. The Commission also recommended to take immediate measures for the implementation of Benami Transactions (Prohibition) Act, 1988. 
7. The Commission gave protection to whistleblowers on the grounds of confidentiality. And also made harassment and retaliation against them a punishable offence. 
8. The Commission said that the media should have their Code of Conduct and self-regulating mechanism to avert from wrongful actions and government be allowed to disclose the cases of corruption to media in order to help them fight against corruption in the country. 
9. The Commission made an important decision stating that the head of the office should be given the responsibility to take proactive vigilance on corruption.

There are other provisions that were presented by the Commission before the Government thereby assisting the Government in their fight against corruption and other malpractices by the people at higher positions in the authority

• Law Commission 47th Report 

In its 47th report, the Law Commission said that since a corporation does not have a physical body, no pain can be inflicted upon them as a punishment. A corporation does not have a mind that can be accused of guilty intent and therefore new penalties should be created to punish them for their illegal and wrongful acts. 

The Commission found that the real penalty for the corporation would be to experience a curtailment in their reputation. And that they be called a disgrace. The commission said that not only the directors or managers should be punished but the corporation as well. The people should be able to link the offence with the name of the corporation also. 

The Commission recommended the inclusion of the following provisions in the Indian Penal Code, 1860: 

1. In every one of those cases where the offence has been committed by the corporation and the punishment includes imprisonment or fine and imprisonment both, the court will have the power to impose on these offenders fine only.
2. In every one of those cases where the offender is the corporation and the punishment for his offence can be either imprisonment and any other punishment other than fine, than in that case the court shall have the power to impose on such offenders fine only.  
3. In this section, ‘corporation’ should mean an incorporated company or other body corporate. It would also include firms and other association of individuals. 

Like the above-mentioned provisions, the Commission in its report has mentioned the punishment the offender corporation or company would be subjected to. 

• The Report by Santhanam Committee 

The Santhanam Committee was the first body to recognize the intensity of the crimes committed by the people of high social standards, which was acknowledged by the 29th report of the Law Commission released in 1972. Santhanam Committee in its report on the Prevention of Corruption has talked about the reasons behind the prevalence of white collar crimes in India. 

The technological advancement and development in scientific temperament has been assigned as the major reason behind the growth of white-collar crimes. These large numbers with advanced disposition is being regulated by only a handful of elite who form the monopoly. The need of this technologically and scientifically advanced era is to make these masses adhere to the rules laid down by the elites to conduct them. Those who fail to do so land up becoming the offender of white-collar crimes.

The committee showed its concern regarding the great damage that this crime can cause to the public morals. The case of white-collar crimes are so complex and since people are not much aware about it, it is only the experts who can recognize such crimes and protect themselves from becoming a victim of it.

Difference between white collar crime and blue-collar crime 

The term ‘blue collar crime’ came into existence some time in the 1920s. The term was then used to refer to Americans who performed manual labor. They often preferred clothes of darker shade so as to stains less visible. Some used to wear clothes with a blue collar. These worked for a low wage on an hourly basis. White collar crimes have been prevalent since centuries and it is not new to all types of businesses, professions and industries. 

The difference between ‘blue collar crimes’, which are crime of a general nature, and ‘white collar crimes’ was laid down by the Supreme Court of India in the case of State of Gujarat v. Mohanlal Jitamalji Porwal and Anr . Justice Thakker elucidated that one person can murder another person in the heat of the moment, but causing financial loss or say committing economic offences requires planning. It involves calculations and strategy making in order to derive personal profits.

Here are the characteristics of white collar crimes which distinguish it from other crimes of general nature:

• Meaning: Blue-collar crimes refer to people who work physically, using their hands, whereas white collar crimes refer to knowledgeable works, who use their knowledge to commit crimes. 
• New v/s Traditional: Where blue-collar crimes refer to traditional crimes that have been committed since ages, the concept of white collar crimes has recently developed. It’s a new species of crime. 
• Mens rea: To constitute a crime element of mens rea and actus reus is must. Where mens rea is an essential element of blue collar crimes, its involvement in white collar crimes is not necessary. 
• Independent of social and personal conditions: White collar crimes have no relation with the social conditions, like poverty, or personal conditions of the offender albeit it matters in the conventional nature of crimes. 
• Direct access to the targets: Since the offenders who commit white collar crimes are people at a higher position in a company they have easy, direct and valid access to their targets. The case is different with blue-collar crimes. For example, if Jhethalal decides to commit theft in the house of Babitaji, he will first have to break the door or make a passage of entrance to get inside Babitaji’s house and thereafter commit theft.

So, before actually committing theft, Jhethalal will first have to get access to Babitaji’s house. Whereas in white collar crimes, one can have direct access to their target making use of one’s higher position and power. 

