By Nirmal Mathew
Budget 2021: Financial crime by its very nature distorts and weakens the economic health of nations. The 2019 Crimes in India report released in 2020 by the National Crimes Records Bureau of the home ministry portrays a worrying picture of rising economic crimes across states. With the same criminal activity having multifarious legal violations, numerous organisations such as the income tax department, economic offences wing of the state police, directorate of revenue intelligence, enforcement directorate and the Central Bureau of Investigation come into the picture. To ensure inter-agency cooperation among various economic agencies, the government set up the Central Economic Intelligence Bureau (CEIB) in 1985 with the mandate to serve as a nodal agency to coordinate investigative efforts and enforcement action by various agencies.
The role played by the CEIB has come under criticism for its lax role in monitoring cases, coordination among various agencies and its failure to prevent large scale tax evasion and financial crimes across various sectors.
CEIB: A paper tiger
The CEIB is headed by a director general functions under the ministry of finance as a secretariat to the economic intelligence council headed by the Union finance minister. Functioning with skeletal staff and with the lack of a ‘whole of government approach’, the CEIB’s current role is only limited to conducting few training programmes, namesake coordination and to acting as a clearing house for passing on economic intelligence. Available public records indicate that the economic intelligence council that has representation from all economic offences agencies including RBI and SEBI does not meet regularly. The regional economic intelligence committee usually headed by a senior income tax official at the state level has the mandate to coordinate joint action among agencies, but this mechanism too has been ineffective due to the legal, political and operational barriers.
The lack of effective inter-agency coordination has been manifestly seen in the recent cases of the PNB fraud where other agencies such as CBI and ED woke up to the fraud much later than the civil measures already taken by the tax department. The turf war between agencies and the legal barriers prevent the functioning of an operational model which enables agencies to work together for mutual benefit. If only the CEIB had done its duty of effective monitoring, many such frauds could have been nipped in the bud.
Unified multidisciplinary agency
With economic offences growing in complexity and sophistication, there is an urgent need to have a unified agency to harmonise investigations and monitor all financial crimes across the country. With multiple stages, agencies and strategies involved in combating economic offences, a unified approach is needed to coordinate operations and share information across organisations. The current leadership has been putting serious efforts in plugging the loopholes through both legislations like the Fugitive Economic Offenders and Black Money Acts and new units like the foreign assets investigation and benami prohibition units, but the same issues of coordination and cooperation still persist.
An invigorated CEIB with a clear legal mandate of coordination and cooperation is one of the key reforms that Budget 2021 could bring. An urgent restructuring of the vision, mission and organisation of the CEIB could be effected to bring about the much-needed reforms. A brief study of inter-agency coordination models across countries conducted by the OECD favours a unified approach to tackling economic offences. The financial intelligence unit (FIU) can be merged with the CEIB to be an inter-agency centre for intelligence gathering and dissemination. The National Economic Intelligence Network should be connected to the National Intelligence Grid (NATGRID), Interoperable Criminal Justice System (ICJS) and the Criminal Tracking Network and Systems (CCTNS) for the use of all economic offences probes.
A charter of direct and automatic information sharing between all organisations should be ensured so that there is real-time action and monitoring of cases. CEIB should have multi-disciplinary staff consisting of chartered accountants, lawyers, bankers, technology specialists, tax officers and police to effectively understand the various nuances of economic crimes. A financial crimes academy can be housed within the National Academy of Direct Taxes to promote inter-agency learning and joint training. In the case of large financial frauds involving multiple agencies, CEIB can set up joint investigation units to harmonise the probe actions and to avoid multiple agencies conducting parallel investigations. Australia’s Project Wickenby is an example of such a unified approach. A dedicated vertical for prosecution of all the economic offences across agencies can be set up under CEIB. This will ensure that a specialised central team will coordinate between all agencies to initiate prosecutions in a strategic and time-bound manner.
In conclusion, urgent reforms to the working of the CEIB is needed to ensure a unified approach to tackling economic crimes. With the current leadership committed to national security, Budget 2021 has an opportunity to undertake crucial reforms to preserve the economic health of the nation.
(The author is a tax lawyer based in Bengaluru. Views are personal.)