The challenges of enforcement

Interview with M.K. Bezboruah.

M.K. Bezboruah, who has been under media attention ever since he took over as Director, Enforcement Directorate, shies away from publicity. During his 22-month tenure he rarely gave interviews to mediapersons. Propriety has been the hallmark of his conduct, so much so that even his harshest critics find no chinks in his integrity. Behind the unassuming exterior lies a steely resolve to do justice to his position even in the face of tremendous pressures. It was after a lot of persuasion that Bezboruah faxed his responses to a set of questions sent by Sudha Mahalingam:

The E.D. is perceived to have assumed an activist role ever since you took over its leadership. Over the last two years, many high-profile persons accused in various cases have been arrested or are being investigated by the E.D. What are your comments?

All enforcement officers, including the Director, have to discharge their duties strictly within the powers derived under the Foreign Exchange Regulation Act (FERA), 1973. If the law is not followed, they are answerable both to the Government and to the courts. Sometimes, persons suspected of offences are well known, and there is a lot of media interest and publicity that is beyond the control of the E.D. This might give the impression that the E.D. has assumed an activist's role, which is not factually the position. However, it is a fact that the E.D. has been focussing on financial crimes of the nature of money-laundering involving large foreign exchange transactions. These affect the nation's economy adversely. Out of the 5,511 inquiries registered in 1997, only 159 persons, which works out to 3 per cent, have actually been arrested. It is, of course, a fact that in addition to the usual hawala racketeers, a number of corporate bodies, politicians, bureaucrats and former members of the judiciary have come under FERA investigations in the recent past.

The E.D's track record of investigations appears to be poor. For instance, Ashok Jain was investigated by the E.D. twice earlier, once in the 1980s and again in the early 1990s. Yet the investigations did not lead to any show-cause notices or prosecution. So were several others. Besides, practically all those who were adjudicated by the E.D. for FERA violations went on appeal to the FERA Board, which set aside your adjudication awards in many cases. How do you defend your agency's credibility?

We are unable to discuss cases against Shri Ashok Kumar Jain as the matter is sub judice in the Delhi High Court. However, in some of the other major cases, we have already completed investigations and issued show-cause notices (which are like charge-sheets). For instance, in the ITC case, we issued 20 show-cause notices after conducting a dozen search operations and scrutinising thousands of documents, interrogating about 45 senior and middle-level managers, besides gathering evidence across the country and abroad. In fact, this case generated a lot of debate on issues of corporate governance and the role of statutory auditors and nominee directors of financial institutions. The law provides for an appeal to the FERA Board and many of the parties do choose this option and are sometimes able to get favourable orders. This gives an indication that the system is by and large fair.

The E.D. is accused of insisting on custodial interrogation in cases where it does not have enough evidence. What is your reaction to this accusation?

The fact is, we rarely insist on custodial interrogation. A person is usually summoned to give a statement as part of the normal investigative procedure for collection of evidence. If, at any stage, a decision is taken to arrest somebody because it is necessary and in the best interests of further investigation (to avoid influencing witnesses or tampering with records and so on), the suspected person is immediately produced in a court of law and the E.D. takes further action on the basis of remand orders obtained from the court. Arrest is an exception rather than a rule, and is done only when investigative needs make it necessary.

SHANKER CHAKRAVARTY
M. K. Bezboruah.

The E.D's conviction rate is alleged to be very poor. Can you give me some statistics on your conviction rates? What is your defence against such a perception?

The scheme of FERA does not envisage criminal prosecution in all cases. In fact, criminal prosecution is again an exception rather than a rule in the present system of administering FERA. Normally, economic offences relating to violations under the Foreign Exchange Control Rules and Regulations are penalised through adjudication. These are quasi-judicial civil proceedings held by departmental officers. It is only in cases of large-scale racketeering and organised financial crimes or individual cases which have significant financial content that criminal prosecution is launched in addition to adjudication. During 1997, as against 5,511 cases inquired into, the number of cases in which criminal prosecution was launched was only 92, which is just 1.6 per cent. Moreover, conviction, even in those cases where criminal prosecution is launched, depends on many factors that are beyond the control of the E.D. These include the ability of the lawyers, long and frequent adjournments, witnesses not being available or turning hostile. Sometimes, the Code of Criminal Procedure and the evidence law are themselves not able to cover adequately offences of the nature of money-laundering and financial crimes. For this reason, the Government has now decided to bring about a new piece of legislation known as the Prevention of Money Laundering Act. Most of the evidence in these cases has to be collected from overseas. It is very difficult to collect evidence of this nature owing to bank secrecy laws and the insistence of different countries on the concept of "dual criminality", that is, the crime must be an "offence" in both countries.

What, in your view, is required to ensure autonomy to investigative agencies? Do you believe that the guidelines laid down by the Supreme Court judgment in the hawala case, if faithfully implemented, are enough to insulate investigative agencies from political and bureaucratic interference?

Experience has shown that it may not be enough only to insulate investigating agencies from political and bureaucratic interference in order to ensure autonomy. Many factors are involved, including the quality of personnel, their motivation and the general supportive environment regarding law enforcement.

As these matters have been covered extensively in the landmark judgment of the Supreme Court in the Vineet Narain case and is an ongoing matter in the courts, it may not be appropriate to comment further on this.

Why are economic offences difficult to prove?

Most of the laws relating to economic offences, the Code of Criminal Procedure and the Indian Evidence Act, were framed many years ago. The methods employed in committing large-scale financial crimes are becoming increasingly sophisticated and need a very high degree of expertise both in terms of collection of evidence and in terms of understanding and spotting criminal-type transactions from among a host of "ordinary looking" transactions. In typical money-laundering situations, techniques of placement, layering and integration of dirty money are becoming increasingly more complex. Owing to the inadequate legal framework relating to international cooperation in matters of access to evidence in cross-country transactions, many difficulties are experienced. Although part of the illegal transactions can be proved, the complete circuit of money-laundering (which usually involves FERA violations) is difficult to prove. Moreover, rules of evidence also do not adequately cover transactions carried out on the Internet or through computers, which have now brought about terms such as cyber money-laundering. The entire matter has to be seen from a futuristic angle and adequate laws have to be put in position. This also means adequate training of law enforcement officials, judicial officials and officials and functionaries concerned in the bureaucracy, legislature and the judiciary.

Does the proposed bill on money-laundering adequately address the problem? If not, why? What changes would you propose?

The proposed bill on money-laundering is a major topic by itself. These two bills have already been introduced, but are yet be debated in Parliament. We have no comments to offer at this stage.

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