An evening with Mr V. V. Lakshmi Narayana

On Friday, July 7, we had an engaging session by former IPS officer, Mr V. V. Lakshmi Narayana. The full session can be accessed at:

https://www.youtube.com/watch?v=JPB6SPRFDfo

About Mr V. V. Lakshmi Narayana

Mr Lakshmi Narayana joined the Indian Police Service (IPS), in 1990 as part of the Maharashtra Cadre and took voluntary retirement in April 2018. During his career, he held various positions of responsibility, including Superintendent of Police in Gadchiroli, Nanded, and Pune. He also served as the Commandant of the State Reserve Police Force in Pune, and as Deputy Commissioner of Police (DCP) in both Mumbai and Pune.

Mr Lakshmi Narayana's commitment to combating terrorism led to his appointment as the Deputy Inspector General (DIG) of the Anti-Terrorism Squad in Mumbai. He later became the Joint Director of the Central Bureau of Investigation (CBI) in Hyderabad. His contributions to maintaining law and order earned him prestigious accolades such as the Internal Security Medal from the Government of India and the Hard Duty Medal from the Government of Maharashtra. In 2006, he was honoured with the Indian Police Medal for Meritorious Service. In 2017, he received the esteemed President's Police Medal for Distinguished Services.

Mr Lakshmi Narayana has been actively involved in various social and philanthropic activities. He has donated blood a remarkable 61 times. He has also facilitated the planting of 15,000 saplings.

Mr Lakshmi Narayana's passion for youth development led him to interact with over 3,000,000 young individuals as an active member of Lead India, an initiative inspired by the late President Dr. APJ Abdul Kalam. He has also adopted multiple villages, supported a tribal school in Bhinar near Bhiwandi, and extended his assistance to villages affected by kidney disease. To further his philanthropic endeavours and promote rural development, Mr Lakshmi Narayana has established the Join for Development Foundation. The foundation focuses on empowering farmers, supporting youth, and driving positive change in rural India.

Introduction

As Mr Lakshmi Narayana put it, policing is common sense and law is codified common sense. Information Technology provides opportunities for criminals to perpetrate various crimes. Just like we protect ourselves at home with a compound wall, security, and a good lock, we must take precautions to protect our online assets such as bank accounts. Unfortunately, we are not paying enough attention in this regard. Kautilya’s Arthashastra had pointed out 40 ways of embezzlement. We should put our knowledge and experience to good use when we deal with cyber criminals.

What is an offence?

Offence means violation of law - Omission or Commission. It is intentionally done. Offences can be Conventional and Non-Conventional.

Conventional offences have been in existence since time immemorial. They include theft, burglary, murder etc. They affect individuals or groups of individuals. They typically arise due to disputes over wealth, woman, etc. The number of people affected is small.

Non-conventional offences are of more recent origin. Their impact goes beyond a few individuals. They affect the entire society, the economy and sometimes even the nation. Think of scams like Harshad Mehta. The victims are often ignorant of the crime when it is being committed. Greed is the root cause of such crimes. As Mahatma Gandhi once mentioned: The world has enough for everyone’s need but not for everyone’s greed.

Economic offences

In such crimes, the offender’s principal motive is economic gain. Cybercrimes, tax evasion, robbery, selling of controlled substances and abuses of economic aid are all examples of economic crimes. Cheating and generation of black money are the usual motives. They are an onslaught on the entire humanity. They are done quietly in a highly sophisticated manner by intelligent people. The crime is often difficult to recognize.

Types of Economic Offences
White Collar Crime

According to Sutherland, this is “a crime committed by a person of respectability and high social status in the course of his occupation.”

Examples include bribery, insider trading, embezzlement, computer crime, copyright infringement, money laundering, identity theft & forgery.

These are non- violent offences committed by individuals or organizations in professional or business settings. They are financially motivated. They involve deceit, fraud, manipulation. They are committed for personal or corporate gain. They have a broader impact on the economy, financial system, and public trust.

Blue Collar crimes

They are committed to fulfil immediate personal needs. They are driven by desperation, personal gain and peer pressure. They are confrontational. They involve a direct interaction between the offender and the victim.

