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Welcome FEMA, Money Bills, experts urge businessmen

The much-feared Prevention of Money Laundering Bill, introduced during the monsoon session of Parliament concerns mainly with heinous crimes, and has little to scare businessmen in general.

Framed in line with a recent United Nations resolution, the Bill meets certain international obligations and also the basic needs of a modern civilised country. The Bill's primary aim is to curb the use of tainted money from criminal activities such as ransom, abduction, narcotic and psychotropic drugs, immoral activities like prostitution, corruption and gun-running.

Initial apprehensions about the draconian nature of the Bill have no basis, H P Ranina, tax consultant and lawyer, told a seminar organised by the Indian Merchants Chamber.

There are a few features of the Bill which should be moderated in the interest of good administration. The IMC should identify such features and persuade the government to amend them, Ranina said.

The Bill has a provision to decide the offences initially by an adjudicating authority and then by a tribunal. And this should not be construed as an effort to sideline the established law courts, the purpose is to ensure expeditious disposal of the cases in a time-bound manner, Ranina said.

He ruled out the possibility of harassment of honorable businessmen for offences like falsification of accounts' under the Bill's provisions. Even the existing laws have similar provisions. But in how many cases have these provisions been applied against businesmen? he asked.

Among the few provisions that IMC should plead for amendment are:
a. that a caveat is needed on Section 3 to lay down a cut-off point which will determine when would proceeds of crime cease to be proceeds of crime;
b. that the provision for mandatory reporting by financial institutions to their boards on credits extended exceeeding Rs 2.5 million needs to be toned down;
and c. that the quantum of penalty on officers who wrongfully detain citizens should be enhanced to three years from three months.

He urged businessmen to welcome the Bill because it will protect them from antisocial elements.

Chartered accountant and partner of Jayantilal Thakkar & Co, Dilip Thakkar, who spoke on the Bill for Foreign Exchange Management Act, said that FEMA promises to be a piece of law with a positive approach, while FERA was an out-and-out negative law. The government threw out all draconian provisions of FERA, which had 81 Sections, and formulated FEMA with 49 Sections.

FERA lost its relevance when India began liberalisation in 1991 and building up foreign exchange reserves. Of the FERA's three major features, like extra territorial jurisdiction, power to assume mens rea, and extended arm to reach the alleged aides and abettors, FEMA has retained only the first feature, and none of the latter.

FERA's definition of a 'person resident in India' is at variance with the definition of income tax law: but the FEMA's definition is not. FEMA, for the first time, imposes obligations on exporters of services for reporting and recovery of their export proceeds. FEMA's Sections 3 to 7 deal with vital administrative aspects and its provisions will have only prospective effect, not retrospective.

FEMA replaces the Appellate Board with the Appellate Tribunal, Thakkar said.

UNI