Rs 1cr Floor Set For Black Money Probe

Panel split on treatment of IT, customs evasion as serious crime

The first draft of the proposed Bill against money laundering has suggested Rs 1 crore as the minimum one-time bank deposit amount for launching investigations into the possibility of money laundering.

The draft makes it mandatory for the commercial banks to report any deposit above Rs 1 crore to a special investigative agency, to be set up as an independent organisation, for probing money laundering activities.

But in a safeguard clause, the draft recommends that the source of the funds has to be traced to criminal activities before any legal action can be taken against the depositor.

The floor for initiating investigations has been fixed at Rs 1 crore to include only those large-scale money launderers who operate like illegal fund managers.

The five-member committee set up to draft the bill included Enforcement Directorate chief M K Bezbaruah, Reserve Bank of Indias representative Khezer Ahmed and Narcotics Control Board director-general H P Kumar.

The committee agreed on the offences to be covered by the proposed Act against money laundering.

These include offences involving drugs and narcotics, including peddling, kidnapping, illegal arms transaction among others.

But, differences persist on treating systematic evasion of income-tax and customs duty as serious crime under the proposed Act. The members are also divided over whether to fix responsibility on banks in case of detection of money laundering activities.

One section of the committee is of the view that economic offences like over-invoicing and under-invoicing of exports and misuse of value-based advanced licence (Vabal) and quantity-based advanced licence (Qabal) should be brought under the bills ambit.

According to this section, economic offence constitute the majority of crimes committed in the country.

The amount of money being channeled through hawala is corroding the countrys economic system, they have said.

A Revenue Intelligence report placed before the committee said that most of the money laundering is not done through drug trafficking or criminal activities, but through under-invoicing and over-invoicing in foreign exchanges and misuse of value-based advanced licence and quantity-based advanced licence besides hawala operations.

The proposed Act is supposed to replace certain provisions of the Foreign Exchange Regulation Act (Fera). Most countries do not treat Fera violation as an offence any more, but have strong money laundering laws.

Finance minister P Chidambaram has promised that the bill would be introduced in the current session of Parliament. However, the differences have to be sorted out before a final draft can be submitted.