Super agency to probe financial fraud on cards

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The government could soon set up an omnibus agency to investigate financial sector frauds. If it comes through, the proposal, which is now shuttling between the finance and home ministries, is likely to land on the latter’s plate.

The government is expected to tout the move as a means to facilitate ease of doing business in the country. Having to deal with just one agency would be much more convenient for businesses if they are called upon to appear in a case. At present, they have to run between multiple agencies.

The proposal has come from the Confederation of Indian Industries (CII) as part of its prebudget wish-list. Government officials said there were discussions with business leaders at more than one fora on the topic before it made its way into the list.

The CII proposal says: “Create a single specialised agency manned with relevant expertise to investigate financial sector frauds. Alternatively, improve coordination between the existing multiple agencies and strengthen their expertise.”

The discussions over integrating the financial agencies come at the fag end of the tenure of the finance and revenue secretary, Ajay Bhushan Pandey, who will retire in end February. Home secretary, Ajay Bhalla, too, is due to retire in August.

Hence, the modalities of the proposal will likely be worked out by the new secretaries — unless one or both the incumbents get an extension. Bhalla is already on an extension after his two-year term ended in October 2020.

It is also interesting that the discussions are taking place between the home and finance ministries, since the Central Bureau of Investigation (CBI) is under the department of personnel, but reports to the Central Vigilance Commission — an autonomous institution for cases under the Prevention of Corruption Act, 1988. However, the CBI depends on the home ministry for staffing, since most of its investigators

come from the Indian Police Service.

Several attempts have been made over the past two decades to create such a common, overarching agency. The latest of those was the Serious Fraud Investigation Office (SFIO). But since it operates only under the Companies Act, there are plenty of cases where other investigating agencies run parallel efforts. Yet the Naresh Chandra Committee, which was formed after the Satyam scam case, envisaged the SFIO as a super agency to tackle frauds that needed a multidisciplinary task force.

The international Financial Action Task Force (FATF), too, has often encouraged India to set up an overarching body on financial fraud.

However, so far, issues related to the turf, even on matters such as the tracking of narcotics cultivation and seizures, have stymied efforts in this regard. The domain has remained split between agencies under the home and finance ministries as well as the state governments. Annual reports of the finance ministry have also mentioned the need for integrating the

work of investigators.

Yet the government has found it difficult to get even the two tax arms within the finance ministry, the direct and indirect tax departments, work closely. After plenty of acrimonies, a memorandum of understanding (MOU) was signed between the Central Board of Direct Taxes and the Central Board of Indirect Taxes and Customs in July 2020. The MOU is meant to share data between the two organisations and supersedes a 2015 arrangement, which has largely remained on paper.

If a common agency is formed, investigation officers in the tax departments of the two boards could find themselves serving two ministries simultaneously.

Investigative agencies under the finance ministry include the Enforcement Directorate, the Directorate of Revenue Intelligence, the Central Economic Intelligence Bureau (CEIB), and the Narcotics Control Bureau. The home ministry administers the Intelligence Bureau and the National Investigation Agency, both of which often investigate financial misdeeds.