Black Money – Domestic and International Efforts

Deregistered firms deposited Rs 17,000 crore post note ban

Note4Students

Mains Paper3: Indian Economy | Isues relating growth and development.

The following things are important from UPSC perspective:

Prelims: National Finance Reporting Authority

Mains level: This article highlights the steps initiated by the government to curb the menace of money laundering post demonetization.


News

Context

 

  • According to the Finance Ministry cash deposits worth over Rs 17,000 crore were made and later withdrawn post demonetisation by as many as 35,000 companies, which are now deregistered.

 

  • Preliminary enquiry on the basis of information received from 56 banks in respect of 35,000 companies involving 58,000 accounts has revealed that an amount of over Rs 17,000 crore was deposited and withdrawn post demonetisation.
  • Last November, the government cancelled old Rs 500 and Rs 1,000 currency notes as legal tenders as part of larger efforts to fight the black money problem and corruption.

Steps taken by the government to curb the menace of black money

  1. The government said that 2.24 lakh companies that have been inactive for long have been struck off from official records and 3.09 lakh directors have been disqualified.
  2. To further curb the menace of shell companies used to illegally route money, the government plans to set up a National Financial Reporting Authority to test check company statements, empower the SFIO officials to arrest errant directors and limit creation of multiple levels of subsidiary companies typically used to mask the main corporate structure.
  3. In the light of the evidence with respect to abuse of the Corporate Structure through multi-layering, not more than two (2) layers are now permitted beyond the wholly owned subsidiary.
  4. This is in addition to the existing restriction which prohibits a company to make investment through more than two layers of investment companies.
  5. In order to address the criminality angle, the Director, Additional Director or Assistant Director of SFIO have been recently authorized to arrest any person believed to be guilty of any fraud punishable under the (Companies) Act.
  6. Under Section 447 of the Act, which defines fraud, stringent punishment including imprisonment up to 10 years is stipulated.
  7. Further, reference has been made to the Ministry of Finance to include it as a Scheduled Offence under the Prevention of Money Laundering Act.
  8. Also, to keep a tab on dummy directors being appointed to the boards of corporates, work is on to put in place a mechanism wherein new applications for directorship would be linked with PAN and Aadhaar numbers of the individual concerned.
  9. The government has initiated steps to disqualify directors who are on the boards of the companies that failed to file annual returns for three financial years — FY14 to FY16.

                                                                                                                                                                                       

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