• Veiled offenders: In the case of white collar crimes, one does not have to come face to face with the victim and so their identity remains veiled. Whereas in case of blue collar crimes, one has to come face to face in order to inflict injury upon others. 
• Involvement of politicians: In many cases it has been found that the offenders have strong connections with politicians and sometimes, politicians are also involved in committing the crime thus making it difficult for the victims to take action against such offenders. 
• Greater harm: The harm caused by white collar crimes are much more difficult to bear than those inflicted by blue collar crimes. Also, the harm caused by white collar crimes could cause great harm, not only to the public, but to the other institutions and organizations as well. 

Effects of white-collar crime  

• Effect on the company: White collar crimes cause huge loss to companies. In order to recover the loss, these companies eventually raise the cost of their product which decreases the number of customers for that product. This works according to the law of demand states that, other things being equal, when the price of a commodity rises, it’s demand would fall and when the price lowers, its demand would increase.

In short, the price of the commodity is inversely proportional to its demand. Since the company is in loss, the salaries of the employees are lessened. Sometimes the company cut down the jobs of several employees. The investors of that company and its employees finds it difficult to repay their loans. Also, it becomes hard for people to obtain their credits. 

For example, a US-based IT cognizant landed up paying 178 crore rupees to settle the charges levied on it under the Foreign Corrupt Practices Act by the Securities and Exchange Commission. The company had bribed an Indian Government Official from Tamil Nadu to allow the building of a 2.7 million square feet campus in Chennai. Apart from loss in paying 2 million dollar bribery amount, the company also had to bear extra charges of 25 million dollars to get free from the charges. 

• Effect on the employees: White collar crimes endanger employees. They become conscious of their working conditions, whether it is safe anymore or not. They start doubting if they are safe and that they can still be given in their trust to the company.
•  Effect on customers: The most important concern of the customers is whether the products which they are using is safe or not. This doubt rise to see the rate at which white collar crimes have been increasing. 
• Effect on society: White collar crimes are harmful to the society for those people who should be cited as a moral example and who must behave responsibly are one committing such crimes. The society thus becomes polluted. 

When the former director of Andhra Bank and the directors of a Gujarat based pharma company, Sterling Biotech, were arrested for their involvement in 5000 crore fraud case. They used to withdraw money from bank accounts of several benami companies. This was one big scam which put the people in fear. 

Also in 2018 the Punjab National Bank (PNB) found that fraudulent transactions of value 11, 346 crore rupees have been taking place in its Mumbai branch. “The Staff there used to fake LoU ( Letter of Understanding) for the buyer’s credit to the 7/47 company of Nirav modi and Gitanjali Group”, as published in the Business World. 

• Loss of confidence: Stock fraud or trading scandals, like that happened in the U.S. in the 1980s, makes people lose faith in the stock market. Barry Minkow, a teenager and the owner of the business of carpet cleaning built a million-dollar corporation in the 1980s. But he was able to achieve this only through forgery and theft. 

He managed to create more than 10,000 counterfeiting documents and sales receipts without coming to someone’s notice. His company although created through fraud was able to make market capitalization of 200 million dollars and leased 4 million dollars of land. Later, he was sentenced to 25 years of imprisonment. 

Eron was the seventh largest energy trading company, based on revenue, in U.S. Forgery made them waive off hundreds of millions of debts out of their book. The investors thought that the performance of the company was really good and stable. But later on, it as found that the incredible numbers on revenue records were fictitious. The famous Eron scandal where all the retirement accounts were wiped out it was found that people had loss their normality, their power and public confidence. 

• Effect on offenders: The authorities have shown no consensus on the definition of white-collar crimes. There are no accurate statistics available to analyse the causes and effects of such crimes and therefore government fails to take exact measures to prevent them. Also, though these crimes are on the rise, they are generally not reported. 

These crimes have no eyewitnesses as they are committed in camera, which means that the offenders commit these crimes while sitting in a closed room or in their personal space using their computers, and nobody could know about what they are doing on their computer. 

This makes it difficult to track the offenders. All these loopholes become an incentive for the offenders to fearlessly commit such crimes because the punishment is also for a short term unlike in blue-collar crimes. Offenders are mostly seen roaming freely which poses a danger to the society. 

• Effects on the temperament of the affected person: The target of the offenders are generally elderly people with little access to liquid assets and their cognitive ability is less than that of younger people. So they become an easy target for the offenders. The victims of such crimes often undergo depression and are seen to have suicidal tendencies, because sometimes the loss incurred is unbearable. 

The renowned startup founder, Vijay Shekhar Sharma, the person who founded the widely used app for transaction namely Paytm, became a victim of blackmailing by his personal secretary Sonia Dhawan. She along with others stole his personal data along with sensitive business plans, to extort money from him. Also, Sharma received regular calls stating that his personal information would be revealed to the public if he doesn’t give the required amount to them. Sharma was put under a lot of pressure

Common types of White-Collar Crime in India

White collar crime refers to a variety of financially motivated, non-violent crimes that are usually committed by people in corporate or professional environments. These offences, which are intended to obtain an unfair advantage or financial gain, frequently entail deception, betrayal of trust, or concealment. The following list includes common types of white-collar crime.

