Investigation of Corporate Legal Frauds by Shobhit Sisodia

Central government has the power to investigate frauds relating to companies by establishing an office called Serious Fraud Investigation Office (SFIO). Once SFIO is in field i.e. it is taking care of a particular case, no other investigating agency can proceed with investigation in a case in respect of any offence under the Act. Talking about fraud investigations, they are not easy to deal with and include varying levels of legal code and jurisdictions. One has to figure out the common actions that occur during all the investigations he has been a part of to find a solid crust around which all the frauds take place. This develops skills investigators and also it is a trait of their professional duties.

ILLICIT SIDE OF FRAUDS

Fraud always has two things which have same characteristics in all accounts. Fraud under criminal law, is defined as a task carried out by an individual for personal gain or to defame another individual. In order for a fraud investigation to be valid or acceptable in a court of law the investigator must be able to provide reasonable evidence to uphold the investigation. Companies adopt various methodologies to commit such frauds, which may include misrepresentation in the prospectus, manipulation of existing records, hiding expenditures that never incurred but were paid etc.

There are several reasons taken in account which tell that why companies commit such frauds which are- gaining currency, creating deceiving image of the company in the market to gain competitive advantage. The emergence of advance technology and science has contributed a lot to occurrence of criminal frauds in the corporate sector.

TYPES OF CORPORATE FRAUD

There are many types of frauds like financial frauds, employee fraud, vendor fraud, customer fraud, investment scams etc. Some of the common types are:

• Financial frauds– Manipulation, omission of accounts, misapplication of accounting principles etc.
• Misappropriation of Assets– Theft of tangible assets by inside or outside parties, causing wrong payments.
• Corruption– Providing or getting improper payments, giving bribes to individuals of the company, backing up other parties in committing frauds.

MISLEADING PRACTICES

Fraud has many shapes and can be committed in many forms which is deceptive and not easy to come out. It can happen through a number of ways, which might include internet, cellphone, mail, actions conducted in person by individuals. The falsification includes a versatile number of actions from false insurance claims, misrepresenting account books to false advertising and numerous amount of other acts.

The wrongful act of misrepresenting things occurs when an individual who has an intention to perform a fraud and some ways in which it can be done are listed below:

• Getting a document signed for gaining monetary advantage
• Misuse high position in a company to gain currency in a particular project
• Getting a false check issued to pay for services and pay taxes

Well most of the time actions like these are highly deceptive and esoteric so the investigation team of officers are highly skilled and trained for the same. These guys bring out the things which are hidden and are performed under the table and are not visible to the naked eye of the common individual of the corporate sector. The investigation team checks the accounting books of the company and cross checks it with the records of the individuals particularly focusing on the rarely occurring expenses which are too small and in too many places that otherwise no one would’ve noticed.

CORPORATE FRAUDS UNDER COMPANIES ACT, 2013

The Companies Act, 2013 mainly focuses on the problems or acts which are related to the corporate frauds. Fraud that have occurred in connection to the company or any other corporate body as defined in S.447 of the Companies Act 2013 which carry intention to fool another individual for wrongful gain, wrong use of the higher position one is operating at etc.

In order to commit a fraud, an act must be done with the intention to induce the other party to enter a contract. The fraud which messes the contract must have a central point with the acts of the parties entering the contract. This explanation of fraud spotlights the act to prove the wrongful intention of the person who committed fraud.

CONCLUSION

Nowadays there are different ways by which corporate frauds can be prevented under the Companies Act, 2013. Section 211 gives power to the government to establish an office called Serious Fraud Investigation Office (SFIO) to look into the matter of corporate frauds. No other agency or committee is allowed to look into the case once the SFIO has taken charge. Once the SFIO has been assigned the case they have the right to arrest individuals according to the material he/she is in possession of. SFIO may move forward to submit a report of the investigation in short. Then the central government may head to initiate prosecution against the company. Thus we can conclude that the investigation in general around the globe has escalated to a quick advancement. Though the rate of corporate frauds is much more in Canadian countries than in any other place while doing a graph comparison. The corporate sector in those countries is highly corrupt but the government Is working for the better future. The corporate sector needs to be healed as they play a huge role in improving the economy of the country and the investigation committees are working for the same.