White collar crimes with special reference to cyberspace

Dr. Ghulam Yazdani1.

ABSTRACT

The concept of white collar crime has developed into a major part of criminological study. In the interceding years, a perceptible step was from “the study of white collar crime as an individual phenomenon to the study of white-collar crime as an organization practice.” As we are seeing rapid growth of internet usage throughout the world with this the threat of cyber crime is also growing. Problem is this that most of the times the cyber criminals are very hard to be identified. There is requirement of a proper law to trace such kind of cyber criminals. No doubt, a historical step was taken in the cyber world enforcing Information Technology Act however we cannot deny that there is a requirement to bring some changes in the said Act to make more powerful to combat cyber crime. In combating such types of crimes major problem is lack enforcement agencies in most of the countries to combat crime regarding to internet and to build up some level of confidence in its users.

Introduction

It is not settled that always necessity is the motive behind to commit a crime. This idea is elaborated in the year 1939 by the criminologist and sociologist Edwin H. Sutherland,  universalize the term white collar crimes[1] stating that “a crime committed by a person of respectability and high social status in the course of his occupation”[2] According to Kam C Wong[3] “it revolutionized the way crimes were looked at…Before, crimes were considered mainly as a street level phenomenon…After, the rich and poor alike could be implicated…In drawing the distinction between “white-collar crime” and “street crime,” Sutherland wanted to expose to the unsuspecting public a long obscured crime problem, i.e. crimes committed by the rich and powerful…More importantly, he wanted to bring to justice the elite criminals who until then were able to avoid the reach of the law with impunity because of their lofty social status, high political office and or powerful economic connections.”[4]

Undoubtedly, White Collar Crime is a crime against society however very much different than other crimes. The difference is that in this crime victim is not any individual but society is victim. This type of criminal belongs to high socio economic class who don’t have fear to violate the criminal law handling his professional qualities. Thus “misrepresentation through fraudulent advertisements, infringement of patents, copyrights and trademarks etc., are frequently resorted to by manufactures, industrialists and other persons of repute in course of their occupation with a view to earning huge profits.” .

Personal gain is the main motive behind white-collar crimes. We can see that “White-collar crime can be committed by one individual or it can involve a number of individuals in a large corporation who deceive investors.”[5] In this crime, positions hired by Individuals or groups may be used and abused to hide or steal money.

Sutherland viewed that “the present-day white collar criminals are more suave and less forthright but not less criminal. Criminality has been demonstrated again and again in investigations of land offices, railways, insurance, munitions, banking, public utilities, stock exchanges, the petroleum industry, the real estate industry, receiverships, bankruptcies, and politics.”[6]

This illegal activity is carried on within legal frame of business transactions such as banking, stock trading, or insurance claims. White-collar crime is also nonviolent. It is brought into a sharper focus of public attention not only in India but also in other countries . F V Arul opined that “the loss from business frauds affects the entire economy of the country as against the unlimited damages caused by offences against life and property.”[7]

In 1956, the amount of income tax lost through tax evasion was estimated at Rs 300 crore per year.[8]  That white collar crime is essentially connected with social status has been brought out in the following description given by a writer on Criminology:

“White-collar crime is most distinctively defined in terms of attitudes toward those who commit it. White-collar crime is definitely made punishable by law. It is convictable behavior. However, it is generally regarded by courts and by sections of the general public as much as less reprehensible than crimes usually punished by our courts, which may be designated “blue-collar crime”. Blue-Collar crime is the crime of the under-privileged; white-collar crime is upper or middle-class crime”. Just what proportion or section of the population must condone this type of behavior to constitute it as white-collar is not, and perhaps cannot be clear. Many courts and other authorities clearly distinguish between a man who illegally misrepresents the qualities of his products and a burglar or robber. Yet the very existence of the law penalizing the former type of act indicates an adverse attitude toward it, though ordinarily not of the same degree. The fact that white-collar crime is punished in less degrading ways than “ordinary crime” does not imply that the former is petty. Actually the society loses huge sums through white-collar crime. Some of the rackets we described in an earlier chapter are white-collar crimes; some are not. As Sutherland defines the term, most racketeering by officers of a labour union would not be white-collar crime; nor, apparently would the vice racket be so defined. Thus neither in terms of class status, business activity, attitudes, nor degree of seriousness can white-collar crime be wholly separated from other crime. Nevertheless, it is the somewhat distinctive attitudes and polices towards the offender in such cases which sshave been given significance in discussions of white-collar crime. It appears that even outside of business of circles, white-collar crime is less reprehensible than ordinary crime, because low-class people often aspire to be white-collar criminals. Or if not, they at least accept the same individualism and the same value of materialism which the middle and upper classes accept. White-collar crime is attractive because it brings material rewards with little or no loss of status.[9]

