ECONOMIC OFFENCES BY DR. ISH KUMAR, IPS IGP, CID 14/11/2005 1 - - PowerPoint PPT Presentation

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ECONOMIC OFFENCES

BY

• DR. ISH KUMAR, IPS

IGP, CID 14/11/2005

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DEFINITION OF ECONOMIC CRIME

• 1. Unlawful activities which take place during the course
• f economic activities
• 2. Crime motivated by greed are normally committed by

so called respectable citizens including public servants in the course of their business or official duties

• 3. An illegal act or series of illegal acts committed to
• btain money or property, to avoid payment or loss of

money or property. Hence the essential ingredient is a dishonest intention with the motive of wrongful gain or wrongful retention of money or property by himself or any other person.

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IMPACT OF ECONOMIC CRIMES:

• 1. Ruining of country’s economy – Lack of funds with the

Government for taking development programmes

• 2. Spread of black money
• 3. Use of dirty money for organized crime – threat to internal

security and defence

• 4. Loss to innocent depositors/share holders

A) A single white collar crime (Security scam in 1992) by Harshad Mehta – (7720 Crores) is more than the total property lost in all the property offences – Dacoities, robberies, thefts, burglaries etc., over a decade in the whole country. B) Indian Bank Scam, 1997 : 838 Crores C) Ketan Parekh Scam, 2001 : 1230 Crores

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REASONS FOR INCREASING ECONOMIC CRIME:

• 1. Increase in economic activities
• 2. Economic Liberalisation

(1991 onwards)

• 3. Greed
• 4. No fear of law
• 5. Lack of social stigma
• 6. Political nexus

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REASONS FOR INCREASING ECONOMIC CRIME: (Contd..)

7. Lack of adequate cooperation among various Government agencies as well as from other countries 8. Availability of highly trained professional experts (Lawyers, C.As) to criminals 9. Banking secrecy laws 10.Ill equipped I.Os and over burdened courts

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TYPES OF ECONOMIC OFFENCES

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FRAUDS

• 1. Bank frauds
• 2. Import and Export frauds
• 3. Insurance frauds
• 4. Telecom frauds
• 5. Procurement frauds
• 6. Securities related frauds - Stamps security Telgi

Case

• 7. Frauds by land Developers, housing societies
• 8. Frauds in Passports, Visas and other travel

documents

• 9. Frauds in Chit funds Companies

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FRAUDS (Contd..)

• 10. Deposit related

(a) Cooperative banks (b) N.B.F.Cs 11. Misappropriations in Various Govt. schemes e.g.,

• I. Housing schemes

(a) Wrong beneficiaries (b) Substandard material (c) Substandard Construction (d) Contract not to L1

• II. Power Projects – excess payments
• III. Poverty alleviation programmes etc.

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FRAUDS (Contd..)

• 12. Vanishing Companies
• 13. Money Circulation Schemes
• 14. Multi Level Marketing

15.Job related

• Fake job

placements abroad

• Above list is not exhaustive.

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FORGERY

1. Fake educational certificates (tampered marks sheets, NCC) 2. Fake promotional G.Os 3. Forged registration documents etc.

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CYBER CRIMES

1. Offences under I.T. Act i.e, Hacking etc. 2. Use of computers for committing economic crimes i) Electronic transfer of money ii) Credit Card frauds iii) ATM frauds

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OTHER ECONOMIC OFFENCES

• 1. Counterfeit currency
• 2. Hawala and money laundering
• 3. Tax evasions
• 4. Foreign exchange violations
• 5. Adulteration of food and drugs
• 6. Hoarding and black marketing
• 7. Smuggling of gold, drugs, contraband,

antiques, idols, endangered species, human

• rgans etc.

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GOVERNMENT AGENCIES INVOLVED IN CONTROLLING ECONOMIC OFFENCES

1. C.B.I. 2. State Police, Vigilance (V & E) & ACB 3. Customs and Central Excise 4. D.R.I. (Directorate of Revenue Intelligence) 5. Income Tax Department 6. R.B.I. 7. SEBI 8. R.O.C.

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GOVERNMENT AGENCIES INVOLVED IN CONTROLLING ECONOMIC OFFENCES (Contd..)

9. Central Economic Intelligence Bureau

• 10. D.G.F.T. (Directorate General of Foreign

Trade)

• 11. Directorate of Enforcement
• 12. Directorate of Anti Evasion
• 13. C.V.C. and C.V.Os
• 14. B.S.F.
• 15. State Govt. Deptt. i.e, Commercial Taxes

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OTHER GOVERNMENT AGENCIES - NEED FOR COOPERATION

1. Banks 2. Local revenue authorities 3. Courts 4. Excise Department 5. Insurance companies 6. Liquidators 7. Municipal authorities 8. Registrar offices 9. Departments of State Governments i.e., R.C.S. etc.

