'Govt amending law to provide compensation to duped investors'

In what could come as a big relief to investors duped by ponzi schemes like Saradha, the government today said it is amending the law to provide compensation to them.
"The government has provided and made amendments in the Prevention of Money Laundering Act (PMLA), which after the full passage of the Finance Bill, will enable for the 'restitution' of assets to those investors whose assets and monies have been fraudulently cheated away by chit fund or ponzi schemes," Revenue Secretary Shaktikanta Das said.
Thousands of crores of rupees are stuck in these schemes as CBI Director Anil Sinha had recently said that Rs 80,000 crore of 6 crore investors stands locked in such scams probed by the agency.

"Talking about ponzi schemes, a very important component in the Finance Bill has been not highlighted adequaltely...The Enforcement Directorate (ED) attaches and confiscates the assets involved in a ponzi scheme (during its money laundering probe against perpetrators of such scams) but we have to also think about the small, innocent and poor investor," Das said.
It is a fact that people in rural India get carried away by the promise of some handsome returns under these schemes, he said while speaking at an event organised by the ED here.
"Hence, the government has very rightly provided in the PMLA to the Finance Bill for restitution of these assets to the duped investors," he said.

Das said guidelines and rules in this regard will be spelt out in due course and the entire restitution (of assets) will be done under court supervision and the orders of the court.

He also said the second important component in the Finance Bill has been the amendment in the PMLA that violations under direct or indirect tax laws will be treated as "predicate offences" now.
This effectively means that the ED can now book cases of tax evasion under the criminal provisions of the money laundering law as, till now, they were being dealt only under the civil clauses of the Foreign Exchange Management Act (FEMA).

The Secretary also said investigative agencies including the ED have three "huge" challenges before them in the form of checking and curbing hawala trade (illegal transfer of funds by skirting the legal banking route), Trade Based Money Laundering (TBML) and evasion of taxes by way of accommodation entries.
Under the TBML, an offender either under-invoices or over-invoices his trade receipts, Das said the modus operandi is to evade taxes and funds which could be illegally transferred across the world in a matter of seconds and minutes.
With regard to accommodation entries crime, he said this entails an offender setting up a company only on paper, launching of an IPO, offer shares at face value and then later "jack up" its value several times and hence stands to escape capital gains tax.