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Covid-19 is our primary concern at the moment. This outbreak has had a significant influence on numerous criminal and illegal economies. Terrorism, street violence, cybercrime, illicit markets and smuggling, animal and human trafficking, enslavement, robberies, burglaries and white collar crimes have all seen significant changes. During the worldwide campaign against transitional organized crime, it was said that while the pandemic will reduce organized criminal offences, it will raise the crime rate in the organized criminal economy. It was also determined that these alterations might endure for a long period of time.
I don’t want to sound alarmist, but white collar crimes (WCC) are on the increase, and it’s likely to continue to rise – to worrisome proportions – in the months and years ahead. We’ve already seen a significant increase in cases involving cybercrime, employee fraud, unlawful profiteering, accounting misconducts, money laundering, corruption in government contracting, bailouts, stimulus packages, and other issues. To ease the crisis, a significant quantity of money is being deposited into economies all around the world.
We already know it wasn’t the finest of all possible worlds economically, even before Covid-19, but the outbreak amplified the situation. It has created a vicious triangle (aka the “fraud triangle”), a destructive combination of pressure, opportunity and rationalization that has always been a prime foundation for White collar crimes (WCC). However, enforcement authorities in the U.S and Europe have said that their goal in the medium-to-long term is to aggressively pursue violations of anti-fraud and anti-corruption regulations, notably in the context and aftermath of Covid-19.
This blog examines white collar crimes that occur during covid-19 outbreak, as well as the efforts made by authorities to avoid such crimes.
This outbreak has provided a platform for a certain set of white collar offenders to rack up their numbers.
The first concern is that of counterfeiting and fraud. Many experts have warned and predicted that the epidemic and government reactions to it will create fertile ground for deception and profiteering. The Organization for Economic Cooperation and Development (OECD) stated that the COVID-19 pandemic and the resulting economic disruption will establish an environment enabling corruption, emphasising the significance of nations staying actively involved and co-operative in anti-corruption attempts internationally. Bribery and corruption in the healthcare industry are a special focus of the worldwide white collar enforcement community (though such concerns of course are not limited to any particular sector). Procurement, product creation, and distribution, and also medical fraud, are all areas where potential corruption exists. The urgency of obtaining medication, ventilators, and personal protective equipment (PPE) in the face of worldwide shortage issues worsens this. This mixture of elements may result in less inspection of bids for government contracts and a less cost-conscious attitude, opening the door to corruption and profiteering.
Many examples of surgical mask counterfeiting have been discovered all around the world. During Operation Pangea, an INTERPOL operation aimed at combating the online selling of counterfeit illegal pharmaceuticals and medical devices, law enforcement officials confiscated approximately 34,000 counterfeit surgical masks in early March 2020 alone. Thousands of fake N95 masks were seized by Indian authorities in the wake of the outbreak. Crimes such as hoarding critical items and overcharging for masks and sanitizers are also common. People are taking advantage of this moment of need to make money.
More broadly, reports of different misuse of government support packages to steady the economy are beginning to emerge. The Cyber Security and Infrastructure Security Agency, the Department of the Treasury, the Internal Revenue Service, and the Secret Service all issued a combined notice in the U.S, highlighting potential abuses of federal assistance programmes. Spot checks conducted by Austria’s finance ministry reportedly discovered hundreds of breaches of the country’s job-support system.
These cautionary words inevitably raise the question of whether and how law enforcement authorities will respond to these issues. Several agencies have issued strict cautions, vowing a greater focus on COVID-19-related fraud and corruption investigations and prosecutions. People and companies are being urged to report such crimes to the appropriate authorities, and guidelines have been issued to expose fraud, money laundering, and banking frauds involving COVID-19.
The severe market volatility that has preceded the COVID-19 outbreak has led to widespread concerns that there would be an upsurge in different types of market abuse. Regardless of the fact that many services have had to physically close, their caseloads have increased as they take on more COVID-19-related cases. Given the present difficulties, businesses must still satisfy normal – and in some cases, additional – reporting responsibilities, and authorities are attempting to give assistance to hard-pressed businesses by postponing reporting deadlines.
The Financial Conduct Authority (FCA) in the U.K warned that it would continue investigating insider traders during the covid-19 outbreak, recognising that it could still process electronic data and conduct interviews using technology, a point affirmed by the European Securities and Markets Authority (ESMA).
Agencies are also keeping a careful eye on anti-competitive activity, with a special focus on the healthcare industry. Individuals and businesses in the U.S.A and Europe are being urged to report anti-competitive behaviour.
In the U.S.A, a joint antitrust statement from the Department of Justice’s Antitrust Division and the Federal Trade Commission’s Bureau of Competition makes it absolutely clear that the present situation necessitates collaboration between the government and companies. Both authorities will strive to react quickly to COVID-19-related inquiries and give assistance when appropriate. It also said it would “not hesitate to seek to hold responsible” anybody who attempt to avoid competition laws during the Covid-19 outbreak, including prosecuting criminal antitrust violations.
Similarly, the French Competition Authority has launched an attempt to stop businesses from using the crisis to raise the price of items, especially basic necessities/ essential goods. While it acknowledges that temporary cooperative measures put in place by corporations to counter the pandemic’s effects are unlikely to be considered anti-competitive practices, it nonetheless urges the reporting of misconduct that may violate antitrust rules.
The word “hoarding” refers to the purchase of a large quantity of goods with the aim of selling them at a higher price in the future when they are under stocked or unavailability in the market. This may be described as a market monopoly when consumers are unable to acquire the same product from another buyer owing to a scarcity of the commodities. Hoarding of masks and sanitizers is one form of hoarding during covid-19. When a vendor raises the price of products, services, or commodities much over what is deemed acceptable or fair, this is known as “Price Gouging”. This usually happens following a demand or supply shock. Price rises in essential commodities are a common incident during natural calamities. It is the term of a crime that occurs most frequently during civil crises.
