Pause in Enforcement Directorate probe on money laundering

Reportedly waiting for final Sebi report on investors

The Enforcement Directorate (ED) probe of Sahara Mutual Fund for alleged violation of the Prevention of Money Laundering Act (PMLA) has been halted, in the wake of action by the Securities and Exchange Board of India (Sebi).

“We have taken cognizance of the case but formal action would be started after Sebi completes its exercise of finding and verifying Sahara investors,” said an official.

ED’s investigations have been halted as action under PMLA would involve attachment of assets, and that could impact any refund to Sahara investors, said the person.

Sebi, say sources, is in the final leg of finding the investors in the case of the Sahara real estate companies. The latter are required to deposit Rs 36,000 crore in 18 months with Sebi, on directions of the Supreme Court.

This is the second time Sebi has launched an exercise to find the Sahara investors. In the first leg, the regulator had been able to find close to 9,000. In the second one, the regulator issued an advertisement asking investors to come forward with relevant documents. The response is said to have been muted. So far the regulator has processed refunds to the tune of no more than Rs 1 crore, say sources.

Sebi did not respond to a request for comment. The ED also declined comment.

The probe by ED would look into allegations that the funds raised were laundered and there were no genuine investors. The action against Sahara started after the 2011 order of Sebi, marked to the Financial Intelligence Unit and the ED. the latter can also take action on its own accord where it deems an investigation is warranted. Sahara is not only facing heat on alleged PMLA violation but also of the Foreign Exchange Management Act, also under ED’s jurisdiction.

Sahara and two banks, ICICI and Axis, had got a showcause notice from the ED for facilitating transfers of £527 million (Rs 3,600 crore, according to 2010 rates) outside India, allegedly in violation of the foreign exchange laws. The matter is currently in adjudication and Sahara is believed to have told the ED the deal was cleared by the Reserve Bank of India (RBI). Axis had said the appropriate norms were followed and it was co-operating with the investigation. ICICI had declined comment.

In an e-mail response earlier, Sahara had said it asked RBI to allow it to bring back the said investments to India.

Along with this application, the company had filed all the requisite documents of the outward remittance. The permission was granted by RBI without any adverse comment on the outward remittance.