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Comparative Study with Global Jurisdiction on White Collar Crimes

Publications, Research paper

Abstract
A comparative study helps us understand the intricacies of white-collar crime in various legal systems. It offers valuable insights into how to prevent such crimes and identifies common patterns of corporate wrongdoing. Therefore, in this study a comparison is done, in between the laws relating to White Collar Crimes in India and the various other Global Jurisdictions. This study will help you to know the different provisions of law governing the white-collar crimes in various jurisdictions. Like, if you start a business with it  various branches in other countries, then this will help you to identify which regulation governing the white-collar crimes can impact your business or what will be the consequences of non-compliance of these regulations. In this study the various regulations relating to white collar crimes will be discussed with the special emphasis on money laundering to fix a niche to make the study easier and thus, the main focus of this study will be towards the comparison of white-collar crimes specifically money laundering and the anti-money laundering regulations’ differences in various global jurisdictions in relation to India.

Keywords

non-violent, organised crime, money laundering, anti-money laundering regulations, PMLA, PCMLTFA, AMLA

Introduction

White-collar crime refers to offenses committed by individuals from higher social classes who hold reputable positions. Coined by Prof. Edwin H. Sutherland in 1939, it encompasses crimes committed by respectable people in their professional roles. These crimes have significant financial implications and often impact society directly. Examples include bribery, fraud, insider trading, and money laundering. They are non-violent crimes committed through deceptive practices, usually for financial gain. These crimes are typically perpetrated by individuals in business positions who have access to significant amounts of money. White-collar crime can occur through two primary methods: duplication to manipulate power and misrepresentation of asset values. Both approaches involve breaching the victim’s trust for personal gain, resulting in physical and psychological losses for the victim. 

Research Methodology

The research for this descriptive paper’s in-depth examination of white-collar crimes and corporate fraud is derived from secondary sources. Articles, research papers, and websites are examples of secondary sources of information that are used in the research.

Review of Literature

There is many research work on white collar crimes present like one article by Adam Hayes on white collar crime is present on Investopedia.com where he very well describes and talks about white collar crime its type and regulations regarding it all of it is well researched and all this is general and known about white collar crime, but there is a gap in the comparison of money laundering as a type of white-collar crime and its comparison with the various global jurisdictions. In an article on LinkedIn by Radhika Verma whose topic is “Comparative Analysis of white-collar crimes in India, UK and Canada”. Here comparison has been done on white collar crimes in various jurisdiction but its generalised but in this research a niche and particular white-collar crime that is money laundering is compared with various global jurisdictions.

White Collar Crimes and Reasons for its Increase

White-collar crime primarily involves non-violent offenses committed for financial gain. It’s essential to recognize that white-collar crime is not victimless; it inflicts distress and loss on others. Moreover, it can devastate families, companies, and leave victims suffering and in distress. Generally, it is seen that white collar crime is committed by sophisticated segment of society. White collar crime consists of some essential impediments which are:

  1.  White-collar crime is typically non-violent.
  2. It involves acts or omissions that result in harm.
  3. The intention behind white-collar crime is to deceive or defraud others.
  4. Victims experience wrongful loss, while perpetrators gain financially.
  5. Wrongdoers benefit financially from these crimes.
  6. Victims suffer financial distress.
  7. Unlike physical force, white-collar crime does not rely on violence.[1]

This concept and this term of white-collar crimes was evolved because of new terminologies and concepts of differentiation was developed in the 1920’s which differentiated the types of crimes into sophisticated crime which were white collar crimes and blue-collar crimes were the traditional crimes which were violent in nature and was done by normal people. It referred to Americans who performed manual labour, often wearing darker clothes to hide soot or stains. These individuals were involved in traditional crimes such as assault, dacoity, robbery, and theft. As, these people were wearing dark clothes generally blue in colour who committed these sorts of traditional crimes. Thus, these types of traditional crimes were classified into a term white collar crime. On the other hand, White-collar crimes were committed by people of high socio-economic class. These crimes are driven by monetary gain.Examples include embezzlement, fraud, cybercrime, infringement of patents, and bribery. Because, these crimes were mostly committed by the high class it was termed as white-collar crime. White-collar crime offenders require knowledge before committing the crime, whereas blue-collar crime offenders can physically commit the offense. The concept of blue-collar crime is an age-old one, but the concept of white-collar crime is relatively new and represents a distinct category of criminal activity. 

