Source: DNA India

The Special Investigation Team (SIT) on black money has submitted a report to the government requesting it to amend the Foreign Exchange Management Act (FEMA) of 1999, and give it more teeth in order to tackle increasing cases of forex violations. The government may take up the amendment in the upcoming budget session, a member of SIT told dna.

SIT, headed by retired Supreme Court judge M B Shah, has suggested in its report that forex violations are needed to be made a serious ‘criminal offence’. Such violations are at present civil in nature, and do not have criminal proceedings attached as such.

This change will force foreign countries to reveal names and account details of Indians stashing illicit money abroad, said the report.

If FEMA gets enhanced as a ‘criminal offence’ as recommended, any contravention of the Act or ‘any person found guilty of forex violation’ will be punishable with rigorous imprisonment from three to seven years, which can be increased to 10 years in case of repeated offence. A person could also be liable for fine which has no fixed quantum, and it can be more than three times the quantum of the forex violation. At present, it is capped at Rs 5 lakh.

Appropriate authorities can provisionally attach property believed to be “proceeds of crime” for 180 days, said two senior officials from Enforcement Directorate (ED).

At present, FEMA is purely a civil legislation in the sense that its violation implies only payment of monetary penalties and fines. However, under it, a person will be liable to civil imprisonment only if he does not pay the prescribed fine within 90 days from the date of notice, but that too happens after formalities of show-cause notice and personal hearing. So far, there is no provision for attachment of assets with contravention.

All foreign exchange transactions are regulated by FEMA. This Act applies to all branches, offices and agencies outside India-owned or controlled by a person resident in India. The Supreme Court-constituted SIT recently gave its second report on black money, wherein it has disclosed tracing of Rs 4,479 crore held by Indians in a Swiss bank and unaccounted wealth worth Rs 14,958 crore within India. In this report, the SIT pointed out that more than 25 countries have made “tax crimes” a predicate offence.

According to a recent report by news agency PTI, India is seeking cooperation from a number of foreign jurisdictions, including Switzerland, in cases of suspected black money, but its requests have been turned down in most of the instances as tax evasion is not dealt under strict criminal laws, unlike money laundering provisions.

To deal with this issue, the SIT had suggested making tax evasion of Rs 50 lakh and above a ‘predicate offence’, saying this would enable easier investigation into tax evasion crimes under the stringent laws of money laundering as stipulated under the Prevention of Money Laundering Act (PMLA).