COMPARATIVE STUDY OF WHITE COLLAR CRIMES IN INDIA AND UAE

I. Introduction and Meaning of White Collar Crimes

It is often said that Actio personalis moritur cum persona - A personal action dies with the person, but the ideology of the crime is contrast to it. The theory differentiates though in context of the criminal law from civil law. For the acts of the sins are punishable under law (both in criminal and civil). The law punishes the commission and also its attempt at times. Crime, the intentional commission of an act usually deemed socially harmful or dangerous and specifically defined, prohibited, and punishable under criminal law. The crime categorization is way too gigantic to find place in this article. Financial crimes, to be precise, emancipates from the origin of the terminology known as crime.

“Necessity is not always the motive behind the commission of a crime.” Edwin H. Sutherland was the first criminologist who came up with this theory and coined the term “White Collar Crime”. This category of crimes are usually committed by person of respectability and high position and high social status and during the course of his occupation. Earlier it was thought that these crimes are committed by persons operating through large and powerful organizations. Ad ea quae frequentius acciduunt jura adaptantur - The laws are adapted to those cases which occur more frequently. The commission of white collar crimes grabbed the attention of the legislature which resulted into coming into existence the legislations on the same. Some examples of white collar crimes/economic crimes are forgery money-laundering, tax evasion, bribery, embezzlement, ponzi schemes, insider trading, identity thefts, cybercrimes, infringement of intellectual property by industrialists, hoarding, black-marketing, food adulteration, etc. they can be committed by individuals or organizations. The factors responsible for increase in these crimes in recent times are development in science and technology.

This paper focuses on legislation to combat white collar crimes in India and United Arab Emirates with special focus on anti-money laundering legislations. Money laundering is the process by which criminals disguise the original ownership and control of the proceeds of crime by making such proceeds appear to have derived from a legitimate source. Criminalization of money laundering is needed to take the profit out of crime. The logic for the creation of the offence is to demotivate/deter the individuals and organizations to assist criminals to benefit from the proceeds of crime or to facilitate the commission of such crimes by providing financial services to them. ²

International Compliance association https://www.int-comp.org/careers/your-career-in-aml/what-is-money-laundering/

coordinated and imaginative efforts of all the enforcement and investigative agencies. In the year 1991 when the economic reform were placed to reduce the difference between rich and poor at the same time outflows of illegal wealth to overseas is also increased though the intention was to reduce the difference between the rich and poor but the result has shown or we are witnessed to the difference which has grown day by day, due to lack of planning of the government and absence of anti- corruption legislation and by not applying pressure on the international community.

II. Impact of Money Laundering in India and UAE

India is one of the most fast developing nations and it indulges into about $460bn illegal capital flow, funneling corrupt riches money to overseas banks. Economist says that the illegal money that consists of India’s underground economy drains out in foreign lands, if this is to believe, it comes around 50% of the country’s GDP.

By Global standards, the United Arab Emirates is a law-abiding country with low crime rates and civil and domestic harmony. Acts of Money laundering, terrorism financing and fraud are all criminalised. While there is some level of domestic crime, the majority of serious criminal activity in the United Arab Emirates relates to either trans-shipment of prohibited goods through the high-volume port system or the commission of financial crimes and fraud-related offences in the global financial sector. According to UAE law enforcement, the international narcotics trade, organized crime and earnings from institutional corruption in other countries provide a large part of the proceeds of crime laundered in or through the United Arab Emirates. The majority of illegal proceeds entering the country are derived from offences committed overseas.

