Abstract
This study examines the legal, regulatory, and practical dimensions of corporate fraud and white-collar crime in India, with a focus on the challenges posed by the digital economy. It explores the evolution of India’s legal framework, including the Companies Act, SEBI regulations, PMLA, and the IT Act, while drawing comparative insights from international regimes such as the U.S. Sarbanes-Oxley Act, the U.K. Bribery Act, and OECD/FATF guidelines. The analysis highlights persistent challenges in prosecuting corporate fraud, including forensic limitations, jurisdictional complexities, prolonged trials, and the influence of corporate power.
In addressing reform, the paper emphasizes the integration of technology (AI, blockchain, forensic tools), strengthening of corporate governance and whistleblower protections, capacity building for enforcement agencies, and the need for fast-track tribunals. It further stresses the importance of international cooperation and harmonized legal frameworks to tackle cross-border crimes. By balancing innovation, market freedom, and accountability, the study underscores the need for a resilient, technology-driven, and ethically grounded regulatory ecosystem.
Keywords: Corporate fraud, white-collar crime, digital economy, governance, AI, blockchain, whistleblower protection, SEBI, PMLA, international cooperation.
- Introduction
Corporate fraud, as a manifestation of white-collar crime, has long been a challenge to both regulators and legal systems worldwide. Coined by Edwin Sutherland in 1939, the term “white-collar crime” captures offences committed by individuals in positions of trust, typically within business or professional settings, for personal or organizational gain.[1] Unlike conventional crimes, these offences are characterized by deception rather than violence, by manipulation rather than force. Corporate fraud in particular strikes at the heart of economic integrity, eroding public trust in markets, destabilizing financial institutions, and damaging investor confidence.
Traditionally, corporate fraud has taken forms such as embezzlement, insider trading, accounting misrepresentation, and bribery. However, the 21st century has ushered in a new digital dimension to such misconduct. Technology has not only provided new avenues for fraudulent activity but has also multiplied its complexity and scale. Cyber-enabled fraud, money laundering through cryptocurrencies, identity theft within corporate structures, manipulation of digital records, and the exploitation of algorithmic systems illustrate how fraudsters increasingly harness technology. The digital age has thus blurred boundaries between conventional white-collar crime and cybercrime, giving rise to sophisticated hybrid models of wrongdoing.
The globalized and transnational nature of corporate operations further complicates the issue. Fraud committed in one jurisdiction often impacts stakeholders across several countries. Cross-border mergers, foreign investments, and digital trade create opportunities for malfeasance that transcend traditional legal boundaries. This interconnectedness means that corporate fraud in the digital age is not merely a national problem but a global one, necessitating cooperation between legal systems, regulators, and enforcement agencies.[2]
Despite legislative reforms and regulatory interventions, prosecuting corporate fraud continues to be an uphill task. The highly technical nature of digital evidence, the use of layered transactions through shell companies, the anonymity offered by blockchain-based systems, and jurisdictional hurdles often obstruct timely and effective investigation. Moreover, prolonged trials, resource constraints, and the influence of powerful corporate actors add further obstacles to accountability. This “enforcement gap” undermines deterrence and risks normalizing fraudulent conduct in corporate ecosystems.
Against this backdrop, the evolving legal landscape of corporate fraud raises pressing questions: Are current legal frameworks adequate to address the new-age threats posed by digital fraud? How can regulators, enforcement agencies, and judicial bodies keep pace with rapidly evolving technology? And what role should corporate governance and compliance mechanisms play in preventing misconduct before it arises?
This article seeks to explore these concerns by examining the changing nature of corporate fraud in the digital age, the challenges in investigating and prosecuting white-collar crimes, and the responses of legal systems, particularly in India, with comparative insights from global practices. It further discusses the potential of technology, governance, and international cooperation in bridging existing gaps, ultimately underscoring the urgent need for integrated legal and policy reforms to ensure accountability in an increasingly digitized corporate world.[3]
[1]Information Technology Act, No. 21 of 2000, INDIA CODE.
[2]Bharatiya Nyaya Sanhita, No. 45 of 2023, INDIA CODE.
[3]Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745 (U.S.).