Red Collar crimes

In 2015, Frank Perri coined this term. This is the violence committed by a small group of White-Collar Criminals to deter fraud detection. Murder, assault, kidnapping are used to conceal or hide the facts of the case to avoid conviction.

Pink Collar crimes

This is a term coined by Katheen Daly in 1980. These are crimes committed by low and mid-level female workers. They mostly pertain to embezzlement.

Plaid collar crime

These are crimes committed against farmers. Examples are theft of crops, farm stock, farm equipment.

Green collar crimes

These involve violation of environmental laws. They include illegal logging, Illegal wildlife exports, Illegal fishing, illegal dumping of waste, and other forms of pollution.

Black collar crimes

These are crimes committed by the clergy. They are usually covered up by the members of the religion to protect the faith.

CBI on economic offences

The CBI has noted that the increase in economic offences during the recent years has far outstripped the increase of conventional crime. This scenario is likely to further aggravate in the coming years. The coming years are going to witness new types of economic crimes on account of increased globalization, enhanced reliance on internet banking, use of plastic money and expansion of the capital markets.

The Supreme Court on economic offences

The Supreme Court of India has ruled that the entire community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book. A murder may be committed in the heat of moment, but an economic offence is committed with cool calculation and deliberate design regardless of the consequences to the community. When such crimes happen, the community may lose trust and faith in the system to administer justice in an even-handed manner.

Economic offences constitute a class apart and need to be handled differently in the matter of bail. Such offences have deep rooted conspiracies and involve a huge loss of public funds. They pose a serious threat to the financial health of the country.

Trends in white collar crime

The spate in major economic scams in different sectors started in the early 1990s. They have caused havoc in Banks, Public Sector Undertakings, Telcom Sector, Insurance Companies. Some of the major scams have involved Harshad Mehta, Ketan Parekh, Satyam, Sahara group, Vijay Mallya and Nirav Modi. Ponzi schemes include Stock Guru, Speak Asia Online.

Inside trading cases have involved Rakesh Jhunjhunwala, Kishore Biyani and Prannoy Roy.

There have been many bank fraud cases. Shell companies have been used for money laundering. The word money laundering comes from laundry where dirty clothes are converted into clean clothes.

Measures to contain white collar crimes

Various measures have been suggested to control white collar crimes:

• Revamping of laws governing economic offences.
• Depriving the economic offenders of the proceeds of crime.
• Tightening bail provisions.
• Creation of exclusive courts.
• Simplification of court procedure.
• Notifying economic offenders on the internet.
• Coordinated action.
• Education: imparting of ethics and values from a young age.
• Good IT systems that can handle incidents quickly.

The Satyam scam

The company was doing well but wanted to become the industry leader. So it began to show additional revenues which did not exist. False invoices were used to inflate the revenue. Any crime has two dimensions: Motive and Deed. Satyam thought it would get away with a temporary fudge. The company was confident that the business would deliver real numbers soon. But when it did not work out, the fraud continued till it was exposed.

Some of the junior auditors did raise concerns but they were asked to fall in line by the senior auditors. Clearly, the auditors did not do their job. They also breached the code of conduct prescribed by ICAI.

The independent directors did not act presumably because the company was doing well. And there was no suspicion. We cannot expect the directors to understand the financial health of the company. That is where the auditors come. But unfortunately, they did not do their duty. They acted like lap dogs and not watch dogs. They are expected to be professionals, i.e. do their work sincerely even when no one is supervising them.

The auditors were being paid three times the fees compared to peers like Infosys. A lot of money was kept in the current accounts. There were many employees on the bench. All these red flags were ignored. (Now the Companies Act has been amended. Instead of printed submissions, companies must do them online. So software can be used to detect such anomalies and red flags.)

On dealing with cyber criminals

In Jamdara, Jharkand, cybercrime is a cottage industry. What enables these criminals to thrive is that we have become careless with our smart phones and respond to every alert or message. We must take sufficient precaution. We must follow protocols such as changing the password frequently and using tough passwords. Passwords such as date of birth can be easily hacked. We should also use tools like MacAfee. When something happens, we tend to hide the news. We should instead report the incident to the Police Cybercrime cell. They usually take quick action.

On the role of insiders

In two thirds of the cases, internal people are involved. Mr Lakshmi Narayana mentioned that it is often difficult to catch a thief who is inside the house. In case of the major banking frauds, public servants are often involved. The Nirav Mody scam is a good example.

