INTRODUCTION
The term White-collar crime was first coined in the year 1939 by sociologist Edwin Sutherland.. It refers to the offences relating to a financial nature and mostly non-violent offences committed by individuals regarding power and trust. In comparison to other crimes that involve physical harm or violence, white-collar crimes are characterised by deceit, complexities in financial transactions and violation of trusts. These crimes are mostly related to monetary transactions, frauds, tax evasion, money laundering and most commonly bribery. Though the results of white-collar crimes lack the immediate impact of violent crime, the damage it causes is however far-reaching, which includes the hidden costs that highly affect individuals, businesses, and the government on various levels.
THE NATURE AND TYPES OF WHITE-COLLAR CRIME
In simple terms, White-collar crimes are the offences that are committed by individuals or establishments in the course of their activities on the professional level more particularly within the sphere of corporate or governmental institutions. The nature of white-collar crime is the exploitation of power for financial gains, often at the cost of the public at large, employees or clients.
There are various kinds of White-collar crimes, such as:
- Fraud: It includes intentional deception for unlawful gains. For example, corporate fraud involves inflating the company’s financial status to mislead the clients or shareholders. A famous example is the scandal of Enron, in this the executives manipulated statements of the finance of the company to hide losses and the inflation in the profits, which finally resulted in the collapse of the company.
- Embezzlement: It takes place when a person who is trusted with all the assets and finances of the company and the person uses them for their personal use. This situation occurs when an employee(s) draws off money from the company’s accounts or misuses the resources of the company for their benefit. It’s a breach of trust, which is typically carried out over a long period to avoid being detected.
- Bribery and Corruption: It includes the offering, receiving or giving of something that has value to influence the acts of administration of the corporate institution, bribery corrodes trust in public institutions and also in businesses. Corruption is often tied to bribery and it allows for illegal benefits, which causes inefficiency and also cost inflation.
- Insider Trading: It is the buying or selling of shares based on confidentiality, and which is not disclosed to the public about a particular company. By using their positions, the persons engaged in insider trading gain profits and avoid losses, which is a disadvantage to regular investors who do not have access to the same kind of pieces of information.
- Money Laundering: This involves the concealment of the origins of money which is obtained through illegal activities by passing it through various complexities in the banks. It is most often related to other crimes, such as fraud, extortion and various other organized crimes, but they are used by the criminals of white-collar crimes to legalise illegal activities.
However, these types of crimes are typically committed by well-educated individuals, who mainly have access to the resources and also have a deep understanding of the financial and legal systems.
THE ECONOMIC COSTS OF WHITE-COLLAR CRIME
The major impact of white-collar crime is the large amount of economic cost which is imposed on the businesses, government and the public at large. Approximately hundreds of billions of dollars annually are spent on white-collar crime..
These costs mostly include:
- Direct Financial Losses: Direct losses are caused to businesses through fraud, embezzlement, and other serious corporate crimes. There have been cases that led to the insolvency or closure of the establishments, as happened in the case of Enron and WorldCom.
- Regulatory and Legal Costs: The process of investigating and prosecuting the offenders is lengthy and expensive. The authorities and government agencies must invest in high-rate the purpose of exposure of sophisticated schemes, more particularly when the crimes include large multinational corporations and operations.
- Increased Prices for Goods and Services: There are situations when corporations face fraud or are forcibly required to pay heavy fines for the violation of regulatory measures, in such cases the cost of such is often passed to the consumers in the form of a rise in the prices of the goods and services.
- Loss of Public Funds: There is a huge amount of loss of public revenue particularly in the cases of fraud and tax evasion. Because of these losses, there can be a decrease in the allocation of funds for essential public utilities such as education, healthcare and infrastructure.
- Market Instability and Recession: The financial crisis of 2008 was caused due to large-scale white-collar crimes which can destabilise entire economies. The irresponsible attitude of the financial institutes, which have greedy and unethical practices led to the global recession which resulted in the loss of homes, jobs, and investments.
THE SOCIAL AND PSYCHOLOGICAL COSTS OF WHITE-COLLAR CRIME
While there are financial damages, white-collar crimes affect the social and psychological costs also. One of the main foundations of a functioning society is trust, and crimes related to white-collar erode that foundation at various levels. The effects in most cases are deceptive and long-lasting which affects individuals, communities and also the whole nation sometimes..
- Erosion of Public Confidence: When scandals made by corporations come to the view of society, it erodes the confidence of the public in businesses, governments and institutions. The financial crisis in the year 2008 exposed various worldwide unethical behaviours of the banking sector, which resulted in the loss of trust in financial bodies and regulators.
- Impact on Employees and Communities: White-collar crimes often lead to the loss of jobs, especially in cases when corporations break down due to internal fraud or failure in management. There have to be cases where the public at large suffers when the majority of employers close or become insolvent due to misconduct in the establishments leading to the economic ruin of the families.
- Psychological Impact on Victims: The persons affected by white-collar crimes also experience high levels of distress and depression. The employees who lose their jobs, investors who lose their savings or the taxpayers that is the citizens who see that their public service infrastructure is being worn out due to the effect of corruption may experience anxiety, depression and various other mental health issues.
- Widening Social Inequality: The Indian Constitution provides the right of equality under Article 14 but because of white-collar crimes, the principle of equality is violated and leads to the growth of inequality in society. The offenders of these crimes most often enjoy large amounts of wealth and social status and they also hire powerful legal teams of lawyers to escape serious punishments.
LEGAL AND REGULATORY CHALLENGES IN ADDRESSING WHITE-COLLAR CRIME
Although there is substantial harm which is being caused by white-collar crime, there is extensive insight that the legal system is not well equipped to handle these kinds of matters efficiently. Various aspects contribute to this insight.:
- Complexity of White-Collar Crime: It has been seen that crimes of white-collar are very complex and include complicated financial transactions, and various loopholes in the laws and structure to escape from being detected. These complexities make it tougher for the legal authorities to create a strong case against the offenders and because of this many offenders go undetected for several years before they’re caught.
- Lenient Penalties: When the offenders of the white-collar crimes are punished it has been seen that the penalties are often unreasonably lenient in regards to the harm they caused. High-profile corporate executives involved in large frauds also receive imprisonment for a short duration of time or might have the option to settle their cases through the help of financial penalties.
- Corporate Power and Influence: Comparatively large Corporations exert influence such as political and economic, which can capture the regulations. This situation takes place when the enforcement agencies become conquered by the industries themselves which are required to regulate leading to the weak enforcement of the legal sphere.
- Deferred Prosecution Agreements (DPAs): Under these agreements, the corporations agree to pay the penalties and implement the reforms in exchange for facing criminal charges. While they are implemented to encourage corporations to reform, critics contend that DPAs allow companies to escape from punishments because of their illegal misconduct.
CONCLUSION
The crimes of a white-collar nature are often unnoticed threats to the stability and integrity of modern society. Its concealed costs, are profound, affecting individuals, businesses and government. The leniency of these crimes makes it more difficult to address the issues efficiently. Legal frameworks along with cultural shifts towards responsibility and accountability are required to address white-collar crimes. This shift shall provide priority to sustainability and ethical behaviour in the long term rather than short-term profits making sure that the purpose of the businesses is to serve the society’s interest as a whole rather than benefitting a few privileged groups.
Author(s) Name: Debdeep Mukherjee (Department of Law – Veer Narmad South Gujarat University, Surat)
