BW Legal World Global Legal Summit Panel Discussion: White Collar Crimes: Evolution, Trends and the Way Forward

The second edition of the BW Legal Word Global Legal Summit and Legal Leaders Awards for 2020 was conducted virtually with  Legists, Jurists, Speakers and Panelists joining from across the Globe. 

One of the most distinguished Panels of the event that was most widely appreciated comprised of Mr Zulfiquar Memon, Founder & Managing Partner, MZM Legal; Ms Alina Arora, Partner, Shardul Amarchand Mangaldas & Co; Mr Sherbir Panag, Chair of Panag & Babu; Mr Bharat Chugh, Independent Counsel and the session chair Mr Sameer Shah, Chairman India International Institute of Dispute Resolution & Risk Management, Hong Kong; Senior Partner, Trust Legal.

The Panel brought on table intriguing dimensions to the discussion on how the interesting and equally intense problem of white-collar crime has now become the mainstream buzz word for the media and other stakeholders leading to utter neglect of the rights of an accused in an adversarial system. 

Session Chair, Mr Sameer Shah volleyed engaging questions across the table, drawing eye-opening insights from the Panel. 

Without clouding the issue of why white-collar crimes are on the rise, the genesis of the problem and setting the ground realities bare, the experts ensured each second of the 60-minute discussion was packed with revelatory information. Here are some interesting excerpts from the discussion:

“The moment there is a new mechanism of fiscal transactions such as a wallet for example you start seeing issues. The use of mediums such as the internet becomes an area of exploitation. White collar crimes just like any other crime are very very attuned to changes in society and changes in technology that come along with any given period of time in history. I think when we come to India I see three very clear trends: I think first and foremost is  that prosecution in any country is not ideal. Contrary to popular belief, and neither is it in India of white collar crime, but we are seeing an increased number in cases that have been prosecuted. I think that segues into the second issue, which is the more structural issues with what we are seeing which speak to the Indian criminal justice system that we have a multitude of agencies and law enforcement authorities are addressing very similar conduct. Bribery doesn't happen in a vacuum. There's an element of forgery, there could be an element of cheating, the moment that happens there is a predicate offence of money laundering, so there are five or six statutes that can come into place…. you have five or six different agencies, each of whom is prosecuting virtually the same conduct, each of whom has a different lens; fairly disjointed in their prosecutorial effort. This has two impacts. One is the impact to the victim of the fraud itself that by virtue of having so many proceedings the proceedings get delayed, issues with one law enforcement authority trickle into the other; a good case for for for tax may be impacted due to an acquittal as far as the bribery side is concerned and the underlying transaction gets a different flavour from Court, so by virtue of not having centralized prosecution to some extent the victim of the fraud is getting hurt, and for the authorities, their core mandate and objectives are also being diminished...We can't take away from the fact that the rights of an accused are sacrosanct. We can't create new classes of offences by virtue of public sentiment when the legislature has not been (voice break). So the first aspect being, how they've (white-collar crimes) moved; the second being the increase in prosecution; the third being the structural deficiencies in our criminal justice system, which now also needs to segue into exploring other methods, through which punishment and penalties can be implemented” said Sherbir Panag.

Speaking on the way forward, Alina Arora added,  “if we are to look into the future, and we look at the large corporate crimes whether it is a corruption issue, whether it is a money-laundering issue, whether it is a fraud, and we've seen a lot of large financial frauds and issues that have come about, these involve the use of technology concepts and jurisprudence that is still evolving. Corporate criminal liability as a legal concept is still evolving. We still haven't reached the levels to have very clear laws and clarity as to how we go about it. And given the multiplicity of agencies, we are really not closing out on these cases, such that precedence is established and there is a deterrence to prevent corruption in the corporate world, other economic offences and financial issues that I, you know, in a way, impacting the economic development in the corporate world’s evolution in India and, therefore, obviously at the global stage. We definitely need to look at our laws, revisit them which are quite archaic and modify and amend them to make them future looking. We need to use efficient ways of investigating and prosecuting these offences. And traditionally we haven't seen many successful closures whereas if we look at our counterparts in the developed world whether the US etc., we can learn a lot and evolve and modify our structured way forward to come up with the construct of what I've seen in the US is deferred prosecution agreements as well as no prosecution, depending on voluntary disclosures by corporates when red flags identified and negotiating a settlement with the regulatory authorities and paying penalties. At the end of the day, when a large white-collar crime happens there are large amounts of public funds involved; there is a loss to the country there's a loss to the economy, there are people who suffered as a result of a large white-collar, fraud, and therefore, to that extent, we need to ensure to bring about some semblance and this may be the fastest way of at least trying to bring about that deterrence enclosure and normalizing or equalizing the financial losses that we are being hit with time and again... A crime visibly a corporate crime or a white-collar crime, while the liability or the penalty might lead to the company as well, there are individuals who are doing it. And no matter what a corporate does, to try and prevent these crimes of frauds, it can never be 100%. The business has to go on and there has to be a way to move forward and keep developing while deterring corporate frauds and offences.” 

