Black money: Agencies may get power to seize assets under FEMA

In order to put further curbs on the menace of black money generation, an amendment could be soon brought in foreign exchange laws in the forthcoming Budget that will enable probe agencies to attach assets of a defaulter.
Officials said investigating agencies like Enforcement Directorate (ED) had asked the Special Investigation Team (SIT) on black money that some "inadequacies" in the Foreign Exchange Management Act (FEMA) pose a hindrance in prosecuting a defaulter or violator of this law, especially those who undertake hawala or illegal remittances operations.
They said acting on these inputs, the SIT has suggested the government to bring an amendment in FEMA by introducing a new clause under section 14 (enforcement of the orders of Adjudicating Authority) of the Act which will allow probe agencies to attach domestic assets of a defaulter on the lines of a similar power given to them under anti-money laundering laws.

Usually, only penalties are slapped for FEMA violations.
The Budget speech of Finance Minister Arun Jaitley on February 29 may have this amendment coming.
Under the criminal provisions of the Prevention of Money Laundering Act (PMLA), the ED is empowered to attach assets and the clause in the Act is aimed to deprive the accused from deriving benefits of their ill-gotten wealth, from the stage of investigation itself.

Under the civil proceedings of FEMA, the agency is only empowered to "confiscate" properties and foreign exchange holdings of a person who contravenes the said Act and there is a provision to bring them back to the country also.

"However, such an action cannot be taken with regard to domestic assets of a FEMA violator and even in cases of overseas forex holdings, the investigators can lay their hands on these properties after long legal proceedings which usually take many years," an official said.
While there is a provision of a short jail term for wilful defaulters under FEMA there is no power under law which enables investigators to get remitted the defaulted amount by way of attaching and subsequent sale of the seized assets, the official said.
"The jail term in FEMA is for only six months time and that stage too comes at a very late stage when penalty is raised after long years of litigation. Not many defaulters see this as a deterrent in their illegal acts," the official said.

In case a person has already filed declaration under the
IDS, the FAQ said a revised filing could be made.
The period of holding of assets declared under the Scheme would be taken on the basis of the actual date of acquisition of such asset and not from June 1, 2016, the day declaration window under IDS opened.
Declarants have also been assured that no adverse action would be taken against them by Financial Intelligence Unit of the tax department solely on the basis of cash deposits made in banks under the Scheme.
Meanwhile, RBI has been asked to issue instruction to banks to accept payment of tax and penalty in cash under the scheme.

FAQ also said the declarant has to declare the amount of weighted deduction claimed in respect of bogus donation.