1. Opinion: Banking on the Serious Fraud Investigation Office may be dicey

Opinion: Banking on the Serious Fraud Investigation Office may be dicey

Parliamentary panel pulls up govt for Serious Fraud Investigation Office not being able to attain the level it is supposed to in handling serious frauds.

By: | New Delhi | Updated: August 21, 2015 6:31 PM
financial frauds in India

The Standing Committee on Finance in its report presented in Parliament today has pulled up the Ministry of Corporate Affairs for its lackadaisical approach towards the Serious Fraud Investigation Office. (AP)

serious frauds investigation officeEven after over a decade of its creation, the Serious Fraud Investigation Office (SFIO), a multidisciplinary organization to investigate serious financial frauds such as Satyam and Saradha scams among others, is still grappling with teething issues that are crippling its work.

The organization supposed to have experts from the financial sector, capital market, accountancy, forensic audit, taxation, law, information technology, company law, customs and investigation, is facing major manpower problems. Its technological capabilities are also not up to the mark as yet.

The Standing Committee on Finance in its report presented in Parliament today has pulled up the Ministry of Corporate Affairs for its lackadaisical approach towards the SFIO, which is not allowing the investigative agency to attain the level it is supposed to in handling serious financial frauds.

The panel has pointed out: “… the ministry has been following an ad-hoc approach in the functioning of SFIO… even a three month deadline given to the ministry to finalize the recruitment rules have been missed by the ministry… such a lackadaisical approach of the ministry in fulfilling the sanctioned manpower of the SFIO, is proving to be a major obstacle in realizing the full potential of SFIO in unraveling corporate frauds”.

Clearly, the agency created with huge expectations is failing to discharge its duties. The worrying part is if manpower is not adequate, its technical capabilities, which are critical for early warning and investigations, are also not on the lines expected from an agency responsible for detecting and investigating corporate frauds.

“The technological capability of the SFIO, also seems to be falling behind the curve. The Early Warning System (EWS), which was propounded as panacea for all corporate frauds at the time of its launch by the ministry, has been dumped by it for want of encouraging results. The Computer Forensic Lab set up in the Market Research and Analysis Unit (MRAU) of SFIO is yet to show tangible results, by way of timely identification and detection of high-tech corporate frauds,” the committee has found.

The SFIO has produced six investigation reports that have successfully resulted in convictions since its inception. This includes the Satyam and the Reebok case. On an average, it has taken 542 days to wrap up each of the 162 cases where investigations have been completed till March, 2015.

The panel has asked the ministry of corporate affairs now to review the existing systems followed to handle SFIO work to deal with its under-performance, and also put in place a system to fix responsibility for delays in finalizing cases.

The government will do well by acting fast and address these issues quickly if it is serious about putting in place a robust mechanism for tackling corporate frauds efficiently. With a liberal and transparent Companies Act, a strong institution to deal with frauds is a must.

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