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WHITE COLLAR CRIMES

Edwin Sutherland coined the term white-collar crime and defined it as "a crime committed by a
person of respectability and high social status in the course of his occupation".
Sutherland was a proponent of Symbolic Interactionism, and believed that criminal behaviour was
learned from interpersonal interaction with others. White-collar crime therefore overlaps with
corporate crime because the opportunity for fraud, bribery, insider trading, embezzlement,
computer crime, and forgery is more available to white-collar employees.
The most common types of white- collar crime are Corporate Crimes and Money Laundering.
This supplement would focus on money-laundering.

Corporate Crimes
In criminology, corporate crime refers to crimes committed either by a corporation (i.e., a
business entity having a separate legal personality from the natural persons that manage its
activities), or by individuals that may be identified with a corporation or other business entity.
Corporate crime overlaps with:
* white-collar crime, because the majority of individuals who may act as or represent the
interests of the corporation are employees or professionals of a higher social class;
* organized crime, because criminals can set up corporations either for the purposes of crime
or as vehicles for laundering the proceeds of crime. Organized crime has become a branch of big
business and is simply the illegal sector of capital. It has been estimated that, by the middle of the
1990s, the "gross criminal product" of organized crime made it the twentieth richest organization
in the world -- richer than 150 sovereign states.
* state-corporate crime because, in many contexts, the opportunity to commit crime emerges
from the relationship between the corporation and the state.

MONEY LAUNDERING
Definition
Money laundering is the practice of disguising illegally obtained funds so that they seem
legal. It is a crime in many jurisdictions with varying definitions. It is a key operation of
the underground economy.
In US law it is the practice of engaging in financial transactions to conceal the identity,
source, or destination of illegally gained money.
In UK law the common law definition is wider. The act is defined as taking any action
with property of any form which is either wholly or in part the proceeds of a crime that
will disguise the fact that that property is the proceeds of a crime or obscure the
beneficial ownership of said property.
In the past, the term "money laundering" was applied only to financial transactions
related to organized crime. Today its definition is often expanded by government and
international regulators such as the US Office of the Comptroller of the Currency to
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mean any financial transaction which generates an asset or a value as the result of an
illegal act, which may involve actions such as tax evasion or false accounting. In the UK,
it does not even need to involve money, but any economic good.
As a result, courts may see money laundering committed by private individuals, drug dealers,
businesses, corrupt officials, members of criminal organizations such as the Mafia, and even
states.
As financial crime has become more complex, and "financial intelligence information gathering
intelligence" (FININT) has become more recognized in combating international crime and
terrorism, money laundering has become more prominent in political, economic, and legal
debate. Money laundering is ipso facto illegal; the acts generating the money almost always are
themselves criminal in some way (for if not, the money would not need to be laundered).

Common mechanisms of money- laundering

HAWALA
Hawala (also known as hundi) is an informal value transfer system based on the performance and
honor of a huge network of money brokers, which are primarily located in the Near East, North
and Northeast Africa, and South Asia.
How Hawala works
In the most basic variant of the hawala system, money is transferred via a network of hawala
brokers, or hawaladars. A customer approaches a hawala broker in one city and gives a sum of
money to be transferred to a recipient in another, usually foreign, city. The hawala broker calls
another hawala broker in the recipient's city, gives disposition instructions of the funds (usually
minus a small commission), and promises to settle the debt at a later date.
The unique feature of the system is that no promissory instruments are exchanged between the
hawala brokers; the transaction takes place entirely on the honor system. As the system does not
depend on the legal enforceability of claims, it can operate even in the absence of a legal and
juridical environment. No records are produced of individual transactions; only a running tally of
the amount owed by one broker to another is kept. Settlements of debts between hawala brokers
can take a variety of forms, and need not take the form of direct cash transactions.
In addition to commissions, hawala brokers often earn their profits through bypassing official
exchange rates. Generally the funds enter the system in the source country's currency and leave
the system in the recipient country's currency. As settlements often take place without any
foreign exchange transactions, they can be made at other than official exchange rates.
Hawala is attractive to customers because it provides a fast and convenient transfer of funds,
usually with a far lower commission than that charged by banks. Its advantages are most

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pronounced when the receiving country applies distortive exchange rate regulations (as has been
the case for many typical receiving countries such as Pakistan or Egypt) or when the banking
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system in the receiving country is less complex (e.g. due to differences in legal environment in
places such as Afghanistan, Yemen, Somalia).
Furthermore, the transfers are informal and not effectively regulated by governments, which is a
major advantage to customers with tax, currency control, immigration, or other legal concerns.
For the same reasons, governments do not favor the system, and accusations have been made in
recent years that terrorist funding often changes hands through hawala networks.
HUNDIS (THE BILL OF EXCHANGE)
On a similar note, Hundis referred to legal financial instruments evolved on the Indian subcontinent. These were used in trade and credit transactions; they were used as remittance
instruments for the purpose of transfer of funds from one place to another. In the era of bygone
kings and the British Raj these Hundis served as Travellers Cheques. They were also used as
credit instruments for borrowing and as bills of exchange for trade transactions. Technically, a
Hundi is an unconditional order in writing made by a person directing another to pay a certain
sum of money to a person named in the order. Being a part of an informal system, hundis now
have no legal status and were not covered under the Negotiable Instruments Act, 1881. They
were mostly used as cheques by indigenous bankers.
Angadia
The word angadia means courier (in Hindi) but it is also used for people who act as Hawaladars
within the country (India). These people mostly act as a parallel banking system for businessmen.
They charge a commission of around 0.2-0.5% per transaction from transferring money from
one city to another.

