By Sanjeev Sharma From The Tribune India

New Delhi – “How can Cayman Islands (western Caribbean Sea) with a population of less than 55,000 invest Rs 86,000 crore in a single country like India?”

This is a whodunnit on money laundering the Special Investigation Team (SIT) on black money has been grappling with. It suspects that the Participatory notes (used by foreign portfolio investors to invest in the Indian stock market) could be unaccounted wealth in the guise of Foreign Institutional Investors’ (FII) money.

Tackling such matters in its third report, the SIT on black money has raised a red flag on investments and practices in crucial sectors of the economy, including stock markets, education, trade, foreign investments which are leading to money laundering besides the usual suspects like cricket betting.

The Supreme Court-appointed SIT headed by Justice MB Shah today said schools and colleges were accepting huge donations in cash, which is normally unaccounted money. To control such transactions, the SIT has suggested that there should be specific provision under which donations shall not be accepted in cash and whosoever accepts it would be punishable under the Prevention of Corruption Act, as if he is “deemed to be a public servant”.

The SIT has also recommended that on donations to various religious institutions or charities, while there can be no objections but when large amount is donated, it should be only accounted money and that payment should be by account-payee cheque to the charity or the institution. Even if jewellery is gifted to the charity or institution, it should be by mentioning donor’s name and his PAN number.

While asking the Central Board of Direct Taxes (CBDT) to finalise the assessments in such cases, the SIT has noted that these steps would go a long way in curbing the generation and circulation of black money.

Money laundering in the stock markets by rigging of shares has also caught the attention of the SIT. The SIT report noticed that several stocks are being rigged to avoid paying taxes through long-term capital gains. It has recommended that SEBI needs to have an effective monitoring mechanism to study such unusual rise of stock prices of companies while such a rise is taking place.

SEBI has recently barred more than 250 entities, including individuals and companies, from the securities market for suspected tax evasion and laundering of black money through stock market platforms. The report has come down heavily on the misuse of Participatory notes (PNs) for money laundering. Concerns have been raised that some of the money coming into the market via PNs could be the unaccounted wealth camouflaged under the guise of FII investment.

A major chunk of outstanding instruments invested in India are from Cayman Islands at 31.31 per cent. This translates to roughly Rs 85,006 crore.

For more on this story go to: http://www.tribuneindia.com/news/nation/probe-team-raises-red-flag-over-fii-funds-in-key-sectors/111155.html

IMAGE: www.iconsplace.com

See related iNews Cayman story published July 20 2015 “‘India has shared protocol to tackle black money abroad’” at: http://www.ieyenews.com/wordpress/india-has-shared-protocol-to-tackle-black-money-abroad/