Pressure on India to criminalise TBML and other financial crimes

A multi-agency group in India, has decided at a high level meeting that the Foreign Exchange Management Act (FEMA) should be made a criminal offence in view of the economic damage caused by trade-based money laundering (TBML), illegal hawala transactions and foreign currency smuggling.

At the moment, breaches of FEMA are treated as compoundable offences, which means offenders can only be fined or pay penalties and cannot be sentenced to prison.

Interested parties

Agencies represented at the meeting included the Directorate of Revenue Intelligence and the Enforcement Directorate as well as the Serious Frauds Investigation Office, Reserve Bank of India and the Directorate General of Foreign Trade.

The agencies are keen to bring FEMA in line with the Prevention of Money Laundering Act (PMLA) so that they can bring criminal prosecutions against those who commit offences under FEMA.

Most violations of the PMLA, which are already classed as criminal offences, carry significant prison sentences of three to seven years, fines and confiscation of property.

Integration benefits

A significant benefit of criminalising FEMA offences is that it would integrate the two acts in the same legal system.

In many cases, offenders have violated both the FEMA and PMLA so it would streamline the judicial process to be able to have all offences dealt with in one case and under one legal system.

The agencies hope that making violations under FEMA criminals offences will make the criminal justice system more effective and provide a strong deterrent for those considering TBML operations. 

Categories: Trade Based Financial crimes News

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