Elaborating on the root cause of these economic offences, Bharat Chugh added, “People who come in white-collar crimes are people who are extremely intelligent and they are people who have the ability to think long term and not just short term.  These are after all not crimes of passion and crimes done at the spur of the moment. They have this extraordinary ability to rationalize their decisions, for example, an executive who is fudging an account can think I'm just doing a small change on a spreadsheet. I'm not taking lives right and I'm doing this to save jobs. I will put the money back in the next quarter so lives are not lost. So these three things you know, make a very dangerous cocktail of why people do it.” 

Speaking on the legal issues, he adds “the problem is over prosecution, sometimes an investigator is only thinking about making that immediate arrest attaching the property of a corporate house as an end in itself, but that's not an end in itself, ultimately it's about how you investigate how you try these cases. If some money has been defrauded for instance from the public, have you been able to disgorge those profits? Have you been able to recoup that money? Have you been able to take that money back to the pensioners or the investors who've lost that money, but nobody's looking at any of that. The problem is we're trying to look for short term solutions, we are prosecuting people, we are making arrests, we are making those interim attachments, but we are not able to take those cases to fruition. Our current conviction rates have been dismal for the longest time, that's bad for me. Too many agencies, Enforcement Directorate, SFIO, CBI, local police, Economic Offences Wing often all of them working on the same set of facts is again a huge problem. We don't have a central agency investigating an offence that leads to, again, over prosecution we've seen that a single accused of a single transaction is first taken into custody by the ED, then the CBI, then the SFIO, then the local police and it's almost like a relay race happening, and you can't normally keep an accused as an under-trial in remand for more than 90 days, but all these agencies would take the remand in a relay, so that's problematic to me. And from the good bad and the ugly, the ugly for me is again a compromise with, the compromises that we are ready to make with due process and personal liberty when it comes to white-collar crime is extremely extremely disturbing….we have the issue of reverse onuses, in many of these laws, where if you are accused of a white-collar crime for money laundering, for instance, or fraud under the Companies Act the investigator and the court would start with a presumption of guilt, the cardinal principle that you are presumed to be innocent until your guilt is proved beyond a reasonable doubt is turned right on its side and that's problematic to me, and I square it off and stop here with one last point which again is deeply disturbing is the kind of vague laws that we have. For instance, if you look at a fraud provision under the Companies Act. The definition says fraud includes, and it lays down some incidents which are fraud but it's an inclusive definition so for what maybe these things, it may be other things too. It's almost like Alice in Wonderland where Humpty Dumpty says that words mean what I want them to mean nothing more nothing less. Here in this case, if you are somebody who's running a company and you've done something which the investigator feels is a fraud, and since the definition is so vague open-ended, and you know it doesn't lay down clearly what is a crime and what is not. This gives the ability to the investigator to go aboard and prosecute cases which might be proper business decisions and not criminal at all. We've all read that there cannot be a blurred signpost to criminality, so this is my view broadly on the legal landscape and, and the trends and what sort of disturbs me as far as the present legal position is concerned."

Agreeing with Bharat Chugh, Zulfiquar Memon concluded the discussion with his expert views and shared what frustrates him the most is conducting of an entire criminal trial on primetime electronic media. He adds, “I think that it does so much disservice to the entire system by itself, as I said that there is a whole different discussion all together about the role of media in white-collar crime specifically because of the entire perception that operates against it makes the life of defense lawyers extremely difficult, where you are labelled as much as like the criminal himself that you're always representing the wrong person. I think there are a lot of areas...which need a lot of change and I'm sure that the way things are going, eventually in the next few years we will see drastic changes to ensure that we get effective justice in this area.”