It is found that “victims of white-collar crime can be an individual; a group of individuals; a local organization whose treasurer secretly spends its money for his own benefit (embezzling); a company like a bank whose officers use its funds for their own gain; the government cheated by the companies who win its contracts; or a large corporation whose officials purposely falsify its financial records.” [10]

Legal Foundation of White Collar Crime:

The laws which underline white-collar crime is different from conventional criminal laws in five ways a)” In origin, b) indetermination of responsibility, or intent, c) in philosophy, d) in enforcement and trial procedure, and e) in sanctions used to punish violators.”

Further Donald J. Newman stated in his book[11] that “in the first place, most white-collar laws have been legislatively created as of a given date, and some of them are in derogation of common-law principles. These, then, are a mala prohibita, crimes created by legislative bodies, in contrast to most of the conventional criminal code, which is viewed as merely a legislative expression of “natural” crimes, mala in se. Secondly, and most regulatory laws define their violations as misdemeanors rather than the implicitly more serious felonies of penal law. Furthermore, the question of intent, so prominent in the criminal code, is irrelevant to conviction under many regulatory laws, although intentional violations, if proved, many increase the punishment. In these respects, white-collar violations are legally much more like traffic laws and municipal ordinances than statues of the criminal code.”

Therefore, the burning problem remains as to how to tackle with such fast growing white-collar crimes in various fields although at every walk of life on every day at every hour we feel frustrated of not getting such offenders to book. Here, it is admitted that “the legal distinctiveness of white-collar legislation is seen even more clearly in procedural variations from those more commonly used in conventional criminal cases. Most of the federal regulatory legislation and much of its counterpart on state levels rely for enforcement not on the police and public prosecutors, but on specially-created investigatory and enforcement bodies. Probably the most familiar of these is the Bureau of Internal Revenue, but many similar agencies exist within the framework of other legislation. of course, in the final analysis, police and the criminal court can be used, but in general, the enforcement of such law is not a common police activity.”[12]

In 1982, Herbert Edelherte wrote that  “research on white-collar-crime issues has proved resistant to organization in a clear conceptual framework because those who work in the field have been unable to agree on the character and nature of behavior to be studied. Political and ideological currents have broad and deep influences here. There is strong disagreement, for example, as to whether wrongful behavior is to be defined in terms of the states of the offender, the characteristics of his or her behavior, or the harm (actual or potential) inflicted on the victims.”[13]

Defining White- Collar Crimes: Juristic exercise

In 21 century definition of White Collar Crime is very complicated task. It is found that “there is a plethora of opinions and findings vis-à-vis the definition of white-collar crimes, which is not only an intricate task but also an evolving and non-static concept. The definitions which are offered by legal scholars vary both across and within disciplines and linguistic practises.”[14] Black’s Law Dictionary defines white-collar crime as “a non-violent crime usually involving cheating or dishonesty in commercial matters.” The Oxford English Dictionary defines the white-collar criminal as “a person who takes advantage of the special knowledge or responsibility of his position to commit non-violent, often financial, crimes.” The American Dictionary of Criminal Justice more specifically defines white-collar crime as “nonviolent crime for financial gain committed by means of deception by persons whose occupational status is entrepreneurial, professional or semi-professional and utilizing their special occupational skills and opportunities.” Again it is considered that “White-collar crime is considered a special breed in the criminal justice system, as there is a long history of perceived leniency with regard to these criminals. The leniency argument stems from the apparent ability of alleged white-collar criminals to utilize their resources to escape indictment or conviction. Whatever definitions have been offered have failed to find general acceptance; whatever alternatives have been suggested have proved inadequate.”[15]

