No reprieve for bank defaulters, government to strengthen PMLA

money laundering, wilful defaulters

PC: New Indian Express

In the latest step to bring wilful defaulters in the ambit of rule of law, the government has authorized executives of Public Sector Banks (PSBs) to make requests to the ministry of Home Affairs to issue look-out-circulars (LoCs) against defaulters who could leave the country. 

The LoCs are used at international airports to confirm whether a person migrating out of the country is wanted by the investigation agencies. Some big defaulters like Vijay Mallya, Nirav Modi, Mehul Choksi, IPL-czar Lalit Modi and arms dealer Sanjay Bhandari left the country while they were under the scanner of investigation agencies.

To punish wilful defaulters like Mallya, who left the country with billions of dollars remaining to be paid to the banks, Modi government has implemented Fugitive Economic Offenders ordinance . The ordinance defines a fugitive economic offender as “A person who has an arrest warrant issued in respect of a scheduled offense and who leaves or has left India so as to avoid criminal prosecution, or refuses to return to India to face criminal prosecution.” Prevention of Money Laundering Act, 2002 (PMLA) allowed the confiscation and seizure of properties obtained from the laundered money if such actions were subject to criminal prosecution. The shortcomings of this act allowed a safe passage to many individuals accused of money laundering and hence, they were able to flee the jurisdiction of Indian courts to avoid criminal prosecution under Prevention of Money Laundering Act and the consequent confiscation of their properties. Therefore, the new Fugitive Offenders ordinance was a must for the confiscation of properties belonging to people like Vijay Mallya, Nirav Modi, Lalit Modi etc.

A few months back, the central government made a no fly list of 91 people of wilful defaulting firms. The courageous steps being taken by the central government to attack rogue defaulters will give a much needed boost to the banking system of the country. The banking system has recently been hit by the Nirav Modi-PNB scam which has its roots in the previous Congress regime. Now, the government does not need to draft the list of wilful defaulters, the CEOs of banks could request LoCs against a person suspected to leave the country and the Home ministry will execute it after looking into the matter. 

Another step to be taken up by the government is to create a master list of all economic offenders in the country in order to sharpen its response to such offenses, and to also prevent the flight of defaulters. The government has also asked all the federal investigative and enforcement agencies to work together to create a single list. The Central Economic Intelligence Bureau (CEIB), an intelligence agency responsible for gathering information and monitoring the economic and financial sectors for economic offenses and warfare has been entrusted with the task to create the list. All other investigative agencies such as the Enforcement Directorate, CBI, capital markets regulator SEBI, the tax department, the customs department, and the Directorate of Revenue Intelligence will be providing their inputs for the list.

The modern Indian economy moved away from ‘Nehruvian socialism’ in the 1990s and is now slowly freeing itself from the ‘stigmatized capitalism’ of the post liberalization era. The Modi government is trying to make India a rule-based capitalist economy where profit will not be a bad word but the companies will be taken to task if not able to post their profits.

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