III. Evolution of Anti Money Laundering Legislation in India

The risks of Money laundering is magnified with the increase of commercial and technological advancements. It was therefore crucial that India’s anti-money laundering laws were adapted to a changing international security and commercial environment. In India, a number of Acts existed which played the role of prevention of money laundering, though these were not so named. However, in India, we have certain statutes, as given below that incorporate measures which attempt to address the problems of money laundering:-

The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; The Income Tax Act, 1961 The Benami Transactions (Prohibition) Act, 1988 The Indian Penal Code and Code of Criminal Procedure, 1973 The Narcotic Drugs and Psychotropic Substances Act, 1985 The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988

The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; The Income Tax Act, 1961 The Benami Transactions (Prohibition) Act, 1988 The Indian Penal Code and Code of Criminal Procedure, 1973 The Narcotic Drugs and Psychotropic Substances Act, 1985 The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988

In November, 2002, Parliament approved the long-pending legislation, Prevention of Money Laundering Act, 2002 to prevent the offence of money laundering. January, 2003, the President gave its assent to the Bill in. The Bill was originally passed in December 1999 by the Lok Sabha and sent to the Rajya Sabha. The Upper House approved the Bill in July 2002 with amendments suggested by the Select Committee. The Bill in its modified form is, however, regarded as a diluted version of the original one.

Money Laundering Act is an endorsement of various international conventions to which India is a party, and it seeks to declare laundering of monies carried through serious crimes a criminal offence. The Act also lists modalities of disclosure by financial institutions regarding reportable transactions, confiscation of the proceeds of crime, declaring money laundering as an extraditable offence and promoting international cooperation in investigation of money laundering. The Act allows for confiscation of property derived from or involved in money laundering. Co-operative banks, non-banking financial companies, chit funds and housing financial institutions come under its ambit. The Act also makes it mandatory for banking companies, financial institutions and intermediaries to maintain a record of all transactions of a prescribed value and to furnish information whenever sought within a prescribed time period. Thus, these entities are required to maintain the record of the transactions for 10 years.

In order to combat money laundering offence India has joined various International Organisations like FATF. An intergovernmental body set up by the G-7 for creating global policies and framework to combat money laundering and terror financing will seem more lucrative for foreign investments and enable easier market access for India's financial institutions in the industrialized world. Some of the laws which had been amended to suit the guidelines of FATF includes the Prevention of Money Laundering Act (PMLA), Overseas payment gateways such as Visa and Master, money changers and money transfer service providers, Insider trading and market manipulation, human trafficking, smuggling of migrants, piracy and environmental crimes, over-invoicing and under-invoicing under customs were also made offences under the PMLA. All these are now in the line of FATF's recommendations.

The criminals have developed number of methods for the purpose of “Structuring” and “Laundering” currency in the process of converting it from “dirty” to “clean” funds. The major risk to a bank is in the potential for complicity and violation of Acts if such funds are channelled through that Bank.

IV. Evolution of Anti Money Laundering legislations in UAE

In 2001, the UAE Government (UAEG) started taking steps to better monitor cash flows through the financial system of UAE and in order to cooperate with international efforts to combat terrorist financing. The UAE has enacted two major laws that serve as the foundation for the country’s Anti Money Laundering (AML) and counterterrorist financing (CTF) efforts (1) Law No 4/2002, the Anti Money Laundering Law (2) Law No. 1/2004, the Counterterrorism Law.

Although the Anti-Money Laundering law criminalizes the act of money laundering, it is the Administrative Regulation No. 24/2000 that provides guidelines for the financial institutions to monitor the money laundering activity. The Administrative Regulation No. 24/2000 requires banks, money exchange houses, finance companies, and any other financial institutions operating in the UAE to strictly follow the Know Your Customer (KYC) guidelines propounded by it. In addition to that, financial institutions also needs to verify the customer’s identity and maintain transaction details (including name and address of originator and beneficiary) for all exchange house transactions over $545, and for all non-account holder bank transactions over $10,900. The regulation even describes the procedures to be followed for the identification of natural and juridical persons, the types of documents to be presented, and rules on what customer records must be maintained on file at the institution. Other provisions of Regulation 24/2000 mandates customer records to be maintained for a minimum of 5 years and further require that they be periodically updated as long as the account is open.

