economic offences in India

ECONOMIC OFFENCES

WHAT IS ECONOMIC OFFENSES????•Economic and financial offences cover fraud, forgery and counterfeiting, offences against the legislation governing cheques (in particular forgery or use of stolen cheques), forgery or use of credit cards, undeclared employment, offences against companies (such as misuse of company assets).

TYPES OF ECONOMIC OFFENCES:

NBFC’S

SECONDARY MARKET FRAUD

PRIMARY MARKET FRAUD

BANK FRAUD

IMPORT/EXPORT FRAUD

INSURANCE FRAUD

FAKE CURRENCY

INTELLECTUAL PROPERTY FRAUD

Bank fraud is the use of potentially illegal means to obtain money,

assets, or other property owned or held by a financial institution, or

to obtain money from depositors by fraudulently posing as a bank or

other financial institution.

Types Of Banking Fraud

ELECTRONIC FRAUD

CREDIT/DEBIT CARD FRAUD

IDENTITY THEFT

CHEQUE FRAUD

BANK FRAUD

Insider trading is the trading of a corporation's stock or other

security by corporate insiders such as officers, key employees,

directors, or holders of more than ten percent of the firm's

shares.Rajat Gupta, former corporate chairman and member of the Boards of Directors of Goldman Sachs and Procter & Gamble who surrendered before the FBI earlier, was arrested and charged with committing securities fraud as he shared confidential information with hedge fund manager Rajaratnam

INSIDER TRADING

MONEY LAUNDERING

Money laundering is the process of cleaning dirty money with the

objective of hiding its source and enabling it to be used later in a legal

form.

This process creates a web to hide the origin/true nature of these funds.

Prior this crime was covered (FERA) & (FEMA).

The Prevention of Money Laundering Act (PML), 2002 was passed to

combat money laundering in India .

The Saradha group and its investments are already being probed by a host of agencies like the SEBI, income tax department and investigation units under the ministry of corporate affairs

STEPS TAKEN BY THE GOVERNMENT TO CURB MONEY LAUNDERING

The Reserve Bank of India, which is the Central Bank for the

country, has issued directions to be strictly followed by the Banks

regarding the standard practices under the ‘Know Your Customer’

(KYC) guidelines.

The banks are required to obtain all information necessary to

establish the identity/legal existence of each new customer.

The PMLA makes it mandatory for every banking company,

financial institution and intermediary to maintain records of

transactions for a period of ten years.

In case of any violation of this legal obligation, these institutions

have to face penal consequences.

BANK & STOCK MARKET SCAM:

Harshad Shantilal Mehta(1992)An Indian stockbroker, well known for his wealth and for having

been charged with numerous financial crimes that took place in 1992.

Of the 27 criminal charges brought against him, he was only convicted of one, before his death at age 47 in 2001. It was alleged that Mehta engaged in a massive stock manipulation scheme financed by worthless bank receipts, which his firm brokered in "ready forward" transactions between banks.

Mehta was convicted by the Bombay High Court and Supreme Court of India for his part in a financial scandal valued at 50 billion (US$860 million) which took place on the Bombay Stock Exchange (BSE).

In reality he actually exposed the loopholes in the Bombay Stock Exchange (BSE) transaction system and SEBI further introduced new rules to cover those loopholes. He was tried for 9 years, until he died in the late 2001.

KETAN PAREKH(2001) A former stock broker from Mumbai, India, who was

convicted in 2008, for involvement in the Indian stock market manipulation scam in late 1999-2001. Currently he has been debarred from trading in the Indian stock exchanges till 2017. He was trainee of Harshad Mehta.

Parekh is alleged to have been involved in circular trading throughout the time period and with a variety of companies, including Global Trust Bank and Madhavpura Mercantile Co-operative Bank.Parekh made potent use of "layering" of financial transactions through a vast chain of inter linked fraudulent "benaami" bank accounts opened in the name of fictitious entities through violation of KYC guidelines.

FAKE STAMP PAPER SCAM:Abdul Karim Telgi

 He earned money by printing counterfeit stamp paper in India. He cited Sharad Pawar's name in relation to a 600 billion (US$10 billion) stamp-paper scam, during a narcoanalysis filmed by various Indian news channels, wherein he also mentioned Chhagan Bhujbal.

 For example, one Assistant Police Investigator was found to have a net worth of over 1 billion (US$17 million), despite making a salary of only 9,000 (US$150) per month.

On 17 January 2006, Telgi and several associates were sentenced to 30 years rigorous imprisonment.On 28 June 2007, Telgi was sentenced to rigorous imprisonment for 13 years for another aspect of the scandal. He was also fined 1,000 crore (US$170 million). The Income Tax Department requested that Telgi's property be confiscated to pay the fine.

CITI BANK FRAUD: (2009) SCAM WAS OF MORE THAN 400 RS

CRORE.

THE SCAM WAS DONE BY SHIVRAJ PURI WORKING AS RELATIONSHIP MANAGER FOR MORE THAN 7-8 YEARS.