Over the course of pandemic, there have been several allegations of price gouging, which involves selling a product or service at an unreasonably higher pricing in response to a large rise in demand, usually in reaction to a natural calamity or other emergency. Local and state governments have also begun to address price gouging issues and incidents by issuing stop and desist notifications, imposing penalties, and sometimes making arrests. We may take the price increase in oxygen cylinders as an instance. They used to be supplied for Rs. 100-150 for each cylinder, but now they cost Rs. 500-2000 per cylinder. In the private market, it costs roughly Rs. 3000 each. Another recent incident is the price gouging of Remdesivir (the medication injected for covid-19 therapy), which is currently almost marketed for Rs. 10000.
The growth in cybercrime is the second most urgent concern right now. While people spend the majority of their time online during the quarantine, as well as a rise in work from home systems, cybercriminals are taking advantage of the situation to rob their victims. Because people’s personal computers lack the same level of protection as office desktops, business data gets stolen from employee systems throughout the work-from-home operation.
The (WHO) World Health Organization even issued a warning about scammers impersonating WHO personnel in order to extort money from individuals. During the epidemic in U.S.A., the government provided funds to the unemployed, but it was discovered that millions of dollars were flowing into fake accounts. Authorities then discovered that this was carried out by Nigerian hackers.
Phishing and other common cyber-crimes have grown dramatically. Phishing is when thieves use fraudulent emails, websites, or phone calls to persuade individuals to give personal details like passwords and credit card details. The proportion of phishing websites discovered on the web grew from 149 thousand to 522 thousand in just 3 months, according to a Google analysis. Malware, including viruses, spyware, and ransomware, were also used to get access, damage, and steal people’s personal computers. In exchange for ransoms, bank accounts are hacked and blackmailed.
Proposals of false investment opportunities are another sort of crime that occurs during the pandemic. During the Covid-19 pandemic, criminals are promising individual’s investment opportunities that would undoubtedly reward them after the pandemic is over. People are easily misled and invest a specific amount of money in the hopes of making a large profit in the future. Many similar incidents have been recorded in the U.K.
The organised criminal groups that provide drugs to the general public at large did not change even while the pandemic. The only significant difference is that drug movement has been reduced, and dealing has been transferred to a home delivery method. Around the world, substances, primarily cocaine and heroin, were confirmed to be cut in such a manner that supplies can last longer, while street dealers were reported to use various methods to avoid quarantine laws, such as carrying these substances in shopping carts because only shops are permitted to be open, or in taxis to avoid police inspections of private cars and to use public transportation for the faster sale of drugs. Governments worldwide have begun to take efforts to improve police operations and international collaboration in the fight against drug trafficking and organised crime. Drug seizures have taken place both locally and abroad.
The following are some of the most important laws that deal with such crimes:-
Bribery of government servants is criminalised under the Prevention of Corruption Act, 1988. The Act penalizes public officials who gain an unfair advantage via inappropriate execution of their responsibilities, as well as those who engage in criminal misconduct such as illegal enrichment and misappropriation of entrusted property. Individuals are also punished for encouraging such poor performance and providing bribes to public officials. Commercial entities can be fined if people connected to them pay bribes to public officials for the benefit of the company.
In white collar crimes involving businesses, the Companies Act analyses the involvement of important stakeholders. The Act requires auditors to disclose fraud and imposes a fiduciary obligation on directors to engage in the company’s best interests and refrain from making undue advantages. Fraud involving a corporation’s affairs, including activities performed with the aim to deceive or obtain an unfair benefit from the organisation, is illegal and punishable. The Companies Act (together with the SEBI LODR) mandates that some businesses set up a vigil system for directors and employees to report legitimate concerns.
According to the Prevention of Money Laundering Act, 2002, anyone who engages in any activity involving the proceeds of crime, including concealment, possession, acquisition, or use, and projecting or claiming it as untainted property, is guilty of money laundering and continues to face a sentence of more than 3 years in jail, with a maximum sentence of 7 years in jail, as well as a fine.
This Act grants the state the authority to enact orders regulating the selling and buying of essential commodities. They included masks and sanitizers to the Act after many incidents of price gouging and hoarding. The pricing of these items was also determined subsequently. The Ministry of Consumer Affairs recommended the state government to take steps to preserve the demand and supply balance for sanitizers. Contravention of Section 3 orders is a punishable offence punishable by up to 7 years in jail or a fine.
This Act forbids participants from engaging in black marketing or hoarding activities by its provisions, which include measures for the punishment of those who do so. This Act gives the local or the federal government, or an official not lower than the Joint Secretary, the authority to represent the state and federal governments. If there is cause to think that a person is violating the Act’s provisions, that person will be detained. This Act also grants district magistrates and police commissioners comparable powers to take action against such persons.
Offences pertaining to tampering with computer source documents, computer-related crimes like destroying information, phishing, or introducing viruses on computer systems, identity theft, cheating by personation, violation of privacy, cyber terrorism, and failure to prevent and retain information by intermediaries are all covered by the Information Technology Act.
Read our article:Impact of Covid-19 on Financial Reporting
Akansha is a Delhi-based lawyer who is actively involved in publishing articles on a plethora of aspects of Indian and International laws. She holds Master in law (LL.M) focused on Business Laws from Amity University, Noida. Having expertise in the same, she has authored several publications on legal topics related to corporate, M&A and commercial laws.
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