Fraud

Section 17 of the Indian Contract Act, 1872 defines fraud as acts committed by a party to a contract, or with his connivance, or by his agent, with an intent to deceive another party thereto of his agent, or to induce him to enter into the contract. These acts include, inter alia, active concealment, untrue suggestions and false promises.

Section 447 of The Companies Act, 2013 deals with the punishment for fraud which states that any person who is found guilty of fraud shall be punishable with imprisonment for a term which shall be not less that 6 (six) months but which may extend to 10 (ten) years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to 3 (three) times the amount involved in the fraud. Where the fraud in question involves public interest, the term of imprisonment shall not be less than 3 (three) years.

It may well be noted that fraud in itself is a very large category, which includes within it, a variety of White-collar crimes. An example of fraud is banking fraud, where, a person may withdraw the money or assets from a bank or falsely represent himself/herself as a representative of the bank to induce people to submit money or assets to them. Another example of banking frauds can be obtaining loans basis unreliable or forged documents. One more category of a common White-collar fraud is insurance fraud, which involves persons obtaining insurance money through false documents, by staging theft, accident or any other injury that is covered by an insurance policy.

Another important category of White-collar fraud in India comes through the illegal sale of stocks by showing a wrongfully inflated price of a stock to induce people to invest in that stock. Lately, corporate fraud has also emerged as a serious White-collar crime that involves fraudulent acts in the context of the affairs of a company. The Companies Act, 2013 has created several provisions to detect, prevent and penalize corporate fraud, which have been dealt with in the sections mentioned below.

Bribery 

Black’s Law Dictionary defines Bribery as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official, or other person, in charge of public or legal duty. It may be done for the purpose of insisting a public official to do something or to prevent them from doing something.

While the Indian Penal Code punishes bribery as an ‘election offence’, the Prevention of Money Laundering Act (PMLA) 2002 covers all kinds of bribery offences committed by domestic public officials. The term public officials include anyone who is authorized to perform a public function. The Case of Central Bureau of Investigation, Bank Securities and Fraud Cell v Ramesh Gelli and Ors has held that even the chairman or MDs of private banking companies can fall within the definition of ‘public officials’ if they are authorized or required to perform a public duty.

Bribery can either be done either directly (through himself or herself) or through a third party, in which case the third party can also be held liable. While public bribery is prohibited extensively, no specific regulations are covering private/commercial bribery. Usually, companies and organisations formulate their own internal regulations prohibiting such instances of bribery.

Money Laundering

Section 3 of the PMLA defines the offence as a direct or indirect attempt at indulging in any process or activity connected with the proceeds of crime and projecting it as untainted property. In India, money laundering is popularly referred to as a ‘Hawala transaction’.

The PMLA punishes concealment, possession, acquisition or use of proceeds of crime or attempting to project or claim that such proceeds are not laundered. Mens rea has been implied to be an important element for such offences, provided that PMLA uses the term ‘knowingly’ while describing the offences, which has been interpreted to communicate guilty intention, as held in A K Mukherjee v State. 

In addition, regulators such as the Reserve Bank of India, the Securities Exchange Board of India and the Insurance Regulatory and the Development Authority of India have also issued regulations concerning money laundering. Furthermore, the Black Money Act of 2015 empowers the Central government to seek details, investigate and carry out discovery on undisclosed bank accounts and assets.

Embezzlement 

When an individual, who is entrusted by his or her employer’s money or property either to be held or to be used for specific purposes, misappropriates such resources or falsely converts it to his/her own use or disposes it without any law allowing him to do so, commits an act of embezzlement. Embezzlement is a criminal offence which may be punishable under Section 408, 420 of the Indian Penal Code, dealing with Criminal Breach of Trust by Clerk or Servant, Cheating and dishonestly inducing delivery of property respectively.

It is essential that the parties involved must have shared a fiduciary relationship, which compelled one party to provide money or assets to the other party. Subsequently, the party who was entrusted with the funds uses it for a different purpose than they were intended to be used. Individuals who are entrusted with access to an organization’s funds are expected to safeguard those assets for their intended use. Mens rea is an important element to constitute such an offence. The Allahabad HC has held that even if the amount of embezzlement is insignificant, an employee can be terminated because the mens rea in such offences is enough justification to dismiss a delinquent employee. 

Tax Evasion 

Tax evasion occurs when a person deliberately forges his or her state of affairs, to deceive the taxing authorities to levy a lesser amount of tax. This can either be done by an individual, a corporation or a trust. It can be calculated as the difference between the amount of tax lawfully required to be reported and the amount reported by a tax evader. The Income Tax Act (ITA), 1961 under Chapter 22 has proscribed that the offence of tax evasion can result in a fine as well as imprisonment.