At present “Sutherland was famously vague and inconsistent in saying exactly what the term should mean. But even if he had been precise and consistent in his usage, it seems likely that the term would still have generated uncertainty and misunderstanding among other users of the term. The definition for which he is most well known, and that has had the longest staying power, defined white-collar crime as: The crime committed by a person of respectability and high social status in the course of his occupation”[16]. According to him only   certain kinds of people do white-collar crimes, those with “respectability and high social status”.

What is the Social Status of the Offender?

There are many problems with social status of offender. It is also an issue of argument regarding “Sutherland’s definition is whether the social status of offenders should be a defining characteristic of white-collar crime…He included respectability and high social status in his definition, because he wanted to draw attention to the criminality of business groups…Sutherland argued that the criminological theories of his day were class biased and incomplete because they equated crime with lower-class individuals and ignored crime by upper class individuals…In addition, he was morally outraged by what he regarded as the lenient and preferential treatment afforded to business offenders in the criminal justice system.”[17]

White-Collar Crimes Vis-À-Vis Corporate Crimes:

From the above description, it is clear what white collar crime is. Now coming to Corporate crimes, it is viewed that “illegal acts or omissions, punishable by the State under administrative, civil or criminal law, which are the result of deliberate decision making or culpable negligence within a legitimate formal organisation.”Corporate crimes also refer to criminal practices by individuals that have the legal authority to speak for a corporation or company. These can include “Presidents, managers, directors and chairmen, sales people, agents, or anyone within a company that has authority to act on behalf of the firm. Examples of corporate criminal behaviour in most jurisdictions include: antitrust violations, fraud, damage to the environment in violation of environmental legislation, exploitation of labour laws, and failure to maintain a fiduciary responsibility towards shareholders.”

In white-collar laws, the same agency or commission which directs investigation also conducts hearings on cases and administers numerous punishments or sanctions short of prison terms or the other conventional penal sanctions. In a strict sense, these hearings are not trials, and, therefore, the formal criminal procedures are often absent, as, indeed are the many protections given defendants in criminal proceedings. Of course, the findings of such hearings may be appealed to conventional courts, and here the precise, if more cumbersome, formal procedural rules apply. This administrative process of investigation and hearing parallels more closely the practices in juvenile court than those in its criminal counterpart.

Sutherland puts it “An unlawful act is not defined as criminal by the fact that is punished, but by the fact that it is punishable.” This means that while one person may be tried in a criminal court for behavior remarkably similar to that of another which, at the discretion of the investigating agency, results only in a civil suit or a warning, both would be “criminals since the emphasis is on the behavior in question rather than the formality of legal process…”[18]

Hence, the origin of the “white-collar crime” concept derives from a socialist, anti-business viewpoint that defines the term by the class of those it stigmatizes. In coining the phrase, Sutherland initiated a political movement within the legal system. This meddling in law perverts the justice system into a mere tool for achieving narrow political ends. As the movement expands today, those who champion it would be wise to recall its origins. For “those origins reflect contemporary misuses made of criminal law—the criminalization of productive social and economic conduct, not because of its wrongful nature but, ultimately, because of fidelity to a long- discredited class-based view of society.”[19]

It is peculiar phenomenon that those indulge in white-collar crime develop some amount of immunity to criminal action. The subject of white-collar crime is of immediate interest to the criminologist in arriving at a workable theory of crime.  This technological and scientific development is contributing to the emergence of “mass society” with a large rank and file and small controlling elite; encouraging the growth monopolies, strict adherence to high standard of ethical behavior is necessary for the true and honest functioning of the new social and political processes. The inability of all sections of society appreciate in full this need, results in the emergence and growth of white-collar and economic crimes, renders enforcement of the laws, themselves not sufficiently deterrent, more difficult. This type of crime is more dangerous not only because irreparable damage to public morals. Tax evasion and avoidance, share pushing, malpractices controls, usury, under voicing or over voicing, boarding, profiteering, sub-standard performance of contracts of construction and supply, evasive of economic laws, bribery and corruption, election offences and malpractices are some examples of white-collar crime.[20]

