Technology's Two-faced Role in facilitating White Collar Crime

In the early days of the internet, white collar criminals had to rely on traditional methods such as insider trading and Ponzi schemes to defraud unsuspecting investors. However, with the advent of new technologies, such as cryptocurrency and blockchain, white collar criminals have found new ways to facilitate their illegal activities. The intersection of technology and white-collar crime presents a dynamic and multi-faceted challenge, with both opportunities for facilitating illegal activities as well as potential solutions for detecting and preventing them.

White collar crime, defined as non-violent crime driven by financial motivation, is a significant and growing problem today. As technology continues to advance and the business world becomes increasingly digital, the role of technology in facilitating these types of crimes has become an important issue to consider.

On one hand, technology has made it easier for white collar criminals to carry out their activities in a covert manner by providing new tools and opportunities for fraud, embezzlement, and other financial crimes. For example, the use of digital financial transactions and online banking has made it easier for criminals to launder money and move funds between accounts. Similarly, the rise of digital currencies such as Bitcoin has provided new opportunities for criminals to engage in illegal activities without being traced. The anonymity and decentralization provided by blockchain technology has also enabled the creation of anonymous and untraceable platforms for carrying out illegal activities. Additionally, the increasing use of artificial intelligence and machine learning in financial services has also raised concerns about the potential for these technologies to be used for financial fraud.

On the other hand, technology has also provided law enforcement agencies with new tools to investigate and prosecute white collar crime. For example, the use of data analytics has made it easier to detect patterns of fraud and suspicious financial activity. Additionally, the use of digital forensics has provided new ways to gather and analyse electronic evidence. Moreover, the use of emerging technologies like blockchain analysis, AI-based fraud detection, and digital forensics have enabled the investigators to trace the transaction and illicit activities on blockchain-based platforms. It has become easier to track the individuals behind the illegal activities and bring them to justice.

In light of these developments, there are several steps that can be taken to address the issue of technology facilitating white collar crime. One is to increase investment in technology and research to improve the capabilities of law enforcement agencies to detect and investigate white collar crime. This could include the development of new tools and techniques for data analytics and digital forensics, as well as training of law enforcement personnel in these areas. An example of this would be the use of data analytics to detect patterns of fraud and suspicious financial activity in the 2016 Bangladesh Bank heist, where hackers attempted to steal USD 951 million from the Bangladesh central bank's account at the Federal Reserve Bank of New York.

Another step is to increase international cooperation between law enforcement agencies to address white collar crime that spans multiple jurisdictions. This could include the sharing of information and resources between agencies, as well as the development of international protocols for investigating and prosecuting white collar crime. For instance, the creation of international task forces, such as the Panama Papers investigation where the International Consortium of Investigative Journalists (ICIJ) coordinated a global effort to investigate and report on the leaked documents from Panamanian law firm, Mossack Fonseca, or the U.S.-led Operation Car Wash in Brazil, which brought together law enforcement agencies from different countries to investigate a massive corruption scandal involving the state-controlled oil company Petrobras.

Additionally, it is important to have robust regulations in place to prevent the misuse of technology for illegal activities. This can include regulations for the use of digital currencies and blockchain technology, as well as the monitoring of artificial intelligence and machine learning in financial services. Real life examples of this are the regulatory framework established by the Financial Action Task Force (FATF) to combat money laundering and terrorist financing through virtual currencies, or the New York State Department of Financial Services (NYDFS) regulations for virtual currency companies operating in the state of New York, which requires them to obtain a "BitLicense" and comply with anti-money laundering (AML) and know-your-customer (KYC) regulations.

In India also, there are several examples of white-collar crime that have been addressed through a combination of increased investment in technology and research, international cooperation, and robust regulations.

One example is the Satyam Computer Services scandal in 2009, where the company's chairman admitted to inflating the company's profits and assets for several years. The investigation and prosecution of this case involved the use of digital forensics to uncover the fraudulent accounting practices used by the company, as well as the cooperation between Indian law enforcement agencies and the U.S. Securities and Exchange Commission (SEC) to gather evidence and build a case against the individuals involved.

Another example is the Punjab National Bank (PNB) fraud case in 2018, where a group of individuals, including some bank employees, were accused of using fraudulent Letters of Undertaking (LoU) to obtain loans from overseas branches of Indian banks. The investigation of this case involved the use of data analytics to detect patterns of fraud and suspicious financial activity, as well as the cooperation between Indian law enforcement agencies and multiple other countries including Hong Kong and the United Arab Emirates (UAE) to trace the flow of funds and identify the individuals involved.

To conclude, the rapid advancement of technology has had a profound impact on the business world, and it has also created new opportunities for white collar crime. While technology has provided new tools for law enforcement agencies to investigate and prosecute these crimes, it has also created new challenges and complexities. It is important to address these issues through a combination of increased investment in technology and research, international cooperation, and robust regulations.

Additionally, educating the public and businesses on the potential risks of technology-facilitated white-collar crime is important to prevent future crimes from occurring. As the famous criminologist, Edwin Sutherland said, "White collar crime is a higher form of crime because it is more concealed, more intentional, and more destructive of social values than street crime." It is important for us to understand the role of technology in facilitating white-collar crime, and take steps to prevent it, in order to protect the interest of the society as a whole.

Vikram Sobti is Partner at Chandhiok & Mahajan