Some instances of tax evasion constitute a failure to file income tax returns, as laid down under Section 139(1) of the ITA, not providing a PAN card or providing a fake one, giving false information under form 26AS. Recently, the Income Tax Appellate Tribunal, in the case of Galaxy Nirman Pvt Ltd v. Acit, New Delhi has also held that failure to pay the entire amount of self-assessment tax would constitute penal damages.

Cybercrime 

Cybercrime is a novel and developing field of law in India. No particular statute has expressly defined the term, but it can be considered as unlawful acts wherein a computer is either a tool or a target. The Information Technology Act of 2000 is the primary legislation that punishes cybercrime under Section 43, 66, 67, 69, and 72 of the Act. It must be noted that Section 66A of the IT Act, dealing with punishment for sending offensive messages through communication service was held unconstitutional via the landmark Shreya Singhal judgement. Certain White-collar cybercrime include: hacking of an account with a view to access a person’s bank or credit/debit card details, phishing i.e., deceiving people into entering their bank account details or scamming individuals into buying counterfeit products. Crimes against the government like hacking government websites or databases have also been held to be a White-collar cybercrime.

Blackmail 

Section 503 of the Indian Penal Code, 1860 defines blackmailing or criminal intimidation as, making a demand for money or any other consideration by imposition of threat to cause physical injury, or to cause damage to one’s property, or to accuse one of a crime, or to expose somebody’ secret. The threat can be induced in the following ways: 

1. By revealing a secret of the person which the offenders know if revealed will cause great embarrassment to the victim. For example, if A, the Managing Director of the company XYZ, knows that B, a female employee of the same company, was bearing the child of somebody other than her husband. A asked B to commit forgery on the account papers so that he could embezzle 20 lakhs rupees from the company without anybody knowing about it, or else he would reveal her secret which would cause great embarrassment not only to her but her family as well. 
2. By revealing those matters of the victim which are sensitive enough to cause financial loss to him. For example, if X knows that the property Y owns has been fraudulently been taken over from Y’s parents by deceitfully taking their signatures on the will. The X, a senior manager of a law firm, asks Y, a junior employee of the same company, to take out the file containing the personal details of the chief secretary of the company from the storehouse of the company. When Y refuses to do so, X threatens to reveal her secret of forgery to the police. X is said to be blackmailing B. 
3. By doing acts which could falsely accuse the other person of a crime, thereby affecting his life in many ways. For example, when X, an officer at senior most post asks her secretary to marry his son else he would falsely accuse her of embezzlement of 10 lakhs rupees from the company, which actually has been done by X. This is blackmailing as a white-collar crime. 
4. By revealing a report which shows that person’s involvement in a crime. For example, M, the lawyer of N, and an old enemy of his, which N has no idea about, in a murder case, asks him to pay him double the amount else he would give the court the recordings in which M has confessed that he had murdered the person and the manner in which he has committed the same. This is blackmailing.

Credit card frauds 

These frauds are committed when one person uses the credit card of another person unauthorizedly to obtain goods of value, he is said to have committed credit card fraud against the other person. For example, in 2003 in Mumbai, Amit Tiwari, a 21 years old engineering student was arrested for using too many names, for having too many bank accounts and too many clients, all false managed to defraud a Mumbai-based credit card company, CC Avenue, of around 9 lakhs rupees. 

This case brought to the notice of the authorities that credit card frauds have not been recognized by the Information Technology Act, 2000. The loophole in the law has caused a great loss to the company. 

As per the report released by the Economic Times, it was found that over 900 cases of credit/debit cards and internet banking have been registered during the period of April September, 2018. All these cases involved an amount of 1 lakh rupees and above. Minister of State for Electronics and IT (2018), S.S. Ahluwalia, informed that the Reserve Bank of India by 30th September, 2018 had registered a total of 921 cases of credit/debit card fraud. 

In 2017 a Metropolitan Magistrate became a victim of credit/debit card where the victim received two messages for two transactions done from his debit card, not in India, but abroad. The victim claimed that those transactions did not have his consent. A complaint of cheating under Section 420 of the Indian Penal Code, 21860 was filed.

Currency Schemes 

These schemes basically refer to the practice of determining the value of the currency in the near future. The determining of the value is not based on any firm evidence though. According to a report, ‘Trend and Progress of Banking in India’ released by the Reserve Bank of India, published by the Financial Express in January, 2019, it was alleged that the banks have lost 41,168 crore rupees in the financial year of 2018 which shows a 72% rise from what was in 2017. The reason behind this rise is the fraud against currency schemes. The report cited that fraud have turned out to be a major concern with a 90% rise of such cases in the credit portfolio of banks with the major chunk of fraud being concentrated in off-balance sheet operations, foreign exchange transactions, deposit accounts and cyber-security.