The reasons that contribute to the growth of white-collar crime can be-

1. Greed

2. Lack of awareness among public

3. Lack of strict rules and laws

4. Lack of accountability

5. Competition

6. Peer support

7. Loopholes in legal system

8. The development in science and technology.

Examples of White-Collar Crimes

These are the following examples that illustrate different forms of white-collar crimes: –
1.  Fraud:

  1. Fraud is a crime committed with the intention to deceive and gain undue advantage.
  2. Bank fraud is committed by fraudulent companies through fake documentation, manipulation of negotiable instruments (such as check bouncing), and securities-related fraud.
  3. Bank fraud affects the public at large due to the trust relationship between banks and the public.
  4. Bribery:
    • Bribery involves giving money, goods, or favours to a person in a high position in return for a favour.
    • It is a common form of corruption and occurs across various sectors.
  5. Insider Trading:
    • Insider trading occurs when individuals with special knowledge about securities transactions cause significant losses to the company.
    • This crime involves using confidential information for personal gain.
  6. Embezzlement:
    • Embezzlement occurs when a person entrusted with money or property appropriates it for personal use.
    • It often happens within organizations where employees misuse funds or assets.

5.         Cybercrime:

o    Cybercrime is related to computer networks.

o    It involves individuals with expertise in computer technology.

o    Perpetrators use the internet, networks, and other technological sources to harm victims directly or indirectly.

o    Impact: Reputation damage, physical or mental harm.

6.         Money Laundering:

o    Criminals disguise the identity of money.

o    They hide the original ownership and the source of the money.

o    Intention: Make illegitimate money appear legal.

o    Impact: Undermines financial systems and trust.

7.         Tax Evasion:

o    Concealing real income to reduce tax liability.

o    Negative impact on social values.

o    Demoralizes honest taxpayers.

o    Concentrates economic power in undeserving hands.

8.         Ad hoc Crimes:

o    Pursued by individuals for personal objectives.

o    No face-to-face interaction with the victim.

o    Examples: Credit card fraud, hacking, etc.

Ways Where Different Professionals Commit these Crimes
Following below there is a contrast that highlights how different social classes engage in distinct forms of white-collar crimes.

  1. Medical Profession:
    • Example: Making of false medical certificates by doctors, sex determination of the foetus leading to abortion, and drug addiction.
  2. Legal Profession:
    • Examples: Fabricating false evidence, threatening witnesses of the other party, engaging professional witnesses, violating ethical standards of the legal profession, and arranging professional alibis.
  3. Engineering Profession:
    • Examples: Underhand dealing with suppliers, passing substandard works, and maintaining bogus reports of labour works.
  4. Educational Institutions:
    • Examples: Collecting huge sums of money in the name of donations for admission, replacing merit-based admission with donations, and collecting government grants.

These examples illustrate how white-collar crimes can manifest in different professional fields

Money Laundering
In this research paper the white-collar crime of money laundering is compared with various global jurisdictions as to inform what all laws and regulations govern and control this crime.
Money laundering involves accepting cash obtained from illegal activities (such as drug trafficking) and disguising it as legitimate business earnings. Criminals often follow a three-step process:

  1. Placement: This is the initial entry of the criminal’s illicit proceeds into the financial system.
  2. Layering: It involves separating the criminal’s funds from their original source, creating a complex trail through multiple financial transactions.
  3. Integration: At this stage, the laundered money is returned to the criminal, seemingly originating from legitimate sources.