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LAWS IN CONTROLLING ECONOMIC CRIME

1. IPC (Criminal misappropriation, criminal breach of trust, cheating, forgery, criminal conspiracy, counterfeit currency) 2. P.C. Act, 1988 - Criminal misconduct 3. Criminal Law Amendment Act, 1944, 1967 4. A.P. Prize Chits & Money Circulation Scheme (Banning) Act, 1978 5. A.P. Protection of Depositors of Financial Establishments Act, 1999

• 6. Information Technology Act, 2000

7. Copy Right Act 8. N.D.P.S. Act

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LAWS IN CONTROLLING ECONOMIC CRIME (Contd…)

9. I.T. Act (Income Tax Act) 10. Sales Tax Act 11. Customs Act 12. Import, Export Control Act, 1947 13. Conservation of Foreign Exchange of Prevention of Smuggling Act, 1977 14. FERA & FEMA 15. RBI Act

• 16. Companies Act

17. Essential Commodities Act 18. Prevention of Food Adulteration Act etc.

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Economic Offences & Enforcement Agencies

Sl No Economic Crimes Acts of Legislation Enforcement Authorities 1 Corruption and Bribery of Public Servants Prevention of Corruption Act, 1988 Anti Corruption / Vigilance Bureaux / CBI 2 Bank Frauds IPC Police / CBI 3 Insurance Frauds IPC Police / CBI 4 Company Frauds Companies Act, 1956 / IPC / MRTP Act, 1968 Police / CBI 5 Racketing in false Travel Documents Passport Act, 1920 / IPC Police / CBI 6 Credit Cards Fraud IPC Police / CBI 7 Racketeering in Employment IPC Police / CBI 8 Stock Market Manipulation IPC Police / CBI

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Economic Offences & Enforcement Agencies (Contd..)

Sl No Economic Crimes Acts of Legislation Enforcement Authorities 9 Computer Crime/ Software Piracy/ Cyber Law Copy Right Act, 1957 / IT Act 2000 Police / CBI 10 Theft of Intellectual Property Copy Right Act, 1957 (Amendments 1984 & 1994) Police / CBI 11 Cultural Object’s Theft Antiquity and Art Treasures Act, 1972 Police / CBI 12 Trade in Human body parts Transplantation of Human Organs Act 1954 Police / CBI 13 Real Estate Frauds IPC Police / CBI 14 Illicit Drug Trafficking Narcotic Drugs and Psychotropic Substances Act 1985 & NDPS Act 1988 NCB / Police /CBI

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Economic Offences & Enforcement Agencies (Contd..)

Sl No Economic Crimes Acts of Legislation Enforcement Authorities 15 Money Laundering Foreign Exchange Regulations Act 1973 Directorate of Enforcement 16 Tax Evasion Income Tax Act Central Board of Direct Taxes 17 Illicit Trafficking in contraband goods (Smuggling) Custom Act 1962 COFEPOSA, 1974 Collectors of Customs 18 Evasion of Excise Duty Central Excise and Salt Act, 1973 Collectors and Central Excise 19 Illegal Foreign Trade Import & Export (Control) Act, 1947 Directorate General of Foreign Trade/ CBI

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Economic Offences in India & AP

Sl No Type of Offence 2003 2004 Highest in 2004 1 Cheating 47478

AP=7581

50164

AP=7928

Raj= 8333 2 Criminal Breach

• f Trust

13432

AP=1099

12897

AP=898

UP=2377 3 Counterfeiting 2055

AP=318

(Highest) 1912

AP=175

Bihar=439 4 Cyber Crime (IT & IPC)

• AP=221

(Highest)

496

AP=101

Delhi=163 Crime Clock 2004 -1 Cheating every 10 minutes 1 Criminal Breach of Trust every 41 Minutes 1 Counterfeiting every 4.5 hours

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Inter State Comparison for Criminal Breach of Trust and Cheating (in 2003)

67 2 65 53 5 6 42 TOTAL

10 10 5 1 1 3 Gujarat 26 26 5 5 Delhi 1 1 1 1 Tamil Nadu 6 2 4 27 1 3 23 Maharashtra 24 24 6 6 Karnataka 9 3 2 4 Andhra Pradesh

TOTAL 25- 50 Crore 10-25 Core 1-10 Crore TOTAL 25- 50 Crore 10-25 Core 1-10 Crore

Cheating Worth Rs. Criminal Breach of Trust Worth Rs.