Information Technology Act, 2000: to tackle Cyber Crime

After the WTO agreement, India followed the Globalization of Trade and Commerce in its conformity. According to one website “Indian Act was mainly based on the UNCITRAL Model law on Electronic Commerce. India’s Information Technology Act (ITA)was enacted on June 9, 2000. Since the Indian Act, is based on Model law, it can be seen that its focus is mainly on regularizing e-commerce. It does not focus its attention towards combating cyber crime as such.”[21] However, certain provisions are there which deal with “offences falling under this genus. The ITA’s purposes are to: (1) recognize the legal validity of electronic transactions that are used in E-commerce; (2) promote the growth of E-government, i.e., the acceptance and utilization of documents in electronic form by government departments; and accordingly, (3) to amend the criminal law, evidence law and banking law insofar as they are affected by the legal recognition of electronic transactions. Ostensibly, deference was shown by the drafters of the ITA to the United Nations’ Model Law on Electronic Commerce.”[22] The following items are excluded from coverage of the ITA: “(1) negotiable instruments; (2) powers-of-attorney; (3) trusts; (4) wills and other testamentary dispositions; (5) contracts for the sale or transfer of real property; and (6) other documents or transactions which may be specified by the government in the Official Gazette.”

Though the focus of the act is not on cybercrime as such, the Act defines “certain offences and penalties that deal with Acts and omissions falling under the term cybercrimes. Chapter XI of the Act deals with offences and Chapter IX deals with penalties and adjudication. Chapter IX brings a welcome change in the minds of law makers as, may be for the first time, Indian Parliamentarians have come out of their obsession with the idea of “criminalization’ as the sole means of regulating human conduct and upholding societal peace and tranquility and introduced civil liabilities as an alternative”[23].

Unresolved issues:

Although there are the definitions of certain contraventions and offences, and stipulated penalties and punishments thereto, yet there is not proper focus in this direction which has left many issues that are unresolved. The lawmakers did not focus on the procedural issues relating to crime detection and prevention. Issues which are not resolved are briefly discussed here:

  1. “Inapplicability
  2. Qualification for appointment as adjudicating officer not prescribed
  3. Definition of hacking
  4. No steps to combat internet piracy
  5. Lack of International cooperation
  6. Power of police to enter and search limited to public places
  7. Absence of Guidelines for Investigation of cyber crime”

White-Collar Crimes therefore overlap with Corporate Crime and Cyber Crime.

The internet in India is growing rapidly. It has given rise to new opportunities in every field we can think of – be it entertainment, business, sports or education. There are two sides to a coin. Internet also has its own disadvantages. One of the major disadvantages is Cyber crime – illegal activity committed on the internet. The internet, along with its advantages, has also exposed us to security risks that come with connecting to a large network. It is found that “Computers today are being misused for illegal activities like e-mail espionage, spams, software piracy and so on, which invade our privacy and offend our senses. The modern thief can steal more with a computer than with a gun. Tomorrow’s terrorist may be able to do more damage with a keyboard than with a bomb”. The term “cyber crime” is a broad term that is usually applied to a broad range of crimes in which computers are, in some manner, involved. This term, however, is vague and actually refers to a collection of dissimilar forms of criminal conduct that are powered by different motives.

Every computer system is threatened by the large number of crimes which we usually call cyber crimes, but every computer system does not face an equal risk of being victimized by all of those crimes.

Any criminal activity that uses a computer either as an instrumentality, target or a means for perpetuating further crimes comes within the ambit of cyber crime. As Internet usage continues to rise throughout the world, the threat of cyber crime also grows. While some of these crimes are relatively harmless and commonplace, others are very serious and carry with them felony charges.

