Introduction
The appearance “Power of Price” refers to the substance of white-collar crime. When those individuals who are in power, in high positions misuse their authority, manipulate their part just for their particular benefit, self-interest, self-serving purposes, they frequently harm others at the cost of their rights or requirements. White-collar crime is a peaceful crime that is constantly characterized by deception or concealment to get or help to lose money or property, or to gain a competitive edge for oneself or a company. Financially driven, peaceful, or laterally violent crime committed by people, businesses, and government officers is referred to as “white-collar crime.”
The impact of white-collar crime on society is profound, affecting not only the fiscal well-being of individuals and associations but also eroding trust in institutions, undermining economic stability, and compromising the integrity of fiscal systems. There are different types of white-collar crimes, such as embezzlement, bribery, insider trading, price fixing, money laundering, cybercrime, etc. This article will emphasize the determination of dominant positions considering illegal practices against weaker sections.
Types of White-Collar Crimes
A Legal Overview
White-collar crimes are typically non-violent acts carried out by individuals who hold positions of authority or responsibility. These offenses often involve manipulation of financial systems or abuse of entrusted power. Such misconduct can erode public confidence in institutions and lead to significant economic disruption.
Embezzlement
Embezzlement refers to the unlawful appropriation or retention of funds or property by someone who was entrusted with its care. It’s a betrayal of fiduciary obligation, not just theft.
Under the Bhartiya Nyaya Sanhita (BNS), embezzlement is addressed through two key provisions:
- Dishonest Misappropriation of Property – BNS Section 314
Definition: This clause is used when someone illegally takes or uses something for their own gain even when they have no ownership.
Punishment: Up to 2 years of imprisonment, or fine, or both. - Criminal Breach of Trust – BNS Section 316
Definition: This happens when a person who has been given responsibility for property either wrongfully converts it for personal gain or violates the terms of the trust.
Penalties:- General Cases: Up to five years in prison, a fine, or both.
- Special Category: A fine and a maximum sentence of seven years may be imposed if the perpetrator is a carrier, warehouse keeper, or wharfinger.
Landmark Case: Nirav Modi & the PNB Fraud – One of India’s most notorious embezzlement cases involved Nirav Modi, a high-profile jeweler, who orchestrated a massive fraud against Punjab National Bank (PNB). Through unauthorized Letters of Undertaking (LoUs), Modi and his associates siphoned off approximately ₹11,400 crore. These LoUs bypassed internal checks, lacked collateral, and were not recorded in PNB’s core banking system, exposing systemic vulnerabilities and regulatory lapses.
Bribery
Bribery is the practice of offering or accepting cash or other benefits in return for favors or influence. For example, some in charge of official duty may act contrary to their duty and the generally recognized norms of honesty and integrity.
According to Section 8 of the Prevention of Corruption Act of 1988, anyone who gives or promises to give an undue advantage to another person or people with the intent to:
- Persuade a public servant to carry out a public duty improperly; or
- Reward such a public servant for the improper performance of public duty,
Faces a maximum sentence of seven years in prison or fine, or both.
An Illustration: To guarantee that he is given a license ahead of all the other bids, a person, ‘P’, offers a public official, ‘S’, 10 thousand rupees. In light of this subsection, “P” has committed an infraction.
Insider Trading
Insider trading is when someone uses confidential information to buy or sell stocks or other securities. In many countries, trading based on insider information is illegal.
Regulation 3 of the SEBI (Prohibition of Insider Trading) Regulations, 2015 restricts the communication and procurement of Unpublished Price Sensitive Information (UPSI) to prevent insider trading, stating that insiders cannot share UPSI except for legitimate purposes, duties, or legal obligations.
Landmark Case: SEBI v/s Abhijit Rajan (2022) – The Indian Supreme Court ruled that insider trading cannot be proven by an insider’s possession of information alone, but rather by their intention to profit from it.
Money Laundering
Money laundering is when someone tries to hide the source of money obtained through illegal activities, such as drug trafficking, terrorism, corruption, sex work, or embezzlement, and channels it into seemingly legitimate sources.
India’s Prevention of Money Laundering Act, 2002 (PMLA): These laws allow the government to seize and confiscate assets gained through illegal means, and they impose strict punishments like jail time and heavy fines on those found guilty.
Landmark Case: Prakash Industries Ltd. v. Union of India (2023) – The CBI, New Delhi, filed a formal complaint against Mr. Bharat Bomb for cheating banks and misappropriating money obtained through loans from several banks.
Causes and Consequences
Causes
- Greed: Many white-collar crimes are motivated by greed and a desire for financial gain.
- Opportunity: Such crimes often occur when individuals have access to financial resources or sensitive information.
- Lack of Accountability: White-collar crime is more likely to occur when people are not held accountable for their conduct.
Consequences
- Financial Losses: Severe economic damage affecting individuals and businesses, reducing trust in dealings.
- Damage to Reputation: Long-term loss of credibility, goodwill, and investor confidence.
- Economic Instability: Undermines financial systems, lowers public trust, and discourages market participation.
Investigation and Prosecution
Law Enforcement Agencies
- Enforcement Directorate (ED) – Handles money laundering
- Income Tax Department – Handles tax evasion
- Central Bureau of Investigation (CBI) – Handles corruption
- Serious Fraud Investigation Office (SFIO) – Handles corporate fraud
- Police – Handles various types of fraud and corruption
Regulatory Bodies
- Securities and Exchange Board of India (SEBI) – Oversees securities markets and insider trading
- Reserve Bank of India (RBI) – Prescribes AML for banks and financial institutions
- Insurance Regulatory and Development Authority of India (IRDAI) – Establishes AML regulations for insurers
Financial Intelligence Units
The Financial Intelligence Unit—India (FIU-IND) is the primary national organization tasked with receiving, processing, evaluating, and providing law enforcement agencies with information on questionable financial transactions.
Function: FIUs collaborate with financial institutions and regulatory agencies to receive suspicious transaction reports, analyze the data, and forward information to relevant enforcement agencies.
Challenges
- Complexity of Financial Transactions: Makes it difficult to trace the money trail.
- Lack of Evidence: Records may be altered or destroyed, limiting proof.
- Limited Resources: Budget, staff, and expertise may be insufficient for thorough investigations.
Preventing White-Collar Crimes
- Internal Controls: Establishing checks and balances to protect financial integrity.
- Training and Awareness: Educating employees to identify unethical activities.
- Fostering Internal Reporting: Encouraging employees to report unethical or illegal activities without fear of retaliation.
Concluding Thought
White-collar wrongdoing endangers stakeholders across the board—employees, firms, and the economy at large. Maintaining sound financial systems and credible economic governance requires understanding the causes and consequences of financial instability and implementing effective prevention and early-warning strategies.
References:
- Bhartiya Nyaya Sanhita (BNS),2023
- Section 8 of the Prevention of Corruption Act of 1988
- Regulation 3 of the SEBI (Prohibition of Insider Trading) Regulations, 2015
- India’s Prevention of Money Laundering Act, 2002 (PMLA)