Cash-based businesses, like restaurants owned by criminal organizations, are commonly used to launder illegal funds. By inflating daily cash receipts, illicit money is funnelled through the restaurant and eventually deposited into bank accounts for distribution to the owners.[2]

International Jurisdiction on Money Laundering

 An effective approach to understanding the complex web of international agreements and arrangements related to anti-money laundering (AML) regulations is to consider the international political context. By examining the regulatory and enforcement agreements at both universal and regional levels, we can better construct robust AML regimes. So, lets discuss the international political context and the international political bodies which govern the AML laws.

1. The United Nations

The United Nations took a pioneering step in international anti-money laundering (AML) cooperation through the 1988 Vienna Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. This convention mandates signatory countries to criminalize money laundering and freeze the assets of individuals involved in illegal drug trafficking. Given the diverse participation of governments during its inception, variations exist across countries in terms of how they criminalize money laundering, the required level of intent (scienter), enforcement strategies, conviction rates, and the severity of penalties. Nonetheless, subsequent efforts have built upon the Vienna Convention, aiming to maintain consistent terminology and a systematic approach.

2. The Financial Action Task Force

In response to increasing concerns about money laundering, the 1989 Paris G7 Summit established the Financial Action Task Force on Money Laundering (FATF). The FATF’s mandate included analysing money laundering techniques, reviewing existing national and international efforts, and implementing measures to combat this crime. Within a year of its inception, the FATF issued a report containing Forty Recommendations—a comprehensive plan to tackle money laundering. With 36 member countries and 2 regional organizations, the FATF continues to assess methods used for laundering illicit proceeds and promotes global adoption of anti-money laundering (AML) measures. In 2000, the FATF took action against noncooperative countries and territories (NCCTs) that did not meet international AML standards, although it does not maintain a formal list of “restricted” countries.

3. The International Monetary Fund and World Bank

Until 2001, the International Monetary Fund (IMF) was hesitant to actively participate in anti-money laundering (AML) and counterterrorist financial enforcement. While its primary role was seen as assisting with financial regulation rather than criminal law enforcement, recent pressure from major shareholders has compelled the IMF to adopt a more proactive approach. The evolving political landscape has prompted the IMF to address AML and counterterrorism financial (CTF) policies, recognizing the impact of money laundering on both national and international financial systems. Concerns include potential market destabilization, risks to bank stability, and volatility in capital flows resulting from cross-border asset transfers. Despite these efforts, the IMF’s AML unit faces limitations such as a small staff size, short-term contracts, and budget constraints.[3]

Indian Jurisdiction and Laws Preventing Money Laundering

India’s laws continue to evolve rapidly, both in reactive response to emerging forms of crime and proactively to address potential risks and concerns that may arise in the future. The Prevention of Money Laundering Act, 2002 under Section 3 defines Money Laundering as, any involvement in the process of utilising proceeds of a crime and using or projecting it as untainted property. Money laundering in connection with offences under the Narcotic Drugs and Psychotropic Substances Act, 1985. If someone if found committing this crime then he/she will be punished with rigorous imprisonment of three years, which may extend to seven years moreover if any property is involved in the carrying out of money laundering may be attached. If the committed crime is connected with offences pertaining to narcotic drugs or psychotropic substances, maximum imprisonment increases to a period of 10 years.[4]

An Example of this can be the recent case of Delhi Chief Minister Arvind Kejriwal in case of Arvind Kejriwal v. Directorate of Enforcement, where CM of Delhi has been arrested according to the Section 19 of PMLA because of alleged Delhi Liquor Scam.

Canadian Jurisdiction and Laws Preventing Money Laundering in Canada

Canada’s anti-money laundering and terrorist financing laws primarily consist of two statutes: the Criminal Code and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTA). The Criminal Code applies to both individuals and businesses. It prohibits knowingly dealing with property or providing financial services for terrorist activities or to individuals/entities on government lists. The PCMLTA applies to reporting entities such as financial institutions, credit unions, and real estate brokers. Reporting entities must establish compliance programs, verify clients, maintain records, and report specific transactions. Non-compliance of this statute can result in severe penalties, including fines and imprisonment.