• No. of Reported Cases Where the Loss of Property > 1 crore
• State/UT

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Comparative Statement of Economic Offences in A.P.

20 34 23 Commercial Banks (Public & Private sector) 89 185 187 Prize Chits & Money Circulation Schemes 13 386 38 Investment schèmes (Plantation schemes etc.) 3 11 9 Stock Market / Shares etc. 151 119 186 Non Banking financial companies 2005 (upto Sep) 2004 2003 Reported Crime

• Head

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Comparative Statement of Economic Offences in A.P. (Contd..)

291 421 110 Marks Sheets / Degree Certificates/Other General Securities 5 12 12 Urban Co-Operative Banks 16 38 60 Co-op Societies/Institutions 173 93 10 Passports 129 154 223 Counterfeit / Fake Currency / Documents/ Notes/Coins 2648 2978 2351 Cheating by an Individual / Group 2005 (upto

Sep)

2004 2003 Reported Crime

• Head

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Comparative Statement of Economic Offences in A.P. (Contd..)

534 119 659 Criminal Breach of Trust Nil Nil 4 Cyber Crimes

5914 6816 5118 TOTAL

109 190 127 Misappropriation/Govt. Funds/Pvt. Institutions 208 251 239 Employment Scams / Job Rackets 467 553 366 Land Scams/Housing Societies/ Individual/Groups

2005

(upto Sep)

2004 2003 Reported Crime

• Head

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SOME M.Os FOR ECONOMIC OFFENCES

• A. BANK FRAUDS

1) Urban Cooperative Banks

i) Sanction of the huge loans to Directors, Class IV employees and others who were not even income tax payees

• No security or fake securities mortgaged
• Over valuation of the properties for sanction of

excess loans.

• The loans as sanctioned above were siphoned off

to buy palatial houses, vehicles, spending in real estate (benami names), buying shares etc.

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SOME M.Os FOR ECONOMIC OFFENCES (Contd..)

2) Other Bank Frauds

i) Opening of fictitious deposit accounts, depositing

• f stolen/ forged cheques, D.Ds and dividend

warrants and withdrawal of money ii) Connivance of Bank employees doing extra work (high performers) taking advantage of delays in reconciliation iii) Instruments handed over to the middlemen without identification iv) Non-identification of the customers adds to the problems

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SOME M.Os FOR ECONOMIC OFFENCES (Contd..)

• B. FRAUDS BY N.B.F.Cs

1) i) Luring of customers with high rates of interest and

• ther incentives and siphoning of the deposited money

(Plantations companies) ii) Lack of strict regulations by R.B.I. added to the problem

• C. VANISHING COMPANIES

1) - Floating I.P.Os, collecting public money as well as loans from the banks and vanished

• No proper documentation with ROC (even photos of

directors not available)

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SOME M.Os FOR ECONOMIC OFFENCES (Contd..)

• D. OTHER M.Os FOR FRAUDS

1) Setting up of bogus company and transfer of money thereto for supply of goods or contract works etc. (S.P.G.L.) 2) Inflating capital cost and Recirculating loan amount as their share (Power Companies) 3) Creating false documents/vouchers for purchase of raw material etc. 4) Excess payments to the suppliers and sharing the diverted funds Above list is only illustrative not exhaustive

30 INVESTIGATION OF ECONOMIC CRIME

1. TWO PRONG STRATEGY

(a) Collection of evidence to prove the guilt

• f the accused

i) Search, seizure and scrutiny of documents (collection of information, use of C.As & Audit officers for audit of cash books, balance sheets and other connected documents) ii) Study of bank accounts statements, IT returns, property returns, Sales Tax returns to find out the source of deposits and diversion of money (experts, liaison officer from deptt.) iii) Use of forensic experts to compare the signatures and writings to verify the genuineness of documents

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INVESTIGATION OF ECONOMIC CRIME (Contd..)

iv) Use of computer forensics to retrieve the data from computers and its scrutiny v) Recording the statements of witnesses vi) Interrogation of the suspects and accused and verify their version; vii) Use of Lie Detector and Narco Analysis viii) understanding M.O. of crime & Creating Chain of evidence ix) Impounding of passports so that the accused and suspects do not leave the country x) Arrest and charge sheet

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INVESTIGATION OF ECONOMIC CRIME (Contd..)

