I. Introduction

The actual term white collar crime was coined by Edwin Sutherland, Professor of Sociology and 29^th President of American Sociological Society. Sutherland describes such crimes as “a crime committed by a person of respectable and high social status in the course of his occupations.² The term economic crimes is crime committed by an individual or a group of individuals to gain an economic and financial advantage. Economic crimes in its purview include many crimes all of which is done by the purpose of deceiving the society and the government for their own advantage. Such crimes are committed by respectable people in the society that have a high status and good reach in order to relieve themselves of the liability. The society in return has to pay for the acts of such offenders as it has an indirect impact on the people of the country. Economic crimes are on the rise in developing countries due to the lack of competence by the government and hence the occurrence of same is on the rise. A strong government body and policy makers are the key to solving problems regarding economy and the crimes committed. Among its other negative socioeconomic effects, money laundering transfers economic power from the market, government, and citizens to criminals. In short, it turns the old adage that crime doesn’t pay on its head.

(A) Research Problem

1. What is economic crime?

2. What impact does economic crime have on the economy?

3. Do economic crimes lead to an economic crisis?

4. What is the social reaction to economic crime committed in the country?

(B) Objectives:

1. To understand how economic crime impacts the economy of a country.

2. To analyse the extent of effect of economic crime on the society.

3. To understand how economic crimes are reacted to.

4. To understand the relation between economic crisis and economic crime.

(C) Hypothesis

Null Hypothesis (H_o): There is no relationship between economic crimes and economic crisis in India.

Alternative Hypothesis (H₁): There is a relationship between economic crimes and economic crisis in India.

(D) Research Methodology

The research paper follows a doctrinal method of research to understand the impact of economic crime on the economy and its implications on the society. The research paper consists of data from secondary sources such as research papers, articles, journals. The purpose of choosing this particular topic was to understand what are the various crimes and what effect does it have on the people and the government of the country. The research is based solely on secondary data which gives an understanding of how economic crimes is perceived by others. The research paper also suggests ways in dealing with such economic crimes and how does it affect everyone in the society directly or indirectly.

(E) Scope of the Study

The research paper focuses on economic crimes only in India and its implications of the Indian citizens and the society. The paper uses secondary data such as research papers, websites and articles in order to understand the effects of economic crimes. The paper focuses mainly on how such crimes leave a mark on the society and who is capable of committing such crimes. The paper also explains the vicious cycle between economic crime and the adverse impact it has on society. The paper also aims to highlight why the occurrence of such crime takes place and the psychology behind the same. Due to lack of knowledge among the general public, there has been less awareness about economic crimes and how it impacts the society and hence many people do not consider it to be of much importance. Due to the rigid legal framework that follows when such acts come into broad light, many offenders do not pay the price for the acts done by them. The study keeps in mind crimes such as corruption, bribery, money laundering, stock market fraud, extortion, bank scam, insurance fraud and so on. The paper also explains how such crimes are committed by intelligent and powerful people who have a moral image in society and hence do everything in their power to hide the acts done by them.

(F) Importance of the Study

The research paper aims highlighting the impact that economic crimes have on the society and what measures can be taken to reduce the implications of the same. It is important to understand what are economic crimes and how is it different from other crimes, who does it affect, how does it affect the economy and what measures can be taken to ensure a reduce in the occurrence of such crimes. The paper mentions how economic crimes can affect the credibility of the country and have an impact in the global market. Though the people of the country are not directly involved, they are affected by the same indirectly since all of them form a part of the working of the economy. Since these crimes require a higher level of knowledge to be converted into the act, it is for the very reason why it is harder to identify and punish such offenders compared to other crimes. The impact of economic crimes can last for longer than anticipated from the time it is committed to identifying the same and to undo the harm that has been done. The paper focuses on how economic crimes are related to the society and how the government and the society perceive the same. The cascading effect of such crimes can leave a serious dent on the economy which affects a larger number of population if corrective actions are not taken. The researcher, with the help of secondary data, analysis the gravity of these crimes and the level of serious damage it can cause to the nation. Due to the lack of knowledge, many do not consider such crimes as a serious threat as it does not have direct implications however, the research paper aims at explaining how such crimes can be harmful to the entire nation including both the government as well as the people of the society.

