White Collar Crime Penalty Enhancement Criminology Essay

The last few old ages have seen some major cozenages and corporate prostrations across the Earth. A cardinal facet that is being debated in the corridors of India is whether we need major regular alterations to better corporate administration, or whether improved criterions of corporate administration could be achieved through acceptance of rule based criterions of behavior. Possibly the most critical corporate administration statute law in recent old ages is the Sarbanes-Oxley Act, 2002 of US which is going a planetary benchmark for internal best patterns in corporate administration. TheA inclusion of White Collar Crime Penalty EnhancementA Act, 2002 in the corporate reform packageA creates new substantial discourtesies, significantly enhances fiscal and captivity punishments, and loosen up some procedural evidentiary demands for prosecuting officers. White Collar Crime is non merely a offense but a really serious offense with broad and frequently bloodstained reverberations. Its earnestness can be gauged from the fact that consequence of even a few White Collar Crimes on the economic cloth of society can be far more annihilating. This paper outlines that it is high clip for the Indian corporate sector to pull lessons from the experience of the operation of the Act in US in order to get by up with the ongoing planetary reforms in corporate sector, regulative model and administration patterns.

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The words of Woody Guthrie: —

Well, as through this I have rambled

I have seen tonss of amusing work forces,

Some rob you with a sixgun

Some with a fountain pen

White collar crime-definitional issues

Economic offenses in its broad scope besides includes white collar offenses because of the diverse nature of its constituent activities, is incapable of simple definition.

American Sociologist Edwin Sutherland foremost coined the phrase, “ White Collar Criminality ” which he described as ‘a offense committed by a individual of reputability and high societal position, in the class of his business ‘ . However this definition is restrictive in nature as it does non look to include offenses committed outside of one ‘s business. The function of category has been extremely contested, as the position of an wrongdoer may count less than the injury done by person in a sure occupational place. The term ‘crime ‘ is besides combative as many of the harmful activities of concerns or occupational groups are non capable to condemnable jurisprudence and penalty but to administrative or regulative jurisprudence and ‘penalties ‘ or ‘sanctions. Therefore, a part specific definition of White Collar Crime can be: —

“ White Collar Crime is an illegal act or series of illegal act for accomplishing an illegal aim committed by any individual by non-physically or non-violent agencies and by craft, to derive money or belongings wrongfully or to avoid payment of legal dues or retain money or belongings wrongfully as to obtain unlawful concern of personal advantage. ”

White Collar Crimes Broad Categories

This list is declarative of the wide classs of White Collar Crime prevalent in India and all over the universe but can non be considered comprehensive.

Bank Fraud — To prosecute in an act or form of activity where the intent is to victimize a bank of financess, Blackmail — A demand for money or other consideration under menace to make bodily harm, to wound belongings, to impeach of a offense, or to expose secrets, Bribery — When money, goods, services, information or anything else of value is offered with purpose to act upon the actions, sentiments, or determinations of the taker, Cellular Phone Fraud — The unauthorised usage, fiddling, or use of a cellular phone or service, Computer fraud — Where computing machine hackers steal information beginnings contained on computing machines such as: bank information, recognition cards, and proprietary information, Counterfeiting — Occurs when person transcripts or imitates an point without holding been authorized to make so and passes the transcript off for the echt or original point, Credit Card Fraud — The unauthorised usage of a recognition card to obtain goods of value, Currency Schemes — The pattern of theorizing on the future value of currencies, Embezz1ement-When a individual who has been entrusted with money or belongings appropriates it for his or her ain usage and benefit, Environmental Schemes — The overbilling and deceitful patterns exercised by corporations which purport to clean up the environment, Extortion — Occurs when one individual illicitly obtains belongings from another by existent or threatened force, fright, or force, or under screen of official right, Forgery — When a individual passes a false or worthless instrument such as a cheque or imitative security with the purpose to victimize or wound the receiver, Health Care Fraud — Where an unaccredited wellness attention supplier provides services under the pretense of being licensed and obtains pecuniary benefit for the service, Insider Trading — When a individual uses indoors, confidential, or progress information to merchandise in portions of publically held corporations, Insurance Fraud — To prosecute in an act or form of activity wherein one obtains returns from an insurance company through misrepresentation, Investment Schemes — Where an unsuspicious victim is contacted by the histrion who promises to supply a big return on a little investing, Kickback — Occurs when a individual who sells an point pays back a part of the purchase monetary value to the purchaser, Larceny/Theft — When a individual wrongfully takes another individual ‘s money or belongings with the purpose to allow, change over or steal it, Money Laundering — The investing or transportation of money from racketeering, drug minutess or other embezzlement strategies so that it appears that its original beginning either can non be traced or is legitimate, Racketeering — The operation of an illegal concern for personal net income, Securities Fraud — The act of unnaturally blow uping the monetary value of stocks by agents so that purchasers can buy a stock on the rise, Tax Evasion — When a individual commits fraud in filing or paying revenue enhancements, Welfare Fraud — To prosecute in an act or acts where the intent is to obtain benefits ( i.e. Public Assistance, Food Stamps, or Medicaid ) from the State or Federal Government, Weights and Measures — The act of puting an point for sale at one monetary value yet bear downing a higher monetary value at the clip of sale or short weighing an point when the label reflects a higher weight.

