Close coordination and use of RBI data by agencies such as the enforcement directorate (ED) and the directorate of revenue intelligence will help control and track illicit financial flows, SIT believes, as it will plug gaps in the trade flow monitoring system.
RBI maintains an internal database on foreign exchange transactions—both inward and outward remittances. It also has a database tracking inward payments from exports as well as advance payments made for imports.
SIT has asked the revenue department to identify a single agency that will act as the point of contact to access the three databases and send the information to other enforcement agencies.M.B. Shah, the chairman of the SIT, wrote to the RBI governor on 11 August to set up an institutional mechanism for sharing of data available with RBI so that it could be cross-checked with other information available with enforcement authorities and help in curbing illicit financial flows, the finance ministry said in a statement.
SIT wants RBI to allow investigative agencies to access its three databases as it looks to crack down on under-invoicing of trade bills to channel black money.
In one of its previous reports, SIT had flagged 788 exporters who failed to bring back export earnings to India within the time stipulated by existing laws. These exporters were identified on the parameter of each having more than Rs.100 crore of export earnings not brought back into the country.
“The SIT… 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,” the finance ministry statement said.
This is not the first time that SIT has asked a regulator to take steps to help tackle black money. In one of its earlier reports, SIT had directed the Securities and Exchange Board of India (Sebi) to tighten rules governing participatory notes or P-notes—instruments through which some foreign investors invest in Indian markets and which could be used to launder money.Indian authorities suspect that some of the money coming to India through P-notes may be black money stashed overseas returning in the garb of foreign capital. Following this, Sebi recently tightened P-note norms.
SIT also recommended recently a cap on cash transactions at Rs.3 lakh and cash holding limit at Rs.15 lakh. This proposal is under the consideration of the income-tax department.The National Democratic Alliance (NDA) government set up the SIT following Supreme Court orders in May 2014. In the last two years, SIT has identified a number of areas where steps can be taken to plug loopholes and bring tax evaders to task.
Curbing black money was a major electoral promise of the NDA, which came to power in May 2014. Since coming to power, the Narendra Modi-led government has enacted a stringent law to curb black money from being stashed away abroad, known as the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act. It also recently enacted the Benami Transactions (Prohibition) Amendment Bill to curb generation of black money within the country.
“RBI is the one which monitors all foreign exchange transactions including inward and outward remittances and purchase of immovable property. The ED implements whatever decision RBI takes with regards to foreign exchange management act and money laundering,” said M.C. Joshi, former chairman of the central board of direct taxes.
“So to that extent, there is already sharing of data between RBI and ED,” he said. “But as far as other agencies are concerned, there is no such mechanism for information sharing.”