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Industry feels FEMA, money bills are too expansive

Part I

The ICAI felt that the apparent ommission of banks under the definition of financial institution was a major lacuna as the entire banking industry would be outside the ambit of clause '11' of the pension and money laundering bill which seeks to regulate and monitor large financial transactions which may act as conduit for the proceeds of crime. Thus, it is necessary that the definition of financial institution should be enlarged to include banks also.

The ICAI says that the provisions of clause '3' which relate to the offence of money laundering, is so very wide that unwittingly, it was possible for any person or organisation to be covered. Says Rahul Roy, president, ICAI: ''It is possible that a doctor performing a life-saving operation or a chartered accountant or a lawyer, unknowingly receiving payments which are part of tinted money, would have unwittingly committed an offence of money laundering as it is now defined.''

To illustrate further, he said, ''It is apparent that national carriers like Indian Airlines or the railways would unwittingly commit the offence of money laundering for selling tickets to anyone using tinted money.'' This does not seem to be the intention of the proposed legislation and could be easily overcome by including the word 'knowingly', appropriately in clause '3'.

K S Vikamsey, who chaired the recent corporate laws committee meeting of the ICAI on the bill, said powers given in the proposed legislation for survey, search, seizure and detention were unfettered. Elaborating, he said, ''An empowered authority intending to carry out a survey need neither record reasons for the belief that the offence of money laundering has been committed nor obtain any prior approval or confirmation before initiating a survey.

''More shocking perhaps,'' he said, ''is the provision that a person could be arrested without being furnished the reasons for his arrest. The person could be detained in judicial custody for days before he could discover the grounds of his misery.''

Sachdeva says that the mindset of Enforcement Directorate personnel will have to undergo a radical change to ensure fair treatment by them. They should be oriented into the FEMA provisions.

Clause 11, she says, proposes to make it obligatory for every financial institution to maintain accounts and record all transactions of value exceeding Rs 2.5 million and report to the tax authorities. This value should be raised to Rs 50 million to avoid harassment and delays.

Despite some drawbacks, the FEMA is a definite improvement over the FERA, Mehta says. Unlike the FERA, violations of the provisions of the FEMA are civil and not criminal offences, entailing much less stringent penalties. While in the FERA, non-bailable arrest is possible even on ground of suspicion, this is not so in the FEMA. The enforcement agency's power of arrest and seizure has been taken away. Also, under the FEMA, an Indian citizen can hold foreign exchange, or property inherited from foreigners or the NRI who is exempted from the purview of fema, he says.

The PMLA, on the other hand, covers a wide range of crimes, he says. It includes various sections of the Indian Penal Code, Prevention of Corruption Act, Narcotics, Drugs and Substances Act and Psychotropic Substances Act and Arms act and Immoral Traffic (Prevention) Act. All major offences which help in generation of black money have been part of the bill. The clubbing of different kinds of money laundering cases and applying the same yardstick to all are unfair and need careful examination, Mehta says.

The conclusion of those connected with business is that the PMLA in its present form is too wide, too harsh and too sweeping a law. Some of its provisions, such as making all money-laundering offences cognisable and non-bailable, and allowing the right to appeal to the high court only after the appellate authority has given its verdict, seek to bring the FERA by backdoor.

As in the FERA, the burden of proof of guilt in the PMLA will continue to be on the accused. Section 7 of the bill clearly states that it is upto the accused to prove that the property acquired by him is not through laundering and that he is innocent. Such provisions are contrary to the very foundations of the Indian legal system, they say.

In fact, it should be the responsibility of enforcement agencies and not the accused to prove that assets have been acquired through money laundering. No property should be attached without proof, they argue.

All in all, the initiative of the government to combat the serious threat posed by crimes related to drugs and similar other offences is welcome. But only an effective legislation which can combat the serious crimes will go a long way in preserving the financial systems of the country and its integrity and sovereignty.

UNI

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