In fact, today corruptness has broken the bulwarks of traditional domains of constabulary and gross sections and has entered the sanctum sanctorum of national life-the schools and colleges. The full cloth of educational system based on the cloth of white neckband offense where cheating and dishonesty is the base of the full system.

12 Step Process of White Collar Crime

The procedure of white-collar offense has been broken down by the research workers into 12 stairss.

The first measure novices when the culprit is hired into a place of power. Second measure, personality and life fortunes affect the culprit in such a manner that they recognize their power. In the 3rd measure “ drivers ” who turn a unsighted oculus or condone certain activities come into position. The 4th measure sees inactive participants acknowledging an chance. In 5th measure loath participants are drawn into the web of fraudulence by the “ leader ” . In 6th measure misgiving of the other people involved emerges. The 7th measure makes the culprit recognizes that they have their confederates in a vulnerable place and get down to work that place. In eight measure strong-arming tactics become progressively common as illegal ends are aimed for. In 9th measure, the offense continues, but the culprits, trapped in their insatiate dependence, go more blazes, taking bigger hazards, and seeking more moneymaking feats. In 10th measure, an undeniable paradox becomes evident, as the participants ‘ values and their behaviour are now evidently in struggle. In 11th measure, a whistle blower steps up to the grade and the leader loses control. Finally in 12th measure, incrimination is laid at the pess of the culprit at which point they either deny everything or admit their guilt and seek forgiveness by puting bare their activities.

Doctrine of White Collar Crime

The doctrine of White Collar Crime is that success and material promotion are the lone of import things that affairs in life and in accomplishing that one need non waver to follow unethical behavior. It encourages an aptitude of disdain for those who live with gloss of idealism. The doctrine of ‘get rich rapidly ‘ is besides responsible for white collar offense. A European Police Officer is reported to hold one time observed: ‘India has ever seemed to me a really Eden of defrauders. ‘

In the words of Ramsey Clark, one clip Attorney General of India, “ White neckband offense is the most caustic of all offenses. The sure prove untrustworthy, the advantaged dishonest. It shows the capableness of people with better chances for making a nice life for them to take belongings belonging to others. As no other offense, it requisitions our more fiber. ”

White Collar Criminals

“ White collar offenses are committed by individuals of reputability and high societal position in the class of their occupation-also are highly widespread, but an index of their frequence is non found in constabulary studies. Prosecution for this sort of offense is often avoided because of the political or fiscal importance of the parties concerned, because of the evident pettiness for prosecution, peculiarly in the instances of offenses by corruptnesss. ”[ 1 ]

White collar felons operate in upper socio economic degrees. White Collar offense is the merchandise of societal disorganisation, competency and struggle is elaborately and per se more serious than traditional offense committed by the traditional felon. Harmonizing to Barnes and Seesaws

“ Although we must go on to concentrate our attending on the underworld of offense, we must acknowledge the complete universe of reputability that permits offense to boom. Those who deal with offense jobs should non merely go watchful to the cardinal and important alterations in offense forms but should follow their thought and tactics to the worlds of the twentieth century. ”[ 2 ]

The fiscal corporation and establishment have a high incidence of concealed criminalism. Dishonesty is the regulation and honestness is an exclusion. High offense rates are to be accepted in a societal system in which great accent is placed upon the success goal-attainment of single wealth and comparatively little accent is placed upon the proper agencies and devices for accomplishing this end.