b).TO FREEZE THE BANK ACCOUNTS AND ATTACH THE PROPERTIES OF THE ACCUSED

i) Identification of movable and immovable assets and its attachment and auction by Government and Courts (Source information, information from complainant and victims, Sub Registrar Offices, I.T. Returns, property returns and Bank Statements) ii) Freezing of accounts of accused

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PROBLEMS FACED BY I.Os IN INVESTIGATING ECONOMIC OFENCES

• 1. Lack of knowledge regarding various Commercial Laws,

Banking Laws, methods of book keeping and accountancy (a) Thin boundary between civil contractual obligation and cheating, difference between procedural violation and criminal intent (b) I.Os lack of knowledge as to which record to ask for from which agency (Vanishing Company) (c) Used to Investigation of traditional Crime (Criminal to Crime) (d) SOC widely spread over.

• 2. (a) Unavailability of the records

(b) Lack of required cooperation from various departments

• 3. Fear on part of the I.O. to touch the influential accused

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PROBLEMS FACED BY I.Os IN INVESTIGATING ECONOMIC OFENCES (Contd..)

• 4. Voluminous records
• 5. Cumbersome procedures involved in attachment of

properties

• 6. Bank secrecy Laws
• 7. Delaying tactics by accused by obtaining stay
• rders on investigations, trials, arrests etc.
• 8. Lack of designated courts exclusively to deal with

economic offences

• 9. Benamy transactions and lack of information on

assets

• 10. Lack of victims/complainants

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• 11. Cumbersome extradition procedures
• 12. Need for consent of the suspect/accused for

undergoing polygraph, norco-analysis

• 13. Delay in obtaining prosecution orders from

the Government 14.Lack of data base on economic offenders including proper addresses and photographs 15.Lack of database on various M.Os adopted by the offenders

PROBLEMS FACED BY I.Os IN INVESTIGATING ECONOMIC OFENCES (Contd..)

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PROBLEMS FACED BY I.Os IN INVESTIGATING ECONOMIC OFENCES (Contd..)

• 16. ADMINISTRATIVE ISSUES

(a) Frequent transfers of the I.Os - Lack of committed & unwilling officers (b) Meagre man power, vehicles etc. - Infrastructural issues (c) Lack of motivation and rewards (d) Lack of Funds for certified copies of documents (e) Delays in finalizing investigation by I.O. and head

• ffice (CID)

(f) Addition of P.C. Act and L.As remarks at a later stage in the investigation

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PROBLEMS IN IDENTIFYING THE PROCEEDS OF CRIME

1. Mixing of legal and illegal funds (Layering) 2. Quick movement of funds (Electronic Transfer) 3. Difficulties in getting international cooperation 4. Banking Secrecy Laws 5. Benami transactions

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SOLUTIONS - WHAT CAN BE DONE

1. Equipping the I.Os with proper training, exposure and regular interactions (I.O. to understand M.O. for committing each economic crime) 2. Check list for Investigating each Economic Offence.

• 3. Creation of data base on economic offenders/ M.Os.
• 4. Need for inter department, inter-state and

international cooperation (role for seniors in each department)

• 5. Review existing legal frame work and to make the

laws more stringent, bails difficult, severe punishments, attachment procedure simpler, many non-cognizable offences to be made cognizable

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SOLUTIONS - WHAT CAN BE DONE (Contd..)

• 6. Designated Courts and P.Ps
• 7. Improvement in man power and infrastructural facilities
• 8. Making available the professional services to I.Os

(C.As, Lawyers etc.)

• 9. Rewards and incentives for I.Os

10.Banking procedures (Opening of account, endorsing of instruments in favour of 3rd parties) to be changed 11.Use of modern gadgets and technology by I.Os 12.Sensitization of public/Public alerts/Preventive vigilance

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Year No of cases A m o u n t involved (in Cores) A m o u n t recovered (in cores) Percentage

• f recovery

2000 306 1592.48 215.80 13.5% 2001 161 271.48 138.14 50.9% 2002 181 235.91 75.21 32% 2003 166 79.48 35.07 44% 2004 ( 30.6.04) 49 10.17 4.76 47%

Total 863 2188.52 468.98 21%

PERFORMANCE OF E.O.W. (T.N. POLICE)

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Total amount involved in all cases (2000-2004)

• Rs. 2188.52

crores Total number of depositors 12,99,660 Total amount refunded Rs.468.98 crores Total number of depositors benefited 6,12,000 (47%) Value of the properties attached or under attachment process

• Rs. 1025.17

crores

PERFORMANCE OF E.O.W. (T.N. POLICE) (Contd..)

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WE CAN ALSO DO IT

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THANK U