Some common types of Currency Schemes in India

• Schemes involving advance payment of fees: In these cases, the victims are asked to make an advance payment of the sum. They would be promised to be receiving just the double of what they have invested. But one the money has been given; no track of the offenders can be found. In these cases, the scammers target those people who have already lost much amount somewhere. An appeal is made to their sentiment that the amount they are investing would be doubled and they would be able to recover the loss caused from the last transaction done by them. 

The commission of this type of fraud had originated from Nigeria. The first case in India was registered in August in 2003 where Piyush Kankaria, a Howrah-Kolkata based businessman filed a multi-million fraud case under Section 420 of the Indian Penal Code, 1860. Piyush, out of financial crises, had become a victim to this fraud where he had to claim 7.5 million dollars from an account in return for 3 million dollar and for which Piyush had already advanced a mobile handset as a gift. 

• Scams in the boiler room: Boiler room refers to the office which are frequently changed, that is, the office which is not stable and shifts regularly. In these cases, the scammer creates a website giving all fake or false information. The address given on the website would be a temporary one, the toll-free number would be invalid, though all will appear legitimate on the screen. By the time one realizes that they have been defrauded, the scammer moves on to another similar scam at some other place. 

It was recently in 2019 itself when a person by the name of Rohit Soni, from Rajasthan, who was a B.com. Graduate created a fake Amazon website similar to the original website. How Rohit made a profit out of it was by providing the customers with a link which gave access to an app named ‘4Fun’, and for every download he received a sum of 6 rupees. 

• Exempt securities scam: Exempt securities scam refers to the selling of securities by a company without filing a prospectus. This offence is committed against wealthy people who are persuaded to invest in a business. The offenders pitch a fraudulent investment as exempt securities. A fake promise is made to the victim that the business would go public. These scams involve a great risk and make you lose all your investments. 

It was in 1992 when an Indian stockbroker, Harshad Mehta, was held guilty with as much as 27 charges released against him for having committed various financial crimes under the securities scam of 1992. Harshad had been accumulating huge wealth through massive stock manipulation facilitated by the use of fake or worthless bank receipts. 

The Bombay High Court, as well as the Supreme Court of India, held him guilty for being a part of a huge financial scandal involving 4999 crore rupees. This scandal had taken place against the biggest stock market that is the Bombay Stock Exchange (BSE). After having lived in jail for 9 years Harshad Mehta dies in 2001. 

• Scams in the foreign exchange market: In the foreign exchange market, investors buy and sell currencies depending upon its exchange rate. These markets are often dominated by large and developed banks that have plentiful resources at hand. The staff in such organizations are well skilled and trained in using the advanced technology and therefore it becomes difficult to beat these professionals. 

In the foreign exchange market, it is not new to see people becoming prey to the illegal or fraudulent schemes known as forex schemes. Since these schemes are often carried online from another country, the chance of losing your money is high as one is likely to buy services from those firms which are not legitimately set up can market their services ultra vires. It is easy to fake things online. The result of these scams could be that the money one invests might get stolen and one might lose everything that he had invested. 

As per the report published by the Times of India in 2017, the Central Bureau of Investigation has held a total of 13 private companies responsible for sending unknown foreign remittances which hold the value of 2,253 crore rupees under bogus imports of goods during 2015-2016. 

Similarly in 2015, as published by the Times of India, the Bank of Baroda was alleged to have been involved in forex scam worth rupees 6,172 crore. This money was sent from India to Hong Kong for importing cashew nuts, pulses and rice. However, at a later stage it was found that nothing was imported and instead all this money went into 59 different bank accounts of several companies. 

Similarly, in 2015-16, the Directors of a Mumbai-based company called M/s Stelkon Infratel Pvt. Ltd., Manish Prakash Shyamdasani and Mungaram Hakmaram Dewasi, were held liable for their indulgence in large scale illegal foreign remittances under fraudulent imports of goods 2015-16. 

• Offshore investing scams: These scams induce a person to send their money ‘offshore’ to some other country to get more money in return than invested. These scams mostly aim at exempting a person from paying taxes. But the ultimate result of it is that people land up paying money in back taxes, and penalties. 

The major risk involved in these scams is that the victim in cases of foreign investment is not able to seek remedy from the civil court and thus one is not able to recover the invested money. 

It was in 2008 when Ketan Parekh, a stockbroker from Mumbai, and the Director of the Madhavpura Mercantile Co-operative Bank, was convicted for his involvement in the scam that happened between 1998 to 2001 in the Indian Stock Market. Parekh was held responsible for rigging price artificiality of securities. 

He had been able to do this by borrowing money from various banks including his own bank which he was the Director. What Parekh used to do was, at first place, he purchased large stakes from small market capitalization companies. He continued to do so unless a large sum of money has been accumulated and then jacked up the prices via circular trading with other traders, collusion with other companies as well as with the large institutional investors. This led to a huge rise in the prices of the shares. For example, the price of the shares of Zee telefilms rose from 127 rupees to 10,000 rupees. These stocks were referred to as the ‘K-10’ stocks and Parekh was given the name of ‘Pentafour’. 

