The big surprise IPL searches have thrown up is the possibility of black money coming into India instead of fleeing its shores. And the entire sum coming in is not round tripping.
As the economy moves into the fifth gear of GDP growth, this is to be expected. With that kind of expansion, opportunities to make money, like the IPL, will be thrown up regularly. At its core, the cricket league has turned out to be a hugely popular attraction for the expanding middle class. And to cash in on such opportunities, some promoters may often be in cahoots with dubious capital. Instead of stashing black money abroad, people have discovered they can launder it into white by investing in new ventures.
To trip those moves, it is necessary to run a vigorous and smart investigative agency that can track economic crimes and also has the authority to penalise offenders. It will not spoil the party but keep it running within the rules. This has been clearly lacking in the IPL case, as it did in the Satyam case. In the absence of such efforts it will be almost impossible to do a clear job of prosecuting adventure capital. The Financial Intelligence Unit (FIU) set up to prevent money laundering is the nearest we have come, but its mandate does not give it the authority to step into the action, guarded by a clutch of agencies, each keen to preserve their turf. It does not even have the powers to prosecute.
Last week, I was at one of the agencies that have been mandated to carry out raids on the IPL franchisees. Sometime in the afternoon, one of the officials of the organisation rang up his boss from Kolkata to clarify if the visit will constitute a search or a survey. There was reason enough for his confusion. The nationwide operations were called in a rush with little preparatory work. This is not to say that government agencies were not planning to track the IPL bazaar.
Over the last few months, they worked on the leads but those were yet to fructify.
It?s been more than a year since the Satyam scandal broke but various agencies have failed to nail the erstwhile promoters. While the agencies concerned have filed a long list of assets of the family in the special courts, the trail runs cold very soon.
I am not for a moment suggesting the officials from the income tax, the enforcement directorate (ED) or the directorate of revenue intelligence et al lack the ability to take the cases to their logical conclusion. They do so regularly. But each was set up with a separate mandate.
The tax department?s search or survey is limited to the process of establishing if any company or individual has paid up the taxes in full. When a party that is searched accepts its misdemeanour and pays up, the case is closed. The ED, of course, has broader powers but most of them relate to the use of foreign exchange to move funds abroad?quite the reverse of the current investigation. The IPL story is mostly about bringing in foreign exchange. The mandate of the department of revenue intelligence is to check smuggling, including narcotics as well as cases of under- and over-invoicing in foreign trade. Surely, we are not accusing the Modi cartel of any of these crimes.
Believe me, in these days of savvy consultants and tax advisors all over the place, no company, not even the local event management company, can be tripped up this way.
If the idea is to pool in resources, that is the last thing these investigative agencies do. For that to happen, they need a clear direction from the top, which is rare. So the method would quite remind you of a headless chicken running around. If you think I am exaggerating, just check out how many times the agencies have shared real information with an organisation called the Central Economic Intelligence Bureau. This is the nodal agency set up just to tackle such cases. It is instead reduced to holding tri-monthly meetings and zonal conferences and functions as the secretariat for the equally imposing Economic Intelligence Council. The Bureau?s mandate is actually broader than the FIU?s, set up exactly two decades later, in 2004. Using these agencies can create a television grab but precious little evidence.
As of now, the FIU remains the best bet to track economic crime through its charter to prevent money laundering, though it mostly depends on banking channels and money transfer companies to gather information. Its work scale would possibly get robust once its technology platform FinNet becomes operational.
There are, of course, other allegations flying around, but those are up the accountants? turf. The dust has not yet settled on the MCA vs ICAI vs the Big-4 accounting firms post-Satyam. The legislation to give Serious Fraud Investigation Office powers is not even heard in the din in the Parliament. Unless we sew up these things, India could soon acquire a reputation as a soft place to get away with economic offences.
subhomoy.bhattacharjee@expressindia.com