On July 29, 2004, the UAE further build up the existing legal authority to combat terrorism and terrorist financing, by passing Law No. 1/2004. The law introduced penalties for the crimes covered, as harsh as life imprisonment and the death penalty. It also provides for seizure or forfeiture of assets. As per this law, founders of terrorist organizations face up to life imprisonment. The law further penalizes the illegal manufacture, import, or transport of "non-conventional weapons" or their components, with the intent to use them in a terrorist activity.

In July 2013, the Dubai Financial Services Authority (DFSA) AML Module was revised to be the Anti-Money Laundering, Counter Terrorist Financing and Sanctions Module (AML Rules).

Suggestions of Financial Action Task Force (FATF):-

FATF is an intergovernmental organization founded 30 years ago to develop and uphold policies to combat money laundering and terrorist financing, is conducted a peer review (or “mutual evaluation”) of the United Arab Emirates (UAE) in 2020.

In 2008, FATF last assessed the UAE, and found the country’s systems and frameworks geared to prevent criminal abuse of the financial system to be “satisfactory” at that time. FATF made a various suggestions for improvement of its system, which included expanding the range of predicate offenses in the law, extending customer due diligence (“CDD”) requirements to Designated Non-Financial Businesses and Professions (“DNFBPs”), clarifying the bases upon which suspicious activities/transactions are expected to be reported, and increasing the powers to enforcement authorities. In the context of this year’s mutual evaluation, the UAE has undertaken a number of initiatives which are proactive in nature and helps in ensuring best practice of anti-money laundering and counter-terrorist financing measures, including enacting an important new law and seeking to combat financial crime in cooperation with international partners.

On October 30, 2018, the UAE issued by Federal Decree Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal

³http://bankersacademy.com/resources/free-tutorials/57-ba-free-tutorials/608-aml-uae-sp-875 Organizations (the “AML Law”). The AML Law introduced a number of concepts recommended by FATF designed to enhance the UAE’s effectiveness in identifying and preventing attempts at money laundering and terror financing.

V. Comparative chart showing the fundamental differences between the legislations if India and UAE

VI. Conclusion

In addition to evolving the law with the need of time, India and UAE have also extended cooperation to each other in battling the offences of money laundering. In 2016, India and the UAE had signed an MoU between the Reserve Bank of India (RBI) and Central Bank of the UAE on bilateral swapping of Indian Rupee with Dirham. on February 10 and 11, 2018, the Memorandum of Understanding (MoU) on Cooperation in the Exchange of Financial Intelligence related to Money Laundering, Associated Predicate Offences and Terrorist Financing, was concluded during the visit of Prime Minister Sh. Narendra Modi to the UAE.

In the ₹3,600-crore AgustaWestland helicopter deal, a Dubai-based businessman, Rajiv Saxena was deported to India from the UAE in 2019, and arrested under money laundering act as ED claimed that he is a hawala operator. ED has also attached assets worth $50.90 million (about Rs 385.44 crore), including a villa in Dubai’s Palm Jumeirah and five Swiss bank accounts.

From the above discussion, it is the opinion of the authors that that the Money Laundering Law is more defined in India than the UAE law. With the latest i.e. 2018 AML legislation, it appears that the UAE is taking more and more steps for strengthening its legislation to combat the growing offences.

With the advent of legislations to combat launderers, the legislature has played a vital role, for, Firmior et potentior est operatio legis quam dispositio hominis - The operation of law is firmer and more powerful than the will of man. The culprits having the sharpest of brains to evolve new tacts to launder their money and commit offence, the legislature has already sharpen its teeths to bring them under its clutches. The legislature and Judiciary has now come up with ideology to book a culprit from both perspectives, contracting its earlier theory of Lex prospicit not respicit - The law looks forward, not backward. The clutches of law are tighter enough to book the sins of the sinners.

DR. KHUSHBOO BHARDWAJ
ADVOCATE
MOB: 9871812305

SNEHA ARYA
ADVOCATE