For the purpose of looking into such a scam, Joint Parliamentary Committee was set up which found Parekh guilty of circular trading of money and rigging the prices of 10 companies from 1995 to 2001, on a false pretext. 

• Scam against the pension of a retired person: Older people have their retirement accounts where they keep their savings for the period after retirement from their services. Usually, money from these accounts can be withdrawn only after the attainment of a certain age, and only a certain sum of money can be withdrawn in a year, and also some tax is imposed on the money withdrawn. 

Some company can fake such accounts. It can ask the person to invest in their bank where they would be able to keep their savings safely. The bakers ask the person to buy the shares of the company from their savings which would be repaid by granting 60 70% loan from the invested money and the rest would be kept by the bank as a fee. These promises turn out to be fake and the investment made, worthless. There is a high possibility to lose one’s retirement savings in totality to such scams. 

It was in 2009 when India Today published a report on pension scams in India. The report said that in Uttar Pradesh, a huge amount of money which was supposed to be used for giving pension to the 60-years-old people, who were Below the Poverty line (BPL) and used to earn 300 rupees per month were being given to younger people. 

The scheme was basically meant for the older people from the lower strata of the society. The divesting of the money to young people was assisted by the Uttar Pradesh Government by issuing fake BPL cards and certificates showing false age. This helped each beneficiary of the scheme to earn 3,600 rupees annually, half of which was given as a commission to the official who has helped the very person in forging the documents. 

• Double dip scam: The person who has already been a victim of a scam is likely to become a victim again. And when it happens, it is called a double dip scam. The offender in the first instance can store the information of the victims and pass on to other such offenders, thereby assisting them in making money fraudulently. 

The case might also be that the first offender calls you again and you spill out your grudge from the first fraud that you have become a victim of. The scammer then offers you to recover your money in return for a small fee. One would again lose one’s money in this way. 

Unveiling the double dip scam taking place within political parties, the India Today has published a report back in 2016 when politicians were found to have converted back money into white money for 40% commission. The political parties were found double dipping as brokers for undeclared wealth. There politicians used to do the business of converting black money into white in near to their offices in Ghaziabad, Noida and Delhi. 

Such types of situations where politicians indulge in wrong practices have been very common for the politicians enjoy powerful position which comes with various powers, they tend to manipulate things and make illegal profits, which are basically the money supposed to be used for public welfare. And ultimately it is the common people who suffers the most.

• Scam by building a relationship: In such cases the offender targets a group of people, or organizations or communities. The offender in cases is somebody close that the victim. He builds a relationship of trust with the victim, or become a member of the same religious community against whom he has committed fraud, and then misusing the faith people have planted in him, he gains profit by cheating those people. These scams are also called affinity scams. 

• Ponzi scam: Ponzi scam, also known as pyramid scam is a type of affinity scam where the scammer would through emails and advertisements offer one to earn huge profits by sitting at the comfort of their living room, only by investing a certain amount of money. They also keep exciting offers like early birds would be able to make more profits. After investing their money in such schemes people land up having nothing in their hand, as the scammer runs away with the money leaving behind no clue of their existence so as to track them. 

The cases of Ponzi scheme in India are: 

1. In November, 2018, Gaylen Rust of Utah was accused by the Government for running Ponzi scheme and generating huge wealth, like that if 25-40% per year, which is about 47 to 200 million of money. It was found that more than 200 people had become a victim of this scheme. 
2. In the same year when Gaylen ruth was found guilty, in the month of September, a person by the name of Claud R. ‘Rick’ Koerber, from Utah itself, was found guilty of running a Ponzi scheme. Under this the investors in the property had suffered a loss of 100 million. 
3. In 2017, Michael Scronic from New York, was held levied with civil and criminal charges, causing a loss of 27,000 million dollars to the investors. 

• Pump and dump scam: A company who owns a large amount in a low-priced stock, which is actually an illegitimate business, will find potential investors and persuade them to invest in their stock. As more people would invest, the price of the stock would increase and when it reaches its peak the scammers would sell all the shares, earn profit and run away, taking with him all your money. 

It was in 2015 when Rakesh Jhunjhunwala was said to have raised his wealth by purchasing 2,50,000 odd shares because of which though his shares of the ‘Surana Solar’ experienced an 18% rise, but after the dump-sum scam was discovered, the prices quashed. That is how a loophole in the system was also discovered. 

The happening of such scams reveals that there is no proper system to check the authenticity of the information being supplied. And taking the advantage of such a loophole, the Surana Solar made namesake deals easily with the investors causing them great loss. 

• Scams by way of sending spam emails: Often the scammer sends spam mails making fake offers and promises. In the year 2017, a record of 7.5 million cases of spam mails was discovered. Once you reply to such emails you get caught in the trap as these mails are fraudulent. Most of these mails are regarding microcap stock where investments are highly risky when compared to other stocks. 