(G) Review of Literature:

• R F Meier and J F Short (1982): in the paper explain that economic crimes leave an adverse impact on the economy of the country and the victim of the crime. Most experts’ state that the effect of the crime committed is more costly than the actual crime that has been committed. The sociological factor says that such economic crimes are more dangerous since it is committed by powerful people in the society who are looked up to and are considered as a moral example who is expected to behave responsibly. Some individuals may not consider such crimes to be serious because it has no direct impact on everyone however the seriousness of this is more than what is portrayed. An economic crime committed by one person can impact many individuals around the globe unlike any other crime.
• Eli Lehrer (2000): the article suggests that though people get paid the low rate of wages and no crack in profit results to lack of motivation among young men to carry on the honest work. Instead, they resort to criminal activities. Here, the chances of getting caught may be high but the reward for not getting caught is the motivating factor. The article highlights that there is no hard evidence to state that an increase in unemployment rate can lead to increase in economic activities however this has not stopped experts from trying. Other than economic factors other factors also play a role in the crime rate. These factors could be the availability of prison, since the capacity of the prison is not adequate the criminals are left free another reason is the effectivity of law and the rules ensuring the abidance of law. The last factor mentioned in the article was the age group of 16-24-year-old population.
• John McDowell (2001): in the paper explains how money-laundering has an effect on the private sector and had the ability to disrupt an entire sector of the economy. In money-laundering the offender is searching for a way to evade taxes and for this purpose resorts to opening of shell companies or restaurants. In doing this the individual has excess money and does not have to work as the market demand and supply conditions. He can price his products lesser than the prevailing market price since he can manufacture below the manufacturing cost. This possesses a big disadvantage to its competitors. Money-laundering also leads loss of government revenue since it indirectly harms the honest taxpayers. Money-laundering also shifts the economic power from government, market and citizens to criminals.
• Michael Levi (2011): in the research paper “Social Reactions to White-Collar Crimes” states that crime is occupational since to commit a crime one needs to have an occupation in order to hide the wrong doing and black money received from the crime committed. Though they may be motivation to defraud at the time the economy of the country is facing crisis the opportunities to do the same may fall due to the crunch faced by the economy. Despite the controversy following these crimes there is no public anger regarding the same making it easy to supress at the very source.
• United Nations Office on Drugs and Crime (2012): this article states that there is an inverse relationship between economic crimes and economic crisis. When individuals are left with no options, they resort to economic crimes which affects the economy of the nation. This circle goes on and on and hence others have to bear the brunt of the same. The data recorded by 15 countries state that there is a significant increase in the criminal behaviour of the people due to economic stress in the country. The effectivity of law also plays a role in the criminal behaviour of the people since it is believed that stricter law would create fear in the minds of the people.
• Salman Agha (2013): in the research paper explained the difference between white collar crimes and economic crimes. White collar crimes are committed by professional in the process of carrying out their occupation while economic crimes are committed by people who are intelligent but have a devious mind to earn money through illegal means. The paper highlights that the population of India is so vast that the act of one could affect lives of hundreds of people and hence the laws governing economic crimes should be made stricter so that the victims that indirectly pay the price of another’s deeds do not have to bear the brunt.
• John Kurtz (2015): in the research paper titled “Crisis and Crime: Examining the Effect of Macroeconomic Conditions on Criminal Activity during the Great Recession” states that a declining effect of the macroeconomic conditions would lead to an increase in the crime rate of the country. The paper also states that with the increase in technology and the advanced facilities that are available at anyone’s disposal easily would result in much more dangerous crime. For example, an individual would rather hack into a bank and their working system than physically rob a bank. This makes the magnitude of the crime far more difficult and complicated which would affect the economy in a much larger way.
