How do white collar criminals evade justice?

Chennai: In recent times, several cases of bank loan frauds have flooded the headlines. In nearly every major scams, it can be noted that the accused have always evaded justice – making the system or law that holds such rule breakers accountable – appear weak.

According to a report published by Reserve Bank of India (RBI), it said frauds have been predominantly occurring in the loan portfolio, both in terms of number and value. The report declared that Private Sector Banks (PSB) accounted for a bulk of frauds reported in 2018-19 – 55.4 per cent of the number of cases reported and 90.2 per cent of the amount involved.

However it added, ‘Incidents relating to other areas of banking viz., card/internet, off-balance sheet and forex transactions, in terms of value, have reduced in 2018-19.’

Major scandals
Reading such reports reminds one of major scams that brought India’s banking system under the scanner. In September last year, customers of Punjab & Maharashtra Co-operative (PMC) bank were in for a shock when RBI imposed operational restrictions for six months after PMC was found to have given over Rs 6,700 crore loans to HDIL through fraudulent means.

Likewise, in October 2016, ICICI Bank-Videocon scam came into spotlight after a whistleblower raised concerns over shady loan deals. And who can forget the flamboyant liquor baron Vijay Mallya’s loan defaults of over Rs 10,000 crore to Indian banks or Nirav Modi’s dramatic escape to UK after getting involved in scam worth $1.4 billion?

Modus Operandi
The RBI report found that ‘the modus operandi of large value frauds – that account for 86.4 per cent of all frauds reported during the year in terms of value – involved diversion of funds by borrowers through various means, mainly via associated or shell companies, accounting irregularities, manipulating financial or stock statements, opening current accounts with banks outside the lending consortium without a no-objection certificate from lenders and devolving of Letter of Credits (LCs).’

Lesser known scams
While people are often aware of billionaires tricking the system and escaping justice, there are also ‘several lesser known criminals’ who slip from law enforcers’ grip. Take for instance, Ranchi-based businessmen, Mohit Narsaria and Narayan Narsaria. According to media reports, the total current debt taken by their firms, KN Narsaria Pvt Ltd and Narsaria Construction Pvt Ltd alone has exceeded over Rs 22 crores with Bank of India. The brothers have failed to pay electricity bill amounting more than Rs 10 lakh and other taxes. Mohit Narsaria has previously been accused of money laundering, fraud, harassment, among others.

Additional loans in crores has been taken directly in their individual names through Bank of India, UCO Bank, and other private banks. In the last five years, these companies have defaulted multiple times in repayment of their loans to the bank. In 2016, the Bank of India’s risk team had flagged the account as Non-performing Asset (NPA). Reports say that each of the default incidents and non payment of installment issue was done away with insider ‘setting’ with bank and the account was allowed to be restructured without proper risk assessment or auditing of collaterals and security.

Evading justice
Reading such shocking details makes one ask, how do such criminals escape police detection? The RBI report warned that the frauds show ‘lack of adequate internal processes, people and systems to tackle operational risks.’

Financial research scholars, Geetika Sood and Meenu Bala in their study, ‘White Collar Crimes in India published by the International Journal of Trend in Scientific Research and Development, explain, ‘After committing the crimes most of the offenders get away without getting any punishment because there are not enough laws to deal with such kind of crimes.’ There investigations state, ‘In many cases, because of the supreme political connections most of the offenders get away without any punishment. Moreover, in many cases there are no witnesses for the said offences as such offences are committed in private.’

Several financial experts also believe that RBI’s power of monitoring the performances of PSBs should be tightened and conducted regularly. They also suggest slapping severe punishments to those who get involved in axis of money’s evil.

Mohammed Rayaan