Different types of Cyber Crimes: Computer Viruses

Viruses are used by Hackers to infect the user’s computer and damage data saved on the computer by use of “payload” in viruses which carries damaging code. Person would be liable under I.T Act only when the consent of the owner is not taken before inserting virus in his system. The contradiction here is that though certain viruses causes temporary interruption by showing messages on the screen of the user but still it’s not punishable under Information Technology Act 2000 as it doesn’t cause tangible damage. But, it must be made punishable as it would fall under the ambit of ‘unauthorised access’ though doesn’t cause any damage.

Fraud

Credit fraud is another common form of cyber crime. Certain computer viruses can log keystrokes on your keyboard and send them to hackers, who can then take your Social Security number, credit card number and home address. This information will be used by the hacker for his own means.

Cyber terrorism against the Government Organization/Institutions

Cyber Terrorism may be defined to be “ the premeditated use of disruptive activities, or the threat thereof, in cyber space, with the intention to further social, ideological, religious, political or similar objectives, or to intimidate any person in furtherance of such objectives”
Another definition may be attempted to cover within its ambit every act of cyber terrorism.

     “ A terrorist means a person who indulges in wanton killing of persons or in violence or in disruption of services or means of communications essential to the community or in damaging property with the view to –

(1) Putting the public or any section of the public in fear; or

(2) Affecting adversely the harmony between different religious, racial, language or regional groups or castes or communities; or 

(3)Coercing or overawing the government established by law; or
(4)Endangering the sovereignty and integrity of the nation
and a cyber terrorist is the person who uses the computer system as a means or ends to achieve the above objectives. Every act done in pursuance thereof is an act of cyber terrorism.

Reasons for Cyber Crimes:

Hart in his work “The Concept of Lawhas said ‘human beings are vulnerable so rule of law is required to protect them’. Applying this to the cyberspace we may say that computers are vulnerable so rule of law is required to protect and safeguard them against cyber crime. The reasons for the vulnerability of computers may be said to be:

       1. Capacity to store data in comparatively small space 2. Easy to access 3. Complex 4. Negligence 5. Loss of evidence.”

Analysis of the statutory provisions

The Information Technology Act 2000 was undoubtedly a welcome step at a time when there was no legislation on this specialised field. The Act has however during its application has proved to be inadequate to a certain extent. The various loopholes in the Act are-
The hurry, in which the legislation was passed, without sufficient public debate, did not serve the desired purpose. “Cyber laws, in their very preamble and aim, state that they are targeted at aiding e-commerce, and are not meant to regulate cyber crime” According to Mr. Pavan Duggal “the main intention of the legislators has been to provide for a law to regulate the e-commerce and with that aim the I. T. Act 2000 was passed, which may also be one of the reasons for its inadequacy to deal with cases of cyber crime.”

Preventive Measures

Prevention is always better than cure. Precaution, Prevention, Protection, Preservation and Perseverance. “Take security seriously,” he says. “If you protect your customer’s data, your employee’s privacy and your own company, then you are doing your job in the grander scheme of things to regulate and enforce rules on the Net through our community. A netizen should keep in mind the following things-
To prevent cyber stalking, avoid disclosing any information pertaining to oneself.” Always avoid sending photographs online particularly to strangers and chat friends as there have been incidents of misuse of the photographs. Always use latest and up-date ant- virus software to guard against virus attacks. “Always keep back up volumes so that one may not suffer data loss in case of virus contamination.  Never send your credit card number to any site that is not secured, to guard against frauds.” Always keep a watch on the sites that your children are accessing to prevent any kind of harassment or depravation in children.

Conclusion

Today it is need of hour that there is a need for addressing this issue in a comprehensive manner. This can be achieved by bringing in a legislation that exclusively addresses substantive law relating to cybercrimes. This could also be achieved by integrating the real world crimes and virtual world crimes in an integrated code by carrying out necessary amendments in the Indian Penal Code. Another area requiring legislative attention is data protection. Such legislation is necessary to protect the interests of Indian organizations as well as individuals, including their right to privacy. Procedural aspects of combating cybercrime also did not receive the necessary attention of the Indian Parliament. Section 78 and 80 of the Act deals with certain issues related to investigation, search, seizure and arrest and also make the provisions of Criminal Procedure Code applicable to any entry, search or arrest made there under.