• Paul Healy and George Serafeim (2016): in the paper states that there is a considerable amount of variation in the punishment given to the perpetrators by analysing the cost and benefit side of the crime. In case the country has higher rate of corruption the punishment given is not adequate and is in fact overlooked. This is the reason there is less crime committed in countries where the legal framework is strong. The paper also suggests that the higher the individual is in the position chain of a company the more he is interested in committing the crime due to the availability of many resources at his disposable in times of a mishap. Senior perpetrators of a firm are more prone to commit economic crime than any other individual who is part of a firm.
• V. K. Singh (2017): in his article explains how economic crisis impact the economy of the country and the effects of the same on the people. The article classifies economic crimes into four broad ways: Crimes which involve government finances, Crimes regarding individuals’ finances, Crimes involving corporate management, Crimes that affect the national economy. The article further explains black market and mentions how illegal trade takes place in the black market. The author mentions that the trade itself is illegal in black market however the object of trade may or may not be illegal. Economic crimes have an adverse effect on the economy of the country globally as well as from within. It reduces the credibility of the nation in front of the eyes of the creditors thus making it unattractive for foreign investments. The uneven distribution of resources leads to elitism which renders the poor helpless. The author in his article states that India tops the list in order of black money and has more black money than all the other nations combined.
• Zhen Cui and Devika Hazra (2017): in the research paper “Macroeconomic Determinants of Crime: Evidence from India” conducted a research based on India where they concluded that crime rate in India, the inflation, GDP per capita and other macroeconomic variables have an impact on the economy of the country. The study ended by coming to the conclusion that a focus of policy makers to solve one issue would lead to an improvement and a positive outcome on the other.
• Vikas Chadha (2018): the article mentions that these white-collar crimes are committed people of high status until their crimes are discovered, who are otherwise engaged in lawful business. There are different laws depending on the crime committed however perpetrators use all means to keep their crime a secret since they hold respectable position in society. The article explains the duties that companies have to comply, as per the SEBI regulations. Depending on the crime committed the penalty varies which can include combinations of fines, imprisonment and probation among others.
• Sani Abubakar Saddiq and Abu Sufian Abu Baka (2019): in the research paper highlighted that corruption is a major concern for all the developing countries. These countries face the issue of economic crimes in spite of having tough policies in place. Corruption has a negative impact on the poor as well as the economy due to which the country is not able to grow and face economic crisis. The problem that seems to be associated with these economic crimes is the inability to solve these crimes by the government to put an end to such recurring incidents of money-laundering, bribery, corruption and others.
• Ajay Kanth (2020): the article explains the economic crunch faced by people in India during the Covid-19 pandemic. Due to the lockdown imposed in the country the crime rate had lowed however, with the unlock rules in place and the return of normalcy in the country the people are finally facing the economic heat with very little or no money to spend at their disposal. The spike in unemployment and loss of jobs have rendered the people helpless and in turn resort to commit crimes which could be harmful for the economy. The face masks used by people during the pandemic could come in handy in robbery or chain snatching as suggested by the author.
• Encyclopedia.com (2020): the article mentions about determination of cost after the crime is committed. The important question faced by the authority is the determination of cost of crime depending on which the most appropriate measure will be appointed. The article mentions about the wide coverage of media relating to these crimes. These crimes are not only costly but also inculcate a fear factor in the minds of the people, the people pay the cost in both monetary as well as emotional way. The article also explains who the crime affects the most. It is highlighted that the weaker and vulnerable sections of the society fear crimes the most since they will be hit hardest in such scenarios.

