Corporate Fraudsters and Victimized Sri Lankan Companies: Lessons from the Indian Company Law

Abstract

Corporate fraud is a prominent and widely acknowledged offense by both corporate and legal communities. The Association of Certified Fraud Examiners in their Report to the Nations 2022 based on across-country research, revealed that companies lose 5 percent of their annual revenue due to occupational fraud. Moreover, the elevated levels of occupational fraud led to the collapse of the companies. In occupational fraud, the fraudster is the occupant or officer of a corporation. However, corporate criminal liability is the liability imposed upon a corporation for any criminal acts committed by any natural persons who are legally authorized to function as the company’s corporate legal personality. However, due to loopholes in the existing domestic anti-fraud legal framework fraud committed by an individual or group of individuals in collusion employed in a corporation for their self-enrichment able to be tainted and assign their fraudulent acts were committed by the corporate legal personality based on the principle of corporate legal personality. Thus, despite corporations being the actual victims they become the fraudsters before the prevailing domestic law. This paper addresses the said gap in the existing domestic anti-fraud legal system. Also, to find legal measures to prevent and detect occupational fraud in Sri Lanka. This is qualitative doctrinal socio-legal research. The findings of the study affirmed the conviction of occupational fraudsters is hard due to the absence of necessary provisions in the domestic anti-fraud legal system. Hence, the said gap in the law paved the way for occupational fraudsters to commit corporate scandals in the name of corporate fraud. Therefore, the prevention of occupational fraud plays a pivotal forerunner role in preventing corporate fraud.