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June 25, 2001
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Money > Business Headlines > Report June 25, 2001 |
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RBI readies a new scambusterBS Banking Editor The Reserve Bank of India is setting up an agency to specifically investigate scams in the financial sector. An RBI-constituted panel, headed by legal advisor to the central bank NL Mitra, at its last meeting held on Saturday in Bombay gave the final touches to the concept of the Directorate for Financial Frauds Investigations. Modelled on the lines of the Serious Frauds Office of the UK and the Financial Institutions Crime and Enforcement Network of the US, the directorate will be a multi-disciplinary investigating agency accountable to Parliament. The report of the committee along with a draft Bill for the proposed Financial Frauds Act will be submitted to the Reserve Bank of India and the finance ministry by July 30. It is planning to peg the cut-off amount (for any scam to be referred to this body) at Rs 1 billion. The SCO in the UK handles fraud cases involving £1 million while the major frauds wing in the US takes up cases involving $10 million and more. "There is no law in the country to tackle scams or financial frauds where public money is involved. We are trying to address this issue," Mitra said. Section 17 of the Contracts Act deals with cheating but the legal system is not equipped to tackle financial frauds or scams. "At present, any fraudulent transaction is divided into various parts and tackled separately by civil and criminal courts. But there is no legal remedy to check the cascading effect of a scam, its impact on the financial system. The scams are not tracked and the funds are not recovered and given back to the investors," said a source familiar with the panel's deliberations. The proposed directorate will have a multi-disciplinary approach with executives of regulatory bodies like RBI, Sebi, IRDA besides lawyers, chartered accountants and CBI officials joining it. It will have the right to investigate and prosecute the guilty at a special court. It will also have the power to attach property of suspected scamsters while the courts will have the power to confiscate property. It will cover the entire financial system banks, financial institutions, NBFCs and the capital markets. The central bank constituted the panel to look into financial scams last year. Headed by Mitra, the panel has members from the RBI, Sebi, ministry of finance, CBI as well as some law firms and co-operative banks. Powered by YOU MAY ALSO WANT TO READ:
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