II. Findings

(A) Definition

“Economic crimes are a manifestation of criminal acts done either solely or in an organised manner with or without associates or groups with an intent to earn wealth through illegal means, and carry out illicit activities violating the laws of the land, other regulatory statutory provisions governing the economic activities of the Government and its administration.”³

Once popularly known as “white collar crime” by virtue of the fact that it can be indulged in by a person of responsibility (holding an office) in the course of occupation, these forms of crime were known to cover cheating, fraud, larceny criminal misappropriation, embezzlement, criminal breach of trust and to some extent forgery, corruption and counterfeiting.⁴

Economic crimes have prevailed in India from the beginning of time and has posed a threat to the country ever since. These crimes do not harm the society direct but have an indirect effect on the working of the economy of the country. The impact ranges from the government to the poor which hampers the credibility of the society. The difference between white collar crimes and economic crimes is that white collar crimes are committed by professionals in the country whereas economic crimes are committed by intelligent people with a devious plan in mind. Economic crimes give rise to black money which is gained by evading taxes and issuing shell companies which has an impact on the common man.

Largely the following are the different forms of economic crimes committed:

• Tax evasion
• Smuggling of Contraband goods
• Bank Scam/fraud
• Insurance fraud
• Money laundering
• Bribery
• Stock market scams
• Corruption
• Extortion
• Counterfeiting
• Excise/ Custom duty evasion
• Corporate fraud
• Credit card crimes
• Real Estate dealings

These types of crimes are committed by people form among the society. The difficulty with these crimes is that the crime is committed by respectable people who have a moral high ground and are looked up to in the society. In order to keep their image intact, these crimes are well hidden and all measures are taken to keep such crimes from the light of the public.

(B) Impact on Society

Economic crimes cause significant damage to the general economy of the country, adversely affecting the growth and development of the nation.⁵ Along with the offender, the government as well as the general public pay the price for such acts. Economic crimes have a deep impact on the credibility of the country. The country is not viewed as a potential area of investment and can lose of many opportunities. This leads to a setback in the development of the country. Other countries have the impression that entering into agreement with such countries would put their money at risk and hence loses it confidence in the global market. Internationally, such crimes erode the confidence of other nations jeopardising the financial credibility and the stability of the country which in turn weakens its global competitiveness in the market. A high level of economic crime also highlights the kind of government that is in charge. An increase in economic crimes reflects as an incompetent government and the bureaucracy is viewed as corrupt and weak.

• Uneven Distribution: Economic crimes lead to uneven distribution of income in the society. The rich use these ways in order to evade taxes whereas the poor have to pay taxes for all the goods and services consumed by them. This makes the rich richer as they have more disposable income and make the poor poorer as their income in spent on taxes and other transactions. Due to GST, the rule of one nation one tax is imposed, where the tax is imposed based on the expenditure and not the income. Irrespective of the income of the individual be it rich or poor, the tax imposed on both is the same which is the reason of uneven distribution of income. Since the rich have more disposable income, they tend to spend more on goods and this given rise to inflation. At the end, the poor have to suffer due to the tax as well as inflation in the economy. Although economic crimes do not have a direct effect on the society, there are repercussions to the actions, the brunt of which have to be suffered by everyone in the economy. This is why economic crimes have an indirect effect on all the people.
• Evasion of taxes: Taxes are imposed in order to keep the spending power of the people in check, improve the standard of living and taxes help the government in enhancing the facilities provided to the general public. Without taxes, the government would not be able to meet the demand of the society and fund the public sector enterprises which are owned and managed by the government. The money collected from taxes are used to pay the public servants that are working for the benefit for the country. Evasion of taxes puts a halt on all of these aspects thus disrupting the cycle. The cost incurred to locate the crime committed and the entire legal process involve an enormous amount as well as time all of which has to be borne by the government.
• Global Market: The credibility of the country is at stake whenever there is a rise in the number of economic crimes committed. Due to this, many traders in the country are affected since other countries hesitate to step into the market fearing the loss of their money. It gives a negative impact on the economy of the country as it is viewed to be weak and incompetent. The government is considered to be filled with corruption and has no control over its functions thus making it an unfit option for business in the country. A country cannot survive on its own and for an effective functioning of the market it is important for foreign traders to enter in with their innovations and ideas in order to enhance the working of the country. Foreign traders introduce many new ideas and technological advances which benefits the country. All of this is jeopardised due to the effects of economic crimes on the economy of the nation.
• Vicious cycle: The relation between economic crime and economy is a vicious cycle. One affects the other and the cycle continues unless and until it is broken. Economic crimes have an impact on the economy of the country which leads to less income in the hands of the people who in-turn resort to such crimes in order to gain money. The cycle goes on and hence has a great impact on the economy. Since it has an impact on the economy it affects everyone in the society indirectly and hence is perceived to be very harmful for the country.
• Effect on Private Sector: Along with the public sector, the private sector of the economy also has an impact due the rise in economic crimes of the country. The people committing these crimes introduce shell companies in order to turn their black money into white or enter the private sector to clear their books. Due to the availability of surplus funds, they are able to influence the market conditions which renders the honest private sector owners helpless as they do not have that kind of funds. This affects the income of many and has an impact on their earnings. Due to abundance of black money, the morale of the honest people is reduced who then resort to such crimes. Although privatization has its economic benefits to the state as well as the nation it works as a perfect cover to launder funds and keep off the radar of the government. Due to availability of large funds, such companies are able to offer products way below market price since they do not need to recover the manufacturing costs due to large funds. This makes it all the more difficult for the legitimate companies to compete with such subsidised funding which can lead to crowding out of legitimate private sector owners by the criminals.

