Special Investigation Team (SIT) on Black Money asks RBI to develop institutional mechanism to track illicit financial flows out of country in light of identified gaps in the regulatory framework

Chairman, Special Investigation Team (SIT) on Black Money, appointed by the Hon’ble Supreme Court, in a letter dated 11.08.2016, to Governor, RBI has impressed upon the imperative need to establish the following institutional mechanism for sharing of data with the RBI in its various data bases with the Enforcement Authorities so that the data could be cross checked with other information available with Enforcement Authorities and illicit financial flows could be curbed :

 (a)   Foreign Exchange Transactions Electronic Reporting System (FET–ERS):–– 

FET–ERS was introduced through RBI Circular No.77 dated 13.03.2004. All authorized dealers are obligated to report each foreign exchange transactions (inward and outward remittances in FET–ERS). Access to this database would needs to be given to authorities like Enforcement Directorate and Directorate of Revenue Intelligence, so that the above analysis could be done; 

For this, 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.

(b)  Export Outstanding Data:–– 

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 Ministry of Commerce to analyze the data of export outstanding and take necessary action in this regard.

RBI maintains export realization data in its EDPMS database. Chairman, SIT 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 realization of export proceeds on the EDPMS itself. 

(c)   Monitoring of Advance Remittances against Imports:–– 

In wake of the Bank of Baroda scam, the SIT had asked RBI to institutionalize 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 on 30^th September, 2015 for which Bill of Entry correlation has not been done. SIT had thereafter asked RBI to get this co–relation completed and inform. Chairman, SIT in his letter has asked RBI to complete this exercise at the earliest and send information to SIT. Chairman, SIT in his letter expressed satisfaction that IDPMS (Import Data Processing and Monitoring System) is being set up by RBI which is expected to be launched by the end of September which will enable cross checking of each advance remittance irrespective of value against the Bill of Entry. 

Chairman, SIT in his letter 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 i.e. FET–ERS, IDPMS and EDPMS. Chairman, SIT has also 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 Hon’ble 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 the said data warehouse, various agencies can gather the 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. Presently, RBI holds the information with respect to all types of foreign exchange transactions under various categories as elaborated below

SIT feels that for controlling and tracking illicit financial flows out of the country, use of RBI data by various Law enforcement agencies like Enforcement Directorate, Directorate of Revenue Intelligence and CBDT is of critical importance. The SIT in the past had raised this concern and had requested RBI to provide data on advance remittances sent abroad for which corresponding Bill of Entry has not been received by the authorized dealer. 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 above 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.