Financial fraud occurs when, by lying, deceit, or other fraudulent practices, someone takes away your money or otherwise harms your financial health. This can be done through a lot of different methods like identity theft or investment fraud.
Most victim compensation programs do not cover the money lost to fraud or fraudulent schemes. If you want to get your money back, you must check for your specific state laws regarding victim compensation. Justice from law might be the only legal option to recover lost money.
There were many scandals in the early 1990s that shook the Indian ecosystem, such as the Harshad Mehta Securities scandal. The Satyam Scandal, in addition to this, introduced the value of corporate enforcement standards to businesses. It can be noted, however, that the Companies Act, 2013 was brought out to deal with problems such as this.
Companies must also place emphasis on specific procedures relating to the investigation of fraud and misconduct. To define and determine the amount of risk present in a specific organization or company, there must be a system in place.
It is important to report the crimes to the relevant agencies and law enforcement as soon as you can irrespective of the type of financial fraud. Fraudulent charges should also be disputed or canceled as soon as they are discovered as well.
Moreover, victims should collect relevant documents, such as bank statements, credit reports, tax forms from current and previous years, and continue to file important information throughout the reporting process.
There are majorly four Types of Financial Crimes:
We have talked about financial Fraud as a whole, but now we are going to talk about corporate and business frauds.
Corporate fraud consists of activities done by an individual or company that are done misleadingly or illegally, and are designed to give an advantage to the committing individual or company.
Corporate fraud schemes go beyond the scope of an employee’s stated position and are marked by their complication and economic impact on the business, other employees, and outside parties.
Now we are going to talk about the regulatory legislation that comes into play in case of business and financial frauds.
There are many types of corporate fraud, including the following frauds that are very common:
HR managers are being called upon to conduct in-house investigations increasingly these days. The question of whether to bring in law enforcement, a regulatory agency, external audit teams, a private law firm, or handle the matter in-house is one that you must find the answer to. This decision is fact-specific and case-specific and will rely on the length and nature of the potential issue, as well as on the potential in-house investigative skills.
Many times the in-house investigations are conducted with outside counsel. If the company decides that it will conduct an internal investigation instead of an external Investigation at the start, the roles of the individuals involved in the investigation should be clearly described. If the investigation is conducted in-house under the supervision of an HR manager, you may get the following benefits:
By seeking the help of an experienced anti-fraud expert who has investigated hundreds of frauds, one of the best ways to establish policies and procedures that can help you avoid corporate fraud is to develop the most applicable and successful anti-fraud measures, including:
The standardization agency works on the creation of universal standards and their application. These standards must be based on effective risk management to help all the organizations to perform well in the environment of uncertainty and can manage the risk. Develop a standard that can help avoid the consequences that can harm your organization. For effective risk management try and focus on the following principles.
One of the most reputed company announced in September that it had installed software on millions of cars to trick the Environmental Protection Agency’s emissions testers into thinking that the cars were more environmentally friendly than they were, investors deserted the company, as they should have.
The company lost approximately $20 billion in market capitalization, as investors worried about the cost of providing compensations to customers for selling those cars that weren’t compliant with environmental regulations.
The company not only had to deal with providing compensations to their customers, but it will also have to pay fines from regulators as well as a big reputational hit that it took because of this scandal, which severely affected its market share.
Another Example of a Corporate Scandal is one of the biggest Ponzi schemes in West Bengal that enjoyed political patronage and attracted millions of investors and made them deposit money with the promise of abnormally high returns including fancy holidays etc. The chit fund eventually collapsed leading to defaults after a crackdown by SEBI and the Reserve Bank of India. The default, apart from leaving small depositors high and dry, also led to 10 media outlets owned by the company being forced to wind up, leaving 1000 journalists jobless.
And the company was accused of running a Ponzi scheme by an online market survey firm that raised thousands of crores of rupees from over 24 lakh investors, asking them to fill out surveys and ensuring that their income quadrupled in a year. A criminal case was registered against the company in 2011, some accounts frozen, and it’s business shut down.
Section 447 of Companies Act 2013, prescribes that the person who is guilty of frauds or scandals will be punishable with imprisonment for a term not less than 6 months and up to 10 years and a fine, which will not be less than the amount involved in the fraud and is extendable to thrice of such amount.
If the fraud involves public interest, the minimum imprisonment that can be provided will be 3 years.
As per the Prevention of Money-laundering Act 2012, if any person is sentenced to have broken this rule, they may get punishment of imprisonment up to 3-7 years with a fine of up to 5 lakh rupees.
As per Indian Penal Code 1860, the punishment of offenses, every person shall be accountable to punishment under this Code and not otherwise for every act or omission contrary to the requirements thereof, of which he/she must be guilty within India.
As per Section 66F (Acts of cyber terrorism) of Information Technology Act 2002, If a person refuses to give access to authorized personnel to a computer resource, accesses a protected system, or introduces viruses or malware into a system, intending to threaten the unity, integrity, sovereignty or security of India, then he commits cyber terrorism and he is accountable for Imprisonment up to life.
The corporate world is witnessing various changes. The corporate world’s networks are being targeted by cybercriminals more and more these days. Each new day comes up with some news about breaches on corporate networks at global and Indian levels. For running the day-to-day affairs of corporates, the electronic format is considered by some, the defective format.
Corporates must be aware of the facts that the law has gone ahead and given a broad definition of personal information to mean any information that relates to a natural person, which, either directly or indirectly, in combination with other information available or likely to be available with a body corporate, is capable of identifying such person. Moreover, the law has also defined what are the constituents of sensitive personal data or information. Some of these are –
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