III. Limitations

The research paper aims at analysing the implications that economic crimes have over the economy of the country and the gravity of impact it has on the people as well as the government. The research paper relies on data collected solely from secondary sources and not primary sources due to time and money constraints. The research was conducted at the time of the Covid-19 pandemic and hence questionnaire could not be sent to respondents to under their extent of knowledge on the subject and collect first hand data. Due to time crunch the research many not consider all aspects in relation to the topic however efforts have been made to give a holistic understanding of the same. Since the research relies on secondary data there can biased opinions involved regarding certain aspects. However, the research paper aims at understanding how economic crimes impact the society and how does the government react to the same. Certain areas of the topic are under-explored such as the psychological thinking of the offenders and details of how these crimes are committed and practical knowledge of the same. Each crime committed and the level of which it is committed can vary depending on case-to-case basis which could not be examined in the research paper.

IV. Suggestions

A reason for an increase in economic crimes is due to the lack of stricter laws in India. Economics crime requires a lot of work in identifying the type of crime, the gravity of the crime and how many individuals would be involved in committing the crime. Since the offenders take all possible to measures to hide the acts it is essential to find out the root from where the entire crime started. In order to do this a strict legal structure is required.

While individual crime is comparatively easier to account for vicarious liability has not been looked after effective neither is there any fixed law to govern the same. It is difficult to establish mens rea (guilty mind) in such crime since the claim of carelessness, lack of knowledge or a claim of not knowing the consequences could be pleaded. Since there exist establishment of evidence beyond reasonable doubt the rigid judicial system could take a long time to determine the real situation. By the time this is done the onus of liability could be shifted which would defeat the entire purpose.

There is also a possibility to treat these crimes with “fines” which would not be a problem for most offenders given they have a surplus of funds to bail them out of such situations. All of this gives rise to the need of stricter laws. Since economic crimes are committed by people who have a strong place in the society, getting away with their crimes is not a difficult job given that all measures are taken to hide the crime in the first place. By the very nature of crime, the acts surface after a long time where the actual evidence is hard to find.

The entire crux of the matter is that such crimes are committed to evade taxes or responsibilities in the society. The more the income of the individual the more money is given away in taxes. A tax structure where citizens are not afraid of their money going away in taxes would come a long way. If individuals are not afraid of hiding their income and afraid of being imposed with taxes, their spending power will increase which will in-turn boost the economy. This would help the people spend their money freely without being afraid to lose it. This could also reduce corruption since bribes would not be necessary. A taxation policy that proves beneficial for the people of the country would help in reducing economic crimes. For this purpose, the government has to take all possible measures to come with a better taxation system and implement transparency in transaction.

V. Conclusion

It can be concluded that there is a relationship between economic crimes and economic crises in India. Though economic crimes have their negative impact on the society which is harmful for a large population there are ways in which it can be controlled. Since the crimes committed are by people that are intelligent there are many aspects that needs to be considered before making anything concrete. It has its own difficulties but is not impossible to combat such cases. Overall, economic crimes pose a great threat to the country, people, government and global market with its dynamic and complex challenges. Since such crimes are on the rise in developing countries as compared to developed countries, these countries could look at other countries models and way adopted to overcome such pitfalls. Adequate intervention and effective policies will improve the economy despite the many indications stating otherwise. The study concludes that macroeconomic variables and crimes have a connection in India and a positive outcome in one could result in a much better result in the other.

VI. Acknowledgement

I would like to express my gratitude to my Economics Professor Dr. Parinaaz Mehta under whose guidance this study has been conducted.

******

VII. References

Research Papers:

1. Deepa Mehta, ECONOMIC CRIME IN A GLOBALIZING SOCIETY: ITS IMPACT ON THE SOUND DEVELOPMENT OF THE STATE - AN INDIAN PERSPECTIVE 14.

2. Dr. Gilbert Geis in Sociological Inquiry, Vol. XXXII, No.2 (1962) at pp. 162-71.

3. John McDowell (May 2001) “The Consequences of Money Laundering and Financial Crime” An Electronic Journal of the U.S. Department of State, Vol. 6, No. 2.

