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Laws governing economic offences need to be updated

Kumkum Sen  |  New Delhi 

Sometimes wishful thinking pays off. RBI, in making passwords or PIN mandatory for credit card online transactions has taken the first step in protecting card fraud, the most rampant of technology offences, belonging to the wider genre of economic offences. It may be simplistic, but not incorrect to attribute the upswing to opportunities created by globalisation and the increasingly important role of information transmission. Also, such crimes involve players from multiple jurisdictions, who deploy sophisticated technology.

Indian laws have attempted to provide for economic offences; the Indian Penal Code (IPC) deals with basic offences such as cheating, counterfeiting, breach of trust, fraud. The identification of new dimensions of these crimes have also led to updated and specific laws being passed, such as the Prevention of Money Laundering Act & Rules and the recent amendments to the Information Technology Act.

Traditionally, there have been special laws, e.g., Indian tax laws, which have inbuilt provisions and mechanisms to deal with evasion and other offences, authorising the internal departments to investigate, adjudicate, search & seize, and even arrest and detain. Recent statistics tend to indicate that these methods are unsatisfactory. With changing trends in the character of crimes, the approach has to be reoriented, not just in the laws, i.e. but in the overall regulatory regime, i.e, processes, classifications and penal provisions. Amendments to the IPC, and Evidence Act are not the answer: there have to be increased checks and controls, with whistle blowing playing an important part, and possibly a separate procedural code for investigation and trial of economic offences.

The Malimath Committee’s description of economic offences is illegal acts comm-itted through misrepresen-tation or outright deception by an individual or group with specialised professional and technical skills to achieve illegal financial gains. Counterfeiting, money laundering and faking are age old crimes, which like old wine are now being repackaged. India has been living for a long time with “coloured currency”; the production may not be rocket science — tho-ugh computers and hi-tech printers make a difference – but the success lies in market penetration, which can assume transnational dimensions – more frightening than we realise.

What makes such crimes difficult to detect, is the high level of capability and intelligence of the perpetrators, as also their resources. Take stock market scams in which investors suffer huge losses – how many culprits are finally brought to the book? Money laundering, computer and internet and securities frauds are some more of these “non violent” crimes which are being refined to a fine art in operating across borders without “physically” touching base.

too has moved on from jewellery and hard currency to knowledge theft, be it product piracy or simple hacking. And public complacence makes it easy: in pic-king up cheap DVDs in a fake market, the realisation of loss of royalties to the producer and deception of customer are ignored.

Its not that efforts have not been made by the Government to come to grips with these issues. A separate Economic Offences Wing (EOW) has been around in the CBI for years, with exclusive cells committed to diverse crimes e.g., cyber crimes, market frauds. There have been special laws to make certain offences more inclusive – the entire Securities Contract Regulation Act (SCRA) and SEBI related guidelines for capital markets are an example.

But the problems are manifold – for one, the investigations and investigations lack the required expertise and training. There are multiple agencies and the coordination is pathetic. Most of our laws are unduly soft; there is a need to overcome the mind set that only bloodshed calls for long pri-son sentences. The magnitude and implications of economic offences can penetrate societal conscience only when there is awareness of the repercussions.

Also the sentences are too disproportionate to act as deterrents. As the tele-com sector continues to be governed by the Indian Telegraph Act, the maximum punishment is three years imprisonment, plus a ridiculous thousand rupee fine for an industry which demands mega investments. Under the SCRA, the maximum sentence is ten years as compared to twenty-five plus in the USA. Judicial processes are slow — this is where change is imperative. Fast track exclusive judges specifically trained to dispense speedy and effective justice. State Governments, ministers and even High Courts have been randomly promising Special Courts for economic offences without making genuine efforts. There’s no point in walking miles, its time for a giant leap forward.

The author, Kumkum Sen is a partner of Rajinder Narain & Co

First Published: Mon, August 03 2009. 00:28 IST