FEBRUARY 04, 2015

By TIOL Edit Team

FIERCELY fought state assembly elections are turning out to be much more than the usual game of washing the dirty linen in public. The elections are becoming an opportunity to expose politicians for their wrongdoing including violations of the laws.

In a way, the political mudslinging reflects bad governance at different levels in the country. The game of serious allegations and counter-allegations should be seized as an opportunity to focus on transparency-cum-accountability deficit of law-enforcement agencies and regulators.

Two recent expose can be taken as the instances in point for analyzing the functioning of such entities. First is the credible allegation of dubious donations of Rs 50 lakh each by four shell or namesake companies to Aam Aadmi Party (APP). Second is the letter bomb from former Union Environment Minister Jayanthi Natarajan.

The expose by APP's former party members, AAP Volunteer Action Manch (AVAM), of suspicious donations by four companies that exist on paper is enlightening because it is based on information that was available in public domain for several months.

There is nothing on the public record to show that Financial Intelligence Unit (FIU), which is entrusted with oversight and enforcement of Prevention of Money-laundering Act (PMLA), 2002, saw anything fishy on the website of AAP.

It is indeed strange banks/reporting agencies apparently do not find anything wrong with prima facie illegal donations in spite of elaborate anti-money laundering procedures including reporting of suspicious transactions to FIU.

According to FIU, "suspicions transaction means a transaction referred to in clause (h) of the rules, including an attempted transaction, whether or not made in cash which, to a person acting in good faith (a) gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified in the Schedule to the Act, regardless of the value involved; or (b) appears to be made in circumstances of unusual or unjustified complexity; or (c) appears to have no economic rationale or bonafide purpose; or (d) gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism."

FIU has also elaborated on its website six types of activities that constitute grounds for suspicion. Did the concerned banks apply these norms for suspecting identical, large donations by shell companies to APP? Is this the tip of the iceberg of suspicious donations across the political spectrum?

FIU operates like a virtually sleeping guard. It has hardly ever given any statement or report on money laundering. Its annual report for the last two years is unavailable on its website. One does not know whether it has ever unearthed any scam or shown the swiftness to investigate media-reported cases such as Robert Vadra's dubious land transactions.

The Finance Ministry should direct FIU to make periodic disclosures to ensure that PLMA serves as deterrent for money launderers.

How is that suspicious transactions escape the attention of other entities such as Income Tax Department and Serious Frauds Investigation Office even after deployment of business intelligence and frauds detection software?

SFIO investigates the affairs of a company only when its parent, Ministry of Corporate Affairs, assigns it with such task. SFIO thus does not initiate an enquiry suo moto or on the basis of public complaints received by it. The page relating to reporting frauds on its website is "under construction".

As put by Parliamentary Standing Committee in December 2014 in its report on Ministry of Corporate Affairs' (MCA's) demand for grants for 2014-15, "even after ten years of existence, SFIO is still in the process of conducting pilot studies, be it for Early Warning System/ Fraud Prediction Module or for setting up of cutting edge forensic lab. The Early Warning System has also not generated any investigation so far. The Committee are of the view that it is high time the Ministry come out of their tokenism towards such an important office whose capacity to efficiently unravel modern day corporate frauds remains to be adequately built up."

As regards Mrs Natarajan's leaked letter to Congress Party President Mrs. Sonia Gandhi and the former's subsequent resignation from the Party, the letter raises grave issues about governance, extra-constitutional pressures, industrial lobbying and abuse of environmental protection as a means for favours and discriminations by powers that be.
Mrs. Natarajan says: "I received specific requests [which used to be directives for us] from Shri Rahul Gandhi and his office forwarding environmental concerns in some important areas and I took care to honour those "requests."

She adds: "In several cases including the stalled GVK power project regarding the Dhari Devi temple in Himachal Pradesh, the Lavasa project in Maharashtra, the Nirma cement plant in Gujarat and in several other cases I was given specific input, to make my decision."

This disclosure by a Minister of State with independent charge speaks volume about the manner in which the highest echelons of the Government function.

Now that Mrs. Natarajan has spilled some beans, she must disclose in detail who gave the specific inputs? What would have been her decisions if there were no political pressures?

Did money change hands at some level to influence decision-making in the Ministry of Environment and Forests? Should Mr. Narendra Modi's allegation about Jayanthi tax during the Lok Sabha poll campaign not be pursued to the logical conclusion?

This issue should be addressed keeping in view the fact the Ministry is the nerve-centre for lobbying by corporates as well as NGOs, some of whom work at the behest of corporate rivals?

Her letter constitutes a powerful trigger for a public interest litigation for a special probe into decisions taken by the Ministry of Environment and Forests during the UPA regime. Would the Supreme Court act suo moto on the letter? In any case, the letter strengthens the case for constituting a truly independent environmental approvals regulatory authority that the apex court has been pressing for a couple of years.

The letter bomb as well as AVAM's expose on APP should serve as springboard for improvement in the working of all law enforcement agencies and independent regulators.

The least Modi Government should do is to create a freely accessible website for mandatory uploading of annual reports of all companies. Similarly, the regulators and law enforcement agencies should be asked to file quarterly reports on the cases investigated by them on their respective websites.

Put simply, the Government must respect transparency as the prime mover of good governance in letter and spirit.