4. Michael Levi (2011) “Social Reactions to White-Collar Crimes and their Relationship to Economic Crises” Economic Crisis and Crime, Sociology of Crime, Law and Deviance, Volume 16, 87–105.

5. Miethe, T.D., Hughes, M., & McDowall, D., 1991. Social change and crime rates: An evaluation of alternative theoretical approaches. Social Forces, 70(1), 165–85.

6. Sani Abubakar Saddiq and Abu Sufian Abu Bakar (2019) “Impact of economic and financial crimes on economic growth in emerging and developing countries: A systematic review” Journal of Financial Crime Vol. 26 No. 3.

7. Umaru, A., Donga, M., Gambo, E.J., & Yakubu, K.M. (2013) “Relationship between crime level, unemployment, poverty, corruption and inflation in Nigeria: An empirical analysis.” Global Advanced Research Journal of Management and Business Studies, 2(8), 411–22.

Websites:

1. CONSEQUENCES OF ECONOMIC CRIMES AFFECT PEOPLE’S SENSE OF SOCIETY’S FAIRNESS, CRIME CONGRESS’ COMMITTEE 1 TOLD | Meetings Coverage and Press Releases, https://www.un.org/press/en/2005/soccp324.doc.htm.

2. Crime and Economy: What Connection? | The Heritage Foundation, https://www.h eritage.org/crime-and-justice/commentary/crime-and-economy-what-connection.

3. Economic and Social Effects of Crime | Encyclopedia.com, https://www.encyclopedia .com/law/encyclopedias-almanacs-transcripts-and-maps/economic-and-social-effects-crime.

4. Economic crises may trigger rise in crime, United Nations : Office on Drugs and Crime, www.unodc.org/unodc/en/frontpage/2012/February/economic-crises-can-trigg er-rise-in-crime.html.

5. Ellen S Podgor, White-Collar Crime and the Recession: Was the Chicken or Egg First? 19.

6. GIVAS_Final_Report.pdf, https://www.unodc.org/documents/data-and-analysis/statis tics/crime/GIVAS_Final_Report.pdf.

7. Mamta Mittal, Lalit Mohan Goyal, Jasleen Kaur Sethi and D. Jude Hemanth (2018) “Monitoring the Impact of Economic Crisis on Crime in India Using Machine Learning” Comput Econ https://doi.org/10.1007/s10614-018-9821-x

8. NCJRS Abstract - National Criminal Justice Reference Service, https://www.ncjrs.g ov/App/Publications/abstract.aspx?ID=77821.

9. Paul M. Healy & George Serafeim, Who Pays for White-Collar Crime?, SSRN Electron. J. (2016), http://www.ssrn.com/abstract=2801622.

10. SALMAN AGHA, Study of Economic Crimes in India with Special Emphasis on Financial Market Crimes and Control Measures (2013), https://papers.ssrn.com/ abstract=2340506.

11. The World of White-Collar Crime & Its Impact On The Economy, https://www.lega leraonline.com/articles/the-world-of-white-collar-crime-its-impact-on-the-economy.

12. UNAFEI_MeasuresToCombatCrime.pdf, https://www.peacepalacelibrary.nl/ebooks/fi les/UNAFEI_MeasuresToCombatCrime.pdf.

13. V.K.Singh: Economic Crimes and its Impact on Indian Economy, , V.K.Singh , http://vksinghb78.blogspot.com/2014/01/economic-crimes-and-its-impact-on.html.

Report:

1. Santhanam Committee report on the Prevention of Corruption (1964) at pp.18 at pp. 34.

*****

Footnotes

1. Author is a student at Kirti Mehta School of Law, NMIMS, India.

2. The World Of White-Collar Crime & Its Impact On The Economy, https://www.legaleraonline.com/articl es/the-world-of-white-collar-crime-its-impact-on-the-economy (last visited Nov 30, 2020). ↩

3. Salman Agha, Study of Economic Crimes in India with Special Emphasis on Financial Market Crimes and Control Measures (2013), https://papers.ssrn.com/abstract=2340506. ↩

4. Dr. Gilbert Geis in Sociological Inquiry, Vol. XXXII, No.2 (1962) at pp. 162-71 ↩

5. Santhanam Committee report on the Prevention of Corruption (1964) at pp.18 and at pp. 34. ↩