SIT asks RBI to develop mechanism to track illicit money flows

06 Sep 2016


The Special Investigation Team (SIT) on Black Money appointed by the Supreme Court has asked the Reserve Bank of India (RBI) to develop an institutional mechanism to track illicit financial flows out of the country in light of identified gaps in the regulatory framework.

In a letter to the Reserve Bank governor, chairman of the Special Investigation Team (SIT) on Black Money has pointed to the need to establish an institutional mechanism for sharing of data with the RBI with the enforcement authorities so that it could be cross checked with other information available with the enforcement authorities so that illicit financial flows could be curbed.

Towards this, the SIT has suggested feeding data from the Foreign Exchange Transactions Electronic Reporting System (FET–ERS) to the PAN number of the importer or exporter as the case may be.

Under FET–ERS, introduced by the RBI in 2004, all authorised dealers are obligated to report each foreign exchange transactions (inward and outward remittances in FET–ERS).

To give access to this database to authorities like Enforcement Directorate and Directorate of Revenue Intelligence, SIT has suggested that FET–ERS data should capture the PAN number of the importer or the exporter and that RBI  take necessary steps for the same to get this done on an urgent basis.

Also, in the data provided by RBI to the SIT, huge amounts were found outstanding beyond a period of one year in violation of FEMA. The SIT had noted that the possibility of the concerned companies having wrongly claimed duty drawback also cannot be ruled out. Further, the possibility of the concerned companies having availed of various export promotion schemes also cannot be ruled out.

In light of this, the SIT has asked the Enforcement Directorate, Directorate of Revenue Intelligence and the ministry of commerce to analyse the data of export outstanding and take necessary action in this regard.

RBI maintains export realisation data in its EDPMS database. The SIT chairman, in his letter, has observed that it is important to co–relate shipping bills with confirmation from banks on the EDPMS database itself rather than Bank Realization Certificate (BRC), which is different database and that RBI may impress upon the banks to inform regarding realisation of export proceeds on the EDPMS itself.

In the wake of the Bank of Baroda scam, the SIT had asked RBI to institutionalise a mechanism for cross checking of advance remittances against Bill of Entry irrespective of value of advance remittances sent.

RBI had informed the SIT that huge advance remittances running into billions of dollars were outstanding as of 30 September 2015, for which Bill of Entry correlation has not been done. SIT had thereafter asked RBI to get this co–relation completed and provide it with the updated figures.

SIT chairman has also asked RBI to complete this exercise at the earliest and send information to SIT.

SIT, noted that the RBI is in the process of setting up an Import Data Processing and Monitoring System (IDPMS), which is expected to be launched by the end of September and will enable cross checking of each advance remittance irrespective of value against the Bill of Entry.

SIT chairman in his letter also requested RBI to develop, in consultation with Department of Revenue, an institutional online mechanism for sharing of data of all the above three databases being managed by RBI, ie, FET–ERS, IDPMS and EDPMS. Besides, SIT has asked the Revenue Department to identify a single point agency in the Revenue Department which could access the above three databases and could thereafter disseminate them to various enforcement agencies.

In fact, the Special Investigation Team (SIT) on Black Money, appointed by the Supreme Court, is consistently of the view that there should be effective sharing of information between various government departments, particularly of enforcing agencies. The SIT feels that the data can be shared only by having one agency such as Central Economic Intelligence Bureau (CEIB) or any other agency, as a data warehouse, from where various agencies can gather relevant information for taking early appropriate action.

This is so since the data available with one agency can be relevant to action expected to be taken by other law enforcement agency. At present, RBI holds the information with respect to all types of foreign exchange transactions under various categories.

The SIT had also requested RBI to provide details of export outstanding for more than one year. The data provided by RBI on both the counts clearly showed that there are gaps in monitoring the above trade flows which are used by unscrupulous elements to take out precious capital outside the country, thus damaging the fabric of Indian economy.

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