The Hawala Scandal in India

It was an Indian political scandal involving payments allegedly received by politicians through
hawala brokers, the Jain brothers. It was a US$18 million bribery scandal that implicated some of
the country's leading politicians. There were also alleged connections with payments being
channelled to Hizbul Mujahideen militants in Kashmir.
Those accused included L. K. Advani, Madhav Rao Scindia, Arjun Singh, V. C. Shukla, P. Shiv
Shankar, Moti Lal Vora, Ajit Panja, Sharad Yadav, Balram Jakhar and Madan Lal Khurana. Many
were acquitted in 1997 and 1998, partly because the hawala records (including diaries) were
judged in court to be inadequate as the main evidence. The failure of this prosecution by the
Central Bureau of Investigation was widely criticised.

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Vineet Narain was responsible for bringing the Hawala scandals to light.115 top bureaucrats
were identified as having participated in the scam.
The case got a momentary boost up as a result of a PIL (Public Interest Litigation) filed in the
Supreme Court. In 1996, for the first time in Indian history, several cabinet ministers, chief
ministers and governors were charge-sheeted. Several landmark decisions were passed by the
Supreme Court of India in the Vineet Narain Vs Union of India and Ors case.
TAX HAVENS
A tax haven is a place where certain taxes are levied at a low rate or not at all.
Individuals and/or firms can find it attractive to move themselves to areas with lower tax rates.
This creates a situation of tax competition among governments. Different jurisdictions tend to
be havens for different types of taxes, and for different categories of people and/or companies.
There are several definitions of tax havens. The Economist has tentatively adopted the
description by Geoffrey Colin Powell (former Economic Adviser to Jersey): "What ... identifies
an area as a tax haven is the existence of a composite tax structure established deliberately to take
advantage of, and exploit, a worldwide demand for opportunities to engage in tax avoidance."
The Economist points out that this definition would still exclude a number of jurisdictions
traditionally thought of as tax havens. Similarly, others have suggested that any country which
modifies its tax laws to attract foreign capital could be considered a tax haven. According to
other definitions, the central feature of a haven is that its laws and other measures can be used to
evade or avoid the tax laws or regulations of other jurisdictions.
In recent times, Liechtenstein has been in the news because of the 2008 Liechtenstein tax affair,
in which a series of tax investigations in numerous countries whose governments suspect that
some of their citizens may have evaded tax obligations by using banks and trusts in
Liechtenstein; the affair broke open with the biggest complex of investigations ever initiated for
tax evasion in the Federal Republic of Germany. It is seen also as an attempt to put pressure on
Liechtenstein, one of the remaining uncooperative tax havens along with Andorra and
Monaco as identified by the Paris-based Organization for Economic Cooperation and
Development in 2007.
The Prevention of Money Laundering Act
In India, The Prevention of Money-Laundering Act, 2002 came into effect on 1 July 2005.
Section 3 of the Act makes the offense of money-laundering cover those persons or entities who
directly or indirectly attempt to indulge or knowingly assist or knowingly are party or are actually
involved in any process or activity connected with the proceeds of crime and projecting it as
untainted property, such person or entity shall be guilty of offense of money-laundering.

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Section 4 of the Act prescribes punishment for money-laundering with rigorous imprisonment
for a term which shall not be less than three years but which may extend to seven years and shall
also be liable to fine which may extend to five lakh rupees and for the offences mentioned
[elsewhere] the punishment shall be up to ten years.
Section 12 (1) prescribes the obligations on banks, financial institutions and intermediaries (a) to
maintain records detailing the nature and value of transactions which may be prescribed, whether
such transactions comprise of a single transaction or a series of transactions integrally connected
to each other, and where such series of transactions take place within a month; (b) to furnish
information of transactions referred to in clause (a) to the Director within such time as may be
prescribed and to (c) verify and maintain the records of the identity of all its clients, As per
Section 12 (2), the records referred to in sub-section (1) as mentioned above, must be maintained
for ten years after the transactions finished.
The provisions of the Act are frequently reviewed and various amendments have been passed
from time to time.
The government has approved amendments to the Prevention of Money Laundering Act, which
would expedite the process of India's entry into Financial Action Task Force (FATF) -- an intergovernmental body combating money laundering and terrorist financing.
At present, India enjoys an Observer status.

Money Laundering and funding of Terrorism

This has been in the news after 9/11, because the faade of charitable organizations and trusts
was being used to channelize millions of currencies worth into terrorist activities.
The global community, especially the US and the UN have come down heavily on such activities,
and this year, the UN Security Council had banned the JuD (Jamaat ud Dawaa), Hizbul
Mujahideen and the LeT (Lashkar-e-Tayyaba) in the aftermath of the terrorist attacks worldwide,
especially 26/11.

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