The customers of the ICICI Bank became a victim of such scam where certain group of people representing themselves to be an official of the bank, asked for sensitive information about type bank account and defrauded them. The fraud was finally discovered by the manager of the bank when a few of the customers who had received such spam mails filed a complaint. Such a scam in the IT Act is defined as ‘phishing’.

Cellular phone fraud

One aspect of white-collar crime is cellular phone fraud, which poses a serious and constantly changing problem to the telecom industry. Deceit, concealment, or a breach of trust are common characteristics of white-collar crimes. Cell phone fraud, which takes advantage of flaws in user behaviour and mobile networks, closely matches this definition. This category of fraudulent activity includes a variety of illicit practices, such as SIM swapping, cloning, phishing, and subscription fraud.

While phishing connives to fool consumers into disclosing personal information, cloning entails replicating a mobile phone’s electronic serial number in order to make unauthorised calls. Fraudsters who use stolen identities or phoney identities to obtain services without paying for them are engaging in subscription fraud. One of the more modern and frightening strategies is SIM switching, which is transferring a victim’s phone number to a new SIM card. This gives the fraudster access to the victim’s messages, calls, and possibly even their bank accounts.

Cell phone fraud has significant effects on people, companies, and telecommunications companies. It causes monetary losses, violates privacy, and may erode confidence in mobile services. Law enforcement, government agencies, and the telecom sector must work together to identify and prevent cell phone fraud, highlighting the importance of strong security protocols and ongoing public awareness campaigns about protecting personal data.

The illegitimate use, altering or interference, or manipulation of a cellular device or service is known as cellular phone fraud. This can be accomplished either by using of a filched cellular device or where an actor endorses for services under deceitful identification or where an artist clones a valid ESN (i.e. electronic serial number) by using an electronic serial number reader and reprograms another cellular device with a genuine electronic serial number.

The Cellular phone fraud refers to tampering, manipulating or making an unauthorized use of cellular phones or service. The offender in this case would make a fake account in your name and get an access to your bank account details, credit card details, and make payments without your consent. The offender may even sell your cell phone to other criminals to use it in commission of illegal acts. 

The use of the IMEI number of a mobile phone without taking the permission of the person who owns it is punishable with imprisonment for a maximum term of 3 years as laid down in the Mobile Device Equipment Identification Number, Rules, 2017. This provision has been made in combination of Section 7 and Section 25 of the Indian Telegraph Act, 1885. Where section 7 gives the DoT (Department of Telecom) the power to make rules for the conduction of telegraph and telecom services, section 25 says that any damages if caused to the telegraph lines, machines or any such equipment will be imprisoned for up to 3 years or fine or both.

According to an article published in the Business Standard the social media frauds, where crooks use stolen identities and credit card details to obtain illegal gains, have increased by 43% in 2018. Using mobile applications, mostly WhatsApp, Facebook and Instagram, to defraud people have seen a rise of 680% between 2015 and 2018. 

This pose a threat to the online social media users and they need to be conscious and careful while using it. This calls for taking proper protection of one’s account and credit card details while providing it online on a website.

Case

Mohit Goel, the director of Ringing Bells, an Indian firm that claimed to sell the world’s cheapest smartphone, has been arrested on fraud charges. Mohit Goel was detained after one of the company’s distributors alleged it did not receive the handsets it had paid for. The Freedom 251 phone, priced at 251 rupees ($3.70; £3), was available for pre-sale in February 2016. While some customers received their phones, Ringing Bells is accused of failing to fulfil all orders.

Distributor Complaints: Ayam Enterprises, a distribution company, reported paying 3 million rupees ($45,000; £35,800) after Mr. Goel convinced it to distribute the phone. However, only 1.4 million rupees worth of devices were delivered, and staff allegedly received death threats for repeatedly asking for the remaining money.

Police spokesman Rahul Srivastava confirmed the arrest to the BBC and stated Mr. Goel would appear in court on Friday. “Several similar complaints have been filed against him from other parts of the state. We intend to investigate these claims thoroughly,” he said. “It’s crucial to expose these scams to prevent innocent people from losing their hard-earned money.”

Ponzi Scheme Allegations: Ringing Bells began collecting payments for the phones in February last year, initially promising delivery by June. High demand for the inexpensive handset, sold through its website, caused the company’s servers to crash.

At the launch, Mr. Goel claimed the phone would be made locally as part of the Make in India program, strongly promoted by Prime Minister Narendra Modi’s government. However, scepticism about the firm’s business model persisted, with several analysts labelling the phone a “Ponzi scheme.”

Common Types of Cellular Phone Fraud 

• What is SIM Swapping or a Port-Out Scam?

Your mobile phone number may be the key to your most important financial accounts. Text messages are often used by banks, businesses and payment services to verify your identity when you request updates to your account.