In Canada, the maximum sentence for money laundering is 10 years in prison, a $5,000 fine, or 2 years less a day in jail. The punishment depends on the nature and severity of the offense. 

Fines for non-compliance with the PCMLTFA can reach up to $2,000,000. The Crown prosecutor decides whether to treat the offense as a summary or indictable offense. Summary convictions result in lesser sentences. [5 & 6]

American Jurisdiction and Laws Preventing Money Laundering in USA

The most important federal AML laws are Bank Secrecy Act of 1970 and Anti Money Laundering Act of 2020. The Bank Secrecy Act [BSA] of 1970, also known as the Currency and Foreign Transactions Reporting Act, assists government agencies in detecting and preventing money laundering.

The Currency and Foreign Transactions Reporting Act of 1970, more commonly called the Bank Secrecy Act (BSA), helped formalize a federal framework for AML. Many of the laws and regulations that followed either amend or build on this framework. 

Authorizes the Department of the Treasury to create requirements for financial institutions that could help detect or stop money laundering. The guiding regulations of the BSA also require banks to identify customers, maintain records of financial transactions, and file CTRs for cash transactions exceeding $10,000  a threshold unchanged since 1972.[7]

The Anti-Money Laundering Act of 2020 (AMLA) represents a modernization of the AML framework. It introduces amendments to the Bank Secrecy Act (BSA) and incorporates the Corporate Transparency Act (CTA). Key provisions include:

  1. Beneficial Ownership Identification: The CTA mandates identifying beneficial owners of specific businesses and legal entities.
  2. Expanded Definitions of Financial Institutions: The BSA now covers businesses offering services related to “value that substitutes for currency,” potentially including cryptocurrency services and antiquities traders.
  3. Prohibition on Concealing Information: The AMLA prohibits concealing or misrepresenting information from financial institutions, with enhanced penalties for BSA violations.
  4. Subpoena Powers for Foreign Bank Records: The Departments of Justice and Treasury gain new subpoena powers.
  5. Whistleblower Protections and Rewards: The AMLA strengthens existing whistleblower protections and offers rewards for reporting AML violations. [8 & 9]

Conclusion & Suggestions

White Collar Crime is tremendously increasing all over the world. So, it has become necessary to take steps for eliminating this crime. Governments of various global jurisdictions should pass stringent punishment against white collar criminals. Moreover, media can also help to reduce this crime if it actively publishes frauds and scams done by people at higher position and aware general public about white collar crime. Enacting legislation alone will not help but its proper implementation is necessary. Judiciary should strictly interpret the penal provisions so that deterrent effect is created upon society. White Collar Crime is in our society since centuries so it is not easy to eliminate it but we, government, media, legislators and judiciary should try to reduce such crime.

References

1. Sarada Saha, (21-08-2023).” An overview on white collar crime”. International Journal of Law, Policy and Social Review, Volume 5, Issue 3, Pages 46-50.

2.  Adam Hayes, What Is White-Collar Crime? Meaning, Types, and Examples (investopedia.com) (20.05.2024).

3. Bruce Zagaris, (2015). “International White-Collar Crime”. Cambridge University Press, Second Edition, Pages 63-69

4. Prevention of Money Laundering Act, 2002, Acts of Parliament, 2002(India)

5. Proceeds of Crime (Money Laundering) and Terrorist Financing Act [PCMLTFA], 2001(Canada)

6. Peter Dostal, http://criminalnotebook.ca/index.php/Money_Laundering_(Offence) (20.05.2024)

7. Bank Secrecy Act of 1970, 1970(USA)

8. Anti-Money Laundering Act of 2020 (AML Act), 2020(USA)

9. Louis DeNicola, https://withpersona.com/blog/aml-laws-us#:~:text=Money%20Laundering%20Control%20Act%20of%201986&text=Makes%20money%20laundering%20a%20federal,to%20attempt%20to%20evade%20CTRs. (20.05.2024)

Author

NIMIT DHAMIJA

BVIMR, NEW DELHI