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No hasty action on SIT report on money laundering: Jaitley

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New Delhi: Reacting to a SIT report suggesting that market regulator SEBI needs to monitor participatory note misuse for money laundering, the government on Monday said it would avoid any knee-jerk decision that could hurt investor sentiment.

The government also said that it would study the Special Investigation Team (SIT) recommendations in due course of time.

The BSE Sensex fell sharply by over 400 points in intra-day trade on concerns over curbs on P-notes, while the 50-scrip Nifty fell below its support level of 8450.

“No step would be taken which could adversely impact investment sentiment in the country. But the government will certainly not take any such action in a knee-jerk fashion, particularly one which has any adverse impact on investment environment,” Finance Minister Arun Jaitley told reporters in his parliament office.

“The government will apply its mind in due course keeping in mind the investment environment of the country as also the objective behind the SIT recommendations and then take a final view on the matter,” he added.

“The government will study those recommendations, and take decision after due consultation with all stakeholders,” Revenue Secretary Shaktikanta Das also told reporters here.

“At this point, there is no need for the market to respond or react in any manner and not show any panic,” he said.

“The KYC (know-your-customer) and other requirements under P-notes regime have been improved over the last few years,” he added.

The Supreme Court-appointed SIT on black money on Friday said Securities and Exchange Board of India (SEBI) must have a monitoring mechanism for unusual rise of stock prices and study the misuse of participatory notes for money laundering.

“SEBI needs to have an effective monitoring mechanism to study such unusual rise of stock prices of companies while such a rise is taking place,” the SIT said in its report titled ‘Misuse of exemption on long-term capital gains tax for money laundering’.

“Once such instances are detected, SEBI should invariably share this information with the Central Board of Direct Taxes (CBDT) and Finance Intelligence Unit (FIU),” it said.

“Enforcement Directorate (ED) should then be informed to take action under the Prevention of Money Laundering Act for the predicate offences,” the report added.

The SIT cited SEBI investigations on companies with poor financial fundamentals in terms of past income raising huge capital by allotment of preferential shares to various entities. This is followed by a sharp rise in share prices, once the preferential allotment is done, through circular trading.

The market regulator has also been asked to put in place a mechanism to monitor the beneficiaries of participatory notes.

“Obtaining information on “beneficial ownership” of P-notes is of crucial importance to prevent their misuse. SEBI needs to examine the issue and come up with regulations where the ‘final beneficial owners’ of P-notes are known,” the SIT said.

Regarding P-notes, the SIT noted that based on the data provided by SEBI, a major chunk – over 31 percent – of outstanding Offshore Derivative Instruments (ODIs) invested in India are from Cayman Islands.

“This translates to roughly Rs.85,006 crore. The Cayman Islands had a population of 54,397 in 2010, according to Wikipedia. It does not seem conceivable that a jurisdiction with a population of less than 55,000 could invest Rs.85,000 crores in one country,” the report said.

The SIT further said that the Serious Fraud Investigations Office (SFIO) should mine data to track shell companies and share information with other agencies like CBDT, ED and FIU.

Norms are needed to check the menace of betting in cricket since a massive amount of black money is used and generated in this way, the SIT said

(IANS)

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Harsh Penal Proceedings For Illegal Swiss Bank Deposit Holders: Arun Jaitely

A news item has appeared today indicating an increase of money by ‘Indians’ in the Swiss banking system

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Harsh Penal Proceedings For Illegal Swiss Bank Deposit Holders: Arun Jaitely
Harsh Penal Proceedings For Illegal Swiss Bank Deposit Holders: Arun Jaitely. flickr

Union Minister Arun Jaitley today warned that Indians having illegal deposits in Swiss banks would face harsh penal proceedings under the black money law after Switzerland starts real time sharing of details of accounts from January onwards. Latest data from the Swiss National Bank showed that money parked by Indians in Swiss banks rose over 50 per cent to CHF 1.01 billion (Rs 7,000 crore) in 2017, reversing a three-year downward trend amid India’s clampdown on suspected black money stashed by its citizens overseas.

“A news item has appeared today indicating an increase of money by ‘Indians’ in the Swiss banking system. This has led to misinformed reaction in certain circles raising a query whether the government’s anti-black money steps have yielded results,” Jaitley said in a blog. Noting that Switzerland in financial disclosures was always a reluctant state, Jaitley said the Alpine nation has amended its domestic laws involving all disclosures and entered into a treaty even with India and real time flow of information with regard to Indians would be made. “The flow of information is starting in January, 2019. Any illegal depositor knows that it is a matter of months before his name becomes public and he will be subjected to the harsh penal provisions of the black money law in India,” said the senior BJP leader and an eminent lawyer.

Jaitley said the Alpine nation has amended its domestic laws
Jaitley said the Alpine nation has amended its domestic laws. Flickr

Also read: Under Arun Jaitley corruption grew manifold in DDCA: Bishan Singh Bedi

Further, Jaitley said those who participate in a public discourse must understand these basic facts before expressing an opinion which may be ill-informed. “To assume that all the deposits are per se tax evaded money or that Switzerland in the matter of illegal deposits is what it was decades ago, is to start on a shaky presumption,” he added. (IANS)