The Quint has learnt that the multi-agency committee formed by the government on the Panama Papers leak has a strategy in place to procure evidence on those who have been named. With other countries seen taking action against some of their own citizens, India too is starting to feel the pressure. Here is how the investigation could proceed.
What evidence do agencies currently have to begin the investigation?
There is no evidence yet from any authentic source. To begin with, investigating agencies will rely on the list of 500 Indians named in the Panama Papers published by The International Consortium of Investigative Journalists (ICIJ).
What would be considered an ‘authentic’ source?
The documents leaked by the ICIJ will not be considered as evidence in a court of law. The authentic source would therefore only include documents procured from law firm Mossack Fonseca through the Panamanian government.
What’s the first step that can be taken to procure evidence from an authentic source?
According to sources, the ED will write to multiple agencies to share information and evidence. These agencies include the Financial Intelligence Unit (FIU), the Income Tax department (IT) and the Reserve Bank of India (RBI).
What will be the task of FIU?
FIU-India works in coordination with international Financial Intelligence Units to gather information to safeguard the financial system from the abuses of money-laundering, terrorism financing, and other economic offences. Based on ICIJ’s list of names, FIU-India will gather information from Financial Intelligence Units of other countries. This will act as a strong ground for other agencies to proceed in the investigation.
What will be RBI’s role?
The Reserve Bank of India will bank on information provided by the FIU and check whether these offshore investments were made with the permission of the apex bank.
What will be the Income Tax department’s role?
Based on FIU’s information and the list of names, the IT department will check details on the investments made these people abroad. It will also check whether the offshore entities, set up by Panamanian law firm Mossack Fonseca, were declared or unaccounted money. The department can register a case under the Black Money Law against an individual who has not declared his investments.
How can agencies gather documentary evidence to prove the case in court?
Mere information will not help agencies book culprits. To initiate prosecution against suspected violators of the Black Money Law, agencies have to get hold of documents from an authentic source. India doesn’t have a Double Taxation Avoidance Agreement (DTAA) with Panama, which is currently a major hurdle in the investigation. The law firm Mossack Fonseca has the details of all offshore investments made by people mentioned in the Panama Papers leak. But these offshore entities are set up not just in Panama but also in other tax havens. With the help of the information collected by the FIU, the IT department can approach other countries to get relevant documents, provided we have a DTAA with them.
What will be the Enforcement Directorate’s (ED) role?
The ED will file a case under money-laundering based on the black money case registered by the IT department. According to sources, agencies will not serve any notice to individuals to explain their foreign investment. Rather they will bank on their own investigation. Only after agencies have enough documentary proof, will they summon individuals for further explanation.
Will individuals who made investments under the Liberalised Remittance Scheme (LRS) 2004 face trouble?
Under the LRS 2004, all individuals were allowed to freely remit up to $250,000 per financial year. According to sources in the ED, there is a high possibility that quite a lot of Indians may have made offshore investments post 2004. These individuals would not face any trouble if they have declared their investments to the IT department. But if they have not, then these investments will be considered illegal.
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)