Mobile phone numbers can legally be ported from one provider to another when you switch your mobile phone service, and can also be ported from one mobile phone to another when you upgrade or change devices.

Scammers have been known to initiate porting requests. If they have enough of someone’s personal information, they can attempt to con a victim’s mobile phone company into believing the request is from the authorized account holder. If the scam is successful, the phone number will be ported to a different mobile device controlled by the scammer.

Another way to perpetrate this scam is to physically steal the victim’s SIM card, a removable device in some mobile phones that carries a unique ID and stores the consumer’s personal data. The scammer can then use the stolen SIM card in their own mobile device.

In either case, the scammer can gain control over the victim’s private texts and calls, and may then try to reset credentials for the victim’s financial data and social media accounts. If successful, the scammer can drain the victim’s bank accounts and sell or ransom their social media data.

How to prevent sim swapping & port-out scams

• Keep your phone secure. If you lose your phone, notify your bank and cell service provider.
• When you change devices, always wipe and factory reset your old device.
• Enable both email and text notifications for financial accounts. If you receive a notice that changes to your account have been made without your knowledge, contact the financial institution immediately.
• Don’t overshare. Keep personal details that could be used to verify your identity, such as your phone number, date of birth, or your pet’s name, off social media.
• If you suddenly lose service on your device, you may have been the target of a port-out scam. Contact your service provider and bank immediately and then file a police report and place a fraud alert on your credit reports.

• eSIM may decrease SIM Swap Risk

Embedded SIM cards – eSIM cards for short – have replaced traditional SIM cards in newer cell phone models. The eSIM cards are much smaller and hardwired inside the phone, so they’re not removable, eliminating some of the security risk for physical SIM swaps. However, port-out scams remain a security concern. Also, consumers should always wipe their eSIM data when they replace their phones. 

• What is cell phone or SIM cloning fraud?

Every cell phone should have a unique factory-set electronic serial number (ESN) and a mobile identification number (MIN). A cloned cell phone is one that has been reprogrammed to transmit the ESN and MIN belonging to another cell phone. Scammers can steal ESN/MIN combinations by illegally monitoring the radio wave transmissions from the cell phones of legitimate subscribers. After cloning, both the legitimate and the fraudulent cell phones have the same ESN/MIN combination and cellular providers cannot distinguish the cloned cell phone from the legitimate one. Scammers can then run up expensive toll charges and the legitimate phone user gets billed for the cloned phone’s calls. Alert your service provider if you see unauthorized calls or charges on your account.

• What is subscriber fraud?

Subscriber fraud occurs when a scammer signs up for cellular service with fraudulently obtained customer information or false identification. Criminals can obtain your personal information and use it to set up a cell phone account in your name. It may take time to discover that subscriber fraud has occurred, and even more time to prove that you did not incur the debts. Millions of dollars are lost each year due to subscriber fraud.

If you think you have been a victim of subscriber fraud:

• Contact local law enforcement and file a police report. You can also file an identity theft report with the FTC. 
• Notify your current service provider as well as the service provider for the fraudulent account. 
• Place a fraud alert on any of the three major credit reporting bureaus — Equifax, Experian, or TransUnion. The one you notify will share the alert with the other two.

Some Common Examples

• Smishing: A form of phishing where scammers send text messages that appear to be from a legitimate source, such as a bank or government agency, in an attempt to trick the recipient into providing personal information or clicking on a malicious link.

Smishing scams work by sending text messages to victims that appear to be from a legitimate source, such as a bank or government agency. The message may include a link that directs the victim to a website where they are prompted to provide personal information, such as their login credentials or social security number.

• Phishing: A scam where scammers use fake emails or websites that look like they come from a legitimate company, such as a bank or social media platform, to trick people into providing their personal or financial information.

Phishing scams work by sending emails or text messages to victims that appear to be from a legitimate source, such as a bank or online retailer. The message may contain a link that directs the victim to a fake website where they are prompted to provide personal information, such as their login credentials or credit card number.

• Spoofing: A technique used by scammers to make it appear as though the call or message is coming from a trusted source, such as a bank or government agency.

Spoofing scams work by falsifying the phone number or caller ID information displayed on a victim’s phone, making it appear as if the call is coming from a legitimate organization or business. The scammer may then request personal or financial information from the victim, or they may claim that the victim has won a prize or is eligible for a refund.

• Premium rate scams: A scam where scammers send messages or make calls to premium rate numbers, resulting in high charges to the victim’s phone bill.

Premium-rate scams work by sending messages or making calls to premium-rate phone numbers that charge high fees to the victim’s phone bill. The victim may receive a message or call that appears to be from a legitimate source, such as a contest or sweepstakes, but the real purpose is to charge high fees to the victim’s phone bill.

• Malware and virus attacks: A type of fraud where scammers send malware or viruses to a victim’s phone, allowing them to access personal information, steal passwords, or take control of the device.