HE MAINTAINED MANY FAKE ACCOUNTS NAMELY PREM NATH, SHENA PREM NATH.

THEY WERE RUNNING A FAKE SCHEME WHICH PAID HIGHER INTEREST , BUT INTERNAL INQUIRY SAYS THERE WAS NO SUCH SCHEME.

18 FAKE ACCOUNTS WAS FOUND WITH NET AMOUNT WORTH RS. 3.85 CRORE

Palmolein Oil Import Scam (91-92)

Kerala government decided to import palm oil from a Malaysian company in Singapore named "Power and Energy Ltd" above the international price which was approved by the Kerala Cabinet. The price of import was fixed to $405.0 per ton which was higher than the international price of $392.25 per ton.

 The decision was to import 15,000 tonnes of palm oil.

K Karunakaran

Oommen Chandy

The opposition cried foul in the import. A vigilance case was filed against K. Karunakaran and seven others including Thomas. Thomas was bailed in 2003. A Special Leave Petition by the late K. Karunakaran made the Supreme Court stay the proceedings. The court closed the proceedings against K. Karunakaran after his death in December 2010.

The case was reopened in March 2011

2G SPECTRUM SCAM

It is about selling the Communication Bandwidth for lower than

the market value.

This has created a great damage to country’s economy.

This scam amounted to Rs.1,76,000 crores

The key players involved in this scam are:

A.Raja, M.K.Kanimozhi,Nira Radia and many

telecommunication companies.

This scam is also responsible for present economic and financial

crisis in India

Sl. No.

Economic Crimes Acts / Legislation

Enforcement Authorities

1. Tax Evasion Income Tax Act Central Board of Direct Taxes

2. Bank Frauds , Credit card frauds, Insurance frauds

IPC Police/State Vigilance/CB-CID/CBI

3. Stock Market Manipulations

IPC Police/CB-CID/CBI

4. Company Frauds Companies Act, 1956/IPC MRTP Act, 1968

Police/CBI/SFIO

SOME OF ECONOMIC CRIMES:

Sl. No.

Economic Crimes Acts / Legislation

Enforcement Authorities

5. Racketeering in false Travel documents

Passport Act, 1920/IPC

Police/State CB-CID/CBI

6. Computer Crime/Software piracy

Copyright Act, 1957/I.T.Act, 2000

Police/State CB-CID/CBI

7. Money Laundering Foreign Exchange Regulations Act, 1973; Money Laundering Act, 2002

Directorate of Enforcement

8. Evasion of Excise Duty Central Excise Act, 1944

Collectors of Central Excise

Securities and Exchange Board of India

भा�रती�य प्रतितीभातिती और ति�ति मय बो�र्ड�

SEBI Bhavan, Mumbai headquarters

Agency overview

Formed 12 April 1992

Jurisdiction Government of India

Headquarters Mumbai, Maharashtra

Employees 525 (2009)

Agency executive U. K. Sinha, Chairman

Website

www.sebi.gov.in

POWERS OF SEBI:

For the discharge of its functions efficiently, SEBI has been vested with the following powers:

To approve by−laws of stock exchanges.Sebi.

To require the stock exchange to amend their by−laws.

Inspect the books of accounts and call for periodical returns from recognized stock exchanges.

Inspect the books of accounts of a financial intermediaries.

Compel certain companies to list their shares in one or more stock exchanges.

SEBI COMMITTEES Technical Advisory

Committee

Committee for review of structure of market infrastructure institutions

Members of the Advisory Committee for the SEBI Investor Protection and Education Fund

Takeover Regulations Advisory Committe

Primary Market Advisory Committee (PMAC)

Secondary Market Advisory Committee (SMAC)

Mutual Fund Advisory Committee

Corporate Bonds & Securitization Advisory Committee

MAJOR

 SEBI is credited for quick movement towards making the markets electronic and paperless by introducing T+5 rolling cycle from July 2001 and T+3 in April 2002 and further to T+2 in April 2003

SEBI did away with physical certificates that were prone to postal delays, theft and forgery, apart from making the settlement process slow and cumbersome by passing Depositories Act, 1996. 

SEBI has increased the application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at present.

THE REAL PICTURE OF INDIAN ECONOMY

SAHARA V/S SEBI CASEIn the high profile Sahara case involving over Rs. 24,000 crore raised through ‘various illegalities’, market regulator SEBI has begun the process of refund to individual investors who have been verified by it.

The money so far deposited by Sahara be permitted to be refunded to the genuine investors, with interest, after verifying the genuineness of the documents

SEBI has also filed a contempt petition against Sahara, accusing them of not following court directions, while it has also sought orders for arrest of group chief Subrata Roy and his debarment from leaving the country. These matters are also likely to be heard by the court on July 17.

Administrative costs and expenses relating to the case would also be incurred by Sahara and Besides, another contract of Rs. 29.88 crore was given to UTI Infrastructure Technology and Services for the work relating to redemption related activities in this case.