On removing the human element

It is necessary to remove the human element and depend more on technology to reduce frauds. This is exactly what the Income Tax department has done through its faceless system. We are not supposed to visit the IT office to file the tax return. Any scrutiny also happens online. The officer does not know who is being assessed.

On the importance of value-based education

Literacy does not mean education. In Sanskrit, the word for literate is Sakshara. As Mr Lakshmi Narayana joked, Sakshara if reversed reads Rakshasa! What we need is values-based education.

We must inculcate a sense of ethics and values in children at a young age. Today, many families are nuclear. There are no grandchildren to spend time and educate the young children. No wonder, many youngsters are committing cybercrime. Society is attaching a lot of importance to money. That is further aggravating the problem.

Along with education, we also need strict laws, fast track courts and quick conviction of criminals, say within a year. Today, criminals feel encouraged that cases can drag in the courts for 10-15 years or even more.

On how he handled pressure during high profile cases

Mr Lakshmi Narayana’s philosophy has always been to work with detached attachment. He believes in leaving the work behind in the office At home, he has always been a family man. In all the cases he worked on, he realized that he was a professional, being paid to do a job sincerely. Yoga, Pranayama and Sudarshan Kriya have helped him to remain cool and composed. While taking a decision, it is important to stay cool.

On the importance of multi-disciplinary approaches

It is important to take a multidisciplinary approach in many cases. While working on the Satyam case, Mr Lakshmi Narayana realized that deep understanding of accounting was necessary. Knowledge of cyber security was also important. So, he roped in CAs, ICWAs and cybercrime experts in his team. The advice of these people has helped him to deal with complex investigations.

On politically motivated raids

Often the raids are conducted on opposition politicians. Such behaviour can lead to loss of trust and undermine the respectability of the institution. Mr Laksmi Narayana feels that institutions like CBI and Enforcement Directorate should be under the CVC or the Lok Pal and not under the ministry. This will enable them to work with a high degree of independence. It is important that in a democracy these institutions are not just but must also be seen to be just.

On police reforms

There have been many proposals suggested by the Dharam Vira Commission (set up several years ago) and more recently through the PIL initiatives of Mr Prakash Singh, a former IPS Officer.

There are three important posts in the police organization: Thanedar ( Station in charge), Superintendent of Police/Commissioner of Police and DGP.

There should be a tenure of at least 2 years for each of these posts. Otherwise, transfers can be made at the whim and fancy of politicians.

State Security commission: Opposition and reputed people should be included to examine the police functioning.

Police Establishment Board: The board will examine postings and transfers.

Justice Malimath Committee (2003): Suggested various reforms in criminal procedures and Criminal justice code. These have not yet been implemented.

The police represent the government on the roads. They must work efficiently for implementing the rule of law and enable development. Only where the law and order is satisfactory, will investments flow in. The performance of the police must be judged not just by the superiors but also by the people and the stakeholders. This will lead to more accountability.

On espionage and phone tapping

The Indian Telegraph Act permits this under special circumstances such as a threat to the sovereignty of the state. If the eyes and ears of the government are open, such actions will not be needed. Moreover, we must ensure that sincere people are not made scapegoats.

The criminal brain can be innovative. That is why ethical hacking and open discussions are important to understand how cyber-attacks can happen. We should plug all the loopholes. We should also be in touch with what is happening across the world and keep learning from the experiences of others.

On the use of technology to catch cyber criminals

AI and Blockchain can play a big role in dealing with cybercrime. Technology can handle huge volumes of information effortlessly, work faster than human beings and see patterns far more effectively.

The NAT Grid collects all the data relating to cybercrime from different organizations and keeps it in a repository. Law enforcement agencies can access the data base when they need information.

Cyber criminals are not all that well educated. But they often collude with educated insiders within the organization.

On the need for coordination among different agencies

Serious Frauds Investigation Office: Deals with violations of the Companies Act.

Enforcement Directorate: Deals with money laundering

Central Bureau of Investigation: Deals with the criminality of the act.

The three agencies must work in close coordination so that when the case comes before the court, the criminal will not get the benefit of doubt and find an escape route.