Serious Frauds Office can sign global legal pacts

NEW DELHI: The Serious Frauds Office, being set up by the government, will have powers to enter into mutual legal assistance treaties with other countries.
This has been done as a lot of frauds have international ramifications in terms of transfer of moneys by hawala or otherwise misuse of OCBs, exploiting NRI-based loopholes and use of tax havens. The government has taken a view that such frauds can be understood and revealed in all its complexity only if the concerned authorities of the countries co-operate with SFO.
Interestingly, it is learnt that in the initial stages the Central Bureau of Investigation and the CVC were not in favour of an SFO being set up as they felt it would create another agency with overlapping jurisdiction. However, both agencies agreed after clarifications and incorporation of some of their suggestions in the final structure.
The SFO proposal had gone through several nods, including the ministries of home, personnel, law and finance. The ministry of personnel had reservations based on objections raised by the CVC and the CBI. Thereafter, when certain issues were clarified, they also agreed and the Cabinet nod was obtained. CVC, meanwhile, sought proper co-ordination with CBI, which has acquired considerable expertise in the area of scams and is also entrusted with several investigations by the courts.
Some important suggestions made by the CBI director on the structure of the SFO and its monitoring were also incorporated in the final blueprint for the SFO approved by the cabinet. The CBI director has also suggested enhancement of penalties which will be done in the second stage of its functioning. In the second stage of its evolution, legislative changes will be brought about to invest the office with adequate powers and reach, as also the provision for adequate penalties for offences committed, on the UK pattern.
In the first stage, the SFO will function within the existing legal framework. It is envisaged to be a co-ordinating body, along the lines of the CFTF in the USA. Largely, this will involve carrying out investigations under section 235 to 247 of the Companies Act.
One reason for setting up of the SFO is that while the inspections carried out by the DCA in recent years, including inspections following the scams of ’92 and ’01, brought out in plenty minor and procedural violations, they were unable to identify the substance of malfeasance and unravel complex frauds. The indifferent quality of inspections conducted by the DCA has also been commented upon by the JPC in its report submitted to Parliament.