Urgent need of an agency to investigate financial fraud and cyber offences

The resources and skills needed for investigating financial fraud and cyber offences differ from those required for investigating violent crimes. We need a new agency focusing on non-violent offences

It is generally accepted that India’s criminal justice system is not functioning well. An oft-cited statistic in this regard is the poor conviction rate for criminal offences. It is taken as evidence of sub-par investigation and prosecution, leading to a failure to secure convictions of wrongdoers. The poor conviction rate may also be a reflection of the many unwarranted investigations that are launched. 

The putative reasons for this two-dimensional failure are inadequate human and material resources, centralisation of authority with a monolithic police system and dysfunctional mechanisms for enforcing accountability at all levels. This article proposes a new line of action to improve the performance of our principal investigative system, the police system under the states.

Under the current arrangement, the state police is the investigative agency for almost all criminal offences. The exceptions include offences investigated by the tax authorities, Securities and Exchange Board of India (Sebi) and the Enforcement Directorate (ED). This means that our police force is tasked with  investigating criminal offences of great diversity. They include violent criminal offences such as murder, kidnapping, robbery and rioting. However, they also include offences of a non-violent nature (white collar offences) such as financial fraud, cheating, cyber offences and corrupt acts of public officials.

It is evident that the resources and expertise required for investigating violent offences are markedly different from those required for investigating offences of a non-violent nature. In particular, investigation of financial fraud may require expertise in understanding legal documents such as contract deeds, share purchase agreements, and finance and accounting principles. Similarly, investigation of a cyber offence such as identity theft, another offence of a non-violent nature, may require expertise in information technology.

The point is that the skill-sets and equipment required for investigating offences of a non-violent nature are radically different from those required for investigating violent offences. Increasing complexity in the domains of finance, technology and so on will further widen the gulf between such requirements. 

Violent offences have usually been the primary focus of the police system in India. This is the way it should be, as violent offences have a direct and negative association with the maintenance of public order, which itself is the foremost responsibility of any government.

However, the increasing use of technology and the deepening complexity of trade and finance are correspondingly enhancing the disruptive potential of non-violent offences. For example, hacking can massively disrupt our interconnected society, and a well-disguised Ponzi scheme can ruin millions of lives. Investigation of such ruinous, though non-violent, offences should no longer be a subsidiary activity of a police system focussed on violent offences and public order. The focus areas inevitably crowd out the resources and attention allocated to the non-focus areas.

To remedy this, a separate “Investigation Agency (Other Offences)” or IA(OO), can be created under the state governments, with the expertise and resources required for investigating non-violent offences. State police forces can continue to focus on investigating violent offences and maintaining public order.

Government officials and outside experts with domain knowledge in finance, accounts, law and information technology can be appointed to the IA(OO). State governments have cadres of finance /accounts officers, law officers and technical officers, and in the initial stages, these cadres can be used for staffing the IA(OO).

This proposal is not entirely untested, though it may seem novel. As stated earlier, agencies like the ED, Sebi and the tax authorities already have a system in which the entire investigation work for criminal offences under the relevant Acts is done in-house, without any role for the state police.

Another advantage of creating an IA(OO) may be the accountability dividend flowing from breaking up the investigative function from a monolithic police system. Centralisation of public service functions in one agency invariably militates against efficiency and accountability. This is a statement about institutional behaviour in a certain context, and is not meant to deny the commitment of many who serve in the police system.   

The allocation of the investigative jurisdiction over complaints of corruption on the part of public officials — including police officials — to the IA(OO) would act as a check on the abuse of powers by police officials. The vigilance role in respect of IA(OO) officials can, reciprocally, be left to the police system. This arrangement would serve as a system of internal checks and balances within the state governments. 

These are only the broad contours of the proposal, which would have to be refined further, with more details being filled in as needed. The political effort required for fashioning such a new specialised agency would have to be backed by public opinion. In view of the growing socio-economic importance of efficiently investigating non-violent offences with huge social and economic costs, such a reform is urgently needed.   

The writer is Deputy Secretary, Cabinet Secretariat, Government of India