Victims of White collar offenses

White Collar Crime is non merely a offense but a really serious offense with broad and frequently bloodstained reverberations. Its earnestness can be gauged from the fact that consequence of even a few White Collar Crimes on the economic cloth of society can be far more annihilating than all the larcenies, burglaries, robberies and dakoities put together. Victims of white-collar offense can be an person ; a group of persons ; a local organisation ; a company ; authorities or a big corporation.

Role of Enforcement Agencies

Economic Torahs in India are enforced by separate sections. The function of constabulary is really limited. In India, maintaining in position the unsafe omens of White Collar Crime, the Central Bureau of Investigation ( CBI ) which is the Prime Minister investigation bureau for white collar offense in add-on to anti corruptness offenses has through a major reorganisation and restructuring aimed at accomplishing highest degrees of specialisation in economic offenses. White Collar Crime probe formed a separate Economic offenses division in 1994. In order to dispatch its maps and duties efficaciously, the Branches/Units, Regions/Zones of the Economic Offences Division are required to keep close affair with the Ministries of Finance, Commerce, sections of Revenue, Banking, CEIB, SEBI and such other Central/State degree economic establishments. All the economic offenses created by the particular legislative acts are non-cognizable.

Execution of jurisprudence

A differential execution of Torahs is at that place with respect to white collar offenses. It can be explained under three different classs:

Diffused bitterness of people against White Collar Crime

Apparent reputability of the felon

Soft Torahs and softer penalties

In India, the legislative assembly has late shown great consciousness and sensitiveness to passage of Torahs or doing amendments ordering hindrance.

In 2003 Supreme Court in Assistant Commissioner, Assessment-II, Bangalore & A ; Ors. v. Velliappa Textiles Ltd & A ; Anr[ 3 ]took the position that since an unreal individual like a company could non be physically punished to a term of imprisonment, such a subdivision, which makes it compulsory to enforce minimal term of imprisonment, can non use to the instance of unreal individual. However, Supreme Court in 2005 in Standard Charetered Bank v. Directorate of Enforcement[ 4 ]in bulk determination of 3:2 expressly overruled the Velliapa Textiles instance[ 5 ]. K.G.Balkrishnan J. in bulk sentiment held “ We hold that there is no unsusceptibility to the companies from prosecution simply because the prosecution is in regard of offenses for which penalty prescribed is compulsory imprisonment. We overrule by the bulk in Velliappa Textiles on this point ” .

Systemic failing

On October 12, 2008, A Business LineA reported that Satyam “ refuted studies in the international media that World Bank has barred it from making seaward work. “ This denial was a prevarication. In December 2008, the Bank publically declared Satyam “ ineligible for contracts for supplying improper benefits to Bank staff. “ There are no studies about SEBI oppugning Satyam about this. The Government has established a Serious Fraud Investigation Office ( SFIO ) under the Ministry of Corporate Affairs. The magistrate denied SFIO ‘s petition, saying that the latter needed to stipulate the right legal commissariats to oppugn the accused. These constabularies and tribunal actions imply that SFIO may non suit in good within a condemnable proceeding. The constabulary told the tribunal that Satyam had 13,000 fabricated employees, whose wages were used to syphon off financess from the company. However, following a statement issued by the HR section of Satyam, this does non look to be true.

The image that emerges is that there are no chiseled functions and system of coaction within the fact-finding bureaus. None of them appears to hold all the accomplishments or authorization to successfully forestall or prosecute white-collar offense. Without meaningful actions to right these cardinal failings, corporate administration in India will stay weak. In bend, this would do the public hesitant to put their money in the portions of any company. Potential clients would inquire whether they should make concern with the house, notwithstanding its proficient expertness.

There has been a sudden waking up to the fact that the state can come on economically with lawfully right distribution of wealth merely if concern & A ; industry are made to act. The recent liberalisation of the economic system to free concern and industry of the permit-license raj at least to some extent, is a measure in the right way. If, in malice of such liberalisation, big scale economic offenses are committed, so such wrongdoers should be dealt severely and badly.

Corporate Accountability and Excellence under the Sarbanes-Oxley Act, 2002

In the United States ( US ) the Sarbanes-Oxley Act, 2002 ( Act ) came into force the aftermath of prostration of corporate giants like Enron, Tyco, Quest, Global Crossings and WorldCom and the Xerox fiasco.A In about all the instances, grounds of the autumn of transnational corporations ( MNCs ) were accounting uses, failure on the portion of hearers and delinquency of responsibilities by the Board of Directors.A The push of corporateA IndiaA has besides been to forestall malpractices and determine the corporate governance.A To carry through these aims, the Companies ( Amendment ) Bill, 2003, ( Bill ) based on the recommendations of Naresh Chandra Committee on corporate audit and administration has been placed in the Parliamen[ 6 ].