Cybercrimes are not territorial crimes. Therefore, any isolated national efforts will not bring success in controlling cybercrimes. Thus, there is urgent need to undertake steps towards increasing international coordination and cooperation in fighting cybercrimes. Mechanisms, similar to that of 24/7 networks suggested by Council of Europe Convention, may be adopted for coordinating with international agencies for real-time collection of traffic data, interception of content data, preservation of stored data, search and seizure of computer data etc.

It is not possible to eliminate cyber crime from the cyber space. It is quite possible to check them. “History is the witness that no legislation has succeeded in totally eliminating crime from the globe. The only possible step is to make people aware of their rights and duties and further making the application of the laws more stringent to check crime. Undoubtedly the Act is a historical step in the cyber world. Further I all together do not deny that there is a need to bring changes in the Information Technology Act to make it more effective to combat cyber crime. Crucial aspect of problem faced in combating crime is that, most of the countries lack enforcement agencies to combat crime relating to internet and bring some level of confidence in users.

Even if the technology is made better enough to curb the computer related crime there is no guarantee if that would stay out of reach of cyber terrorists. Therefore Nations need to update the Law and its mechanism to meet the challenges of the time.

[1]   “The concept of white-collar crime was first introduced by Sutherland at the 1939 American Sociological meeting.’

[2] See Gilbert Geis (ed.), White-collar Criminals (New York: Atherton Press, 1968), p. 21. “The first major treatment of Sutherland’s thesis is in White-collar Criminality,” American Sociological Review 5 (February, 1940), pp. 1-12. A full treatment of his earthbreaking work is to be found in White-collar Crime ( New York, Dryden Press, 1949).

[3] Kam C Wong is a professor in University of Wisconsin,Oshkosh.

[4]  See http://www.austlii.edu.au/au/journals/MurUEJL/2005/14.html#n6 Accessed on 05/07/2014.

[5]  http://www.legalservicesindia.com/article/article/white-collar-crimes-cyber-crimes-255-1.html

[6] See, E.H. Sutherland, 1961, “White Collar Crimes” Chapter-1, Pg. No. 8-12

[7] F.V. Arul, “ Some thoughts on Economic Offences” CBI Bulletin, Vol.9, June 2001.

[8]    See, Ahmad Siddique, “Criminology” 2001, Eastern Book Co., Lucknow, Pg. No. 389-391.

[9]  See, 29th Law Commission Report 1966, P.7, Chapter-White Collar Crime.

[10] Available on http://www.legalservicesindia.com/article/article/white-collar-crimes-cyber-crimes-255-1.html

[11]  See” Law and Contemporary Problems” written by Donald J. Newman, available at http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=2775&context=lcp

[12]  See Supra Note 12

[13] See, Herbert Edelherte, Thomas D. Ouescast, “White-Collar Crime: An Agenda for Research” 1982, Lexington Books.

[14] Available on http://www.lawteacher.net/free-law-essays/commercial-law/definition-of-white-collar-crimes.php

[15] Ibid.

[16]  Ibid.

[17]  Ibid.

[18] See, Gilbert Geis , Donald J. Newman, “ White-Collar Crime: An overview and Analysis, 1977, Pg. No. 51

[19] See, John S.Baker, “The Sociological origins of “ White collar crime” October 4, 2004, Louisiana state University Law Centre.

[20]  See,  Giriraj Shah, “White Collar Crimes” 1st Edition,  2002,  Pg. No. 16.

[21]  Available on http://www.lawteacher.net/free-law-essays/commercial-law/definition-of-white-collar-crimes.php

[22]   Ibid.

[23]  Ibid.

  1. Assistant Professor Faculty of Law, Jamia Millia Islamia,New Delhi []