Further, financial crimes are becoming increasingly sophisticated in nature, often involving the domains of multiple regulators. For instance, Sebi initiated a probe against several entities that were suspected to have used stock exchange platforms for money laundering and tax evasion. The entities were suspected to have evaded tax worth Rs 300 billion under the long term capital gains (LTCG) scheme.
Although the violations prima-facie appeared to fall under the domain of Sebi, subsequent investigations showed some of the accused entities had funneled unaccounted money into stock exchanges by using shell companies and trusts. After the market transactions, some of this money disappeared into foreign jurisdictions. While Sebi can access extensive data of market-related transactions, it doesn’t have the capability to track the flow of money or ascertain the origin of the money. The Sebi-appointed committee on ‘fair market access’ has taken cognizance of the issue.
In its report, the T K Vishwanathan-led committee has said different enforcement agencies deal with economic offences and financial crimes, and these agencies may acquire evidence on issues that may be useful for Sebi in supporting its own investigation.
“The committee felt that it would be prudent to have a mechanism for information sharing with such agencies. It is recommended that Sebi sign a memorandum of understanding with the various regulatory bodies and enforcement agencies for information sharing and joint investigation in certain cases, to enable speedy and effective investigation of economic offences,” said the committee.
Sebi is already part of several inter-agency panels, including the Supreme Court-appointed committee on black money. These committees meet periodically. If there are emergency requests, there are official protocols to be followed.
Experts say the government could develop a single platform under which every regulator can exchange information with others on a real-time basis. Since all the records are already digitalised, there will not be any operational challenges.
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Data requests by Sebi to other regulators have not yielded adequate responses
This has slowed down efforts to crack down on wrongdoings
Data sharing between agencies currently takes several months
Experts have called for a single platform through which regulators can exchange data on a real-time basis