The Corporate and Criminal Accountability Act, 2002, has been strengthened by amending the Federal condemnable jurisprudence to enforce rigorous condemnable punishments for: ( 1 ) wittingly destructing, changing, hiding, or distorting records with purpose to blockade or act upon either a federal probe or a affair in bankruptcy ; and ( 2 ) hearer failure to keep for a five twelvemonth period all audit or reappraisal paperss refering to an issuer of securities.

TheA White Collar Crime Penalty EnhancementA Act, 2002, has been strengthened by amending the Federal condemnable jurisprudence to: ( a ) set up condemnable punishments for effort and confederacy to perpetrate condemnable fraud offenses ; and ( B ) addition condemnable punishments for mail and wire fraud. The commissariats have been made more rigorous to set up a maximal 20 old ages prison term for fiddling with a record or otherwise impending an official proceeding.

A It has been made mandatary for the Chief Executive Officer ( CEO ) and the Chief Finance Officer ( CFO ) of a company to attest that: ( a ) the periodic studies filed with the SEC are materially right ; A ( B ) the fiscal revelations ‘fairly represent ‘ the company ‘s operations fiscal conditions, and ( degree Celsius ) ; they are responsible for measuring and keeping equal internal controls.A The penaltyA in instance of false or improper enfranchisement ranges from US $ 1 million to US $ 5 million or imprisonment up to ten old ages or both.


It is suggested that in the visible radiation of the experience of the Act in the US, following reforms should be introduced inA IndiaA for accomplishing corporate excellence and answerability[ 7 ]:

Enactment of Torahs on the form of the Corporate and Criminal Accountability Act, A 2002 and White Collar Crime Penalty Enhancement Act, 2002 for probe and prosecution white collarA corporate offenses.[ 8 ]

Strengthening of the Enforcement Agencies such as CBI, DRI, and the Directorate of Enforcement is a sine qua non.

The bench should play a proactive function for rapid test of corporate frauds and award hindrance penalty to unscrupulous managementA found guilty of corporate offenses.[ 9 ]

The liability of managers under the Companies Act for their non-compliance of statutory commissariats and deceitful patterns should be rigorous as that of an ‘occupier ‘ under the Factories Act.A The listing understandings with stock exchanges should besides supply for rigorous penaltyA in instance of misstatement or false information in quarterly studies.[ 10 ]

The institutional investors should efficaciously dispatch their duty in protecting the involvements of little investors by conveying in category action.[ 11 ]

The independent character and function of the Audit Committee under Companies Act and Listing Requirement demand to be strengthened. The pattern of the boards of household managed companies naming their friends as non-executive managers should be stopped because the determination whether a manager is independent or non is left to the Board of Directors.[ 12 ]A

Warning system like ‘whistle blowing ‘ can be an effectual anti-corruption tool. Indian Companies should promote employees to straight inform top direction about anything incorrect observed by them in the company.A On reported, a commission of officers and workers, including adult females representatives, should look into instances and grudges.[ 13 ]

Strengthening the independency of hearers and segregation of audit and non-audit practices.A Management of a company should be prohibited from act uponing hearers in discharge of their duties.A At the same clip, merely those hearers holding arm ‘s length relationship with the board of companies should be appointed as hearers and they should be prohibited from supplying non-audit and revenue enhancement audit services.[ 14 ]

There should be greater self-denial and accent on codifications of moralss and societal duties on the portion of companies.A In the ultimate analysis the society has created concern establishment for its public assistance and it has to dispatch its responsibilities and duties asA good corporate citizens.[ 15 ]


It is high clip for the Indian corporate sector to pull lessons from the experience of the operation of the Act in US in order to get by up with the ongoing planetary reforms in corporate sector, regulative model and administration patterns.[ 16 ]A Section 906 of the US Act provides for 20 old ages of imprisonment, whereas in India the Companies Act, Section 628 provides for 2 twelvemonth imprisonment merely.[ 17 ]It is possibly due to the fact that sufficient hindrance is conspicuously absent in India and fraud after fraud are taking topographic point. The authorities will hold to come up with rough statute law in this respect so that the perpetrators are badly punished in order to guarantee better corporateA governance.A


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