Check gate before the horse bolts

India doesn't have an information problem. It has a sequencing problem. The recent case of a Hyderabad CA allegedly issuing fake Form 15CB certificates that facilitated ₹600 cr in foreign remittances - amid a wider I-T probe into 394 entities and 36 professionals - brought the issue into focus.

But the policy question is bigger than whether a particular certificate was issued correctly or not. How can a transaction pass through tax, banking and trade systems, with each system holding a piece of information, without those pieces being brought together before the money leaves India? The answer should not be another layer of paperwork, but a better-designed system in which the existing information is used at the right time.

GoI could consider creating a separate class of professionals to undertake foreign remittance certification. Eligibility could be based on minimum years of practice, relevant experience, training and an assessment, broadly on the lines of the registered valuer framework. Such a measure would ensure quality and accountability in tax determination, without shifting the burden of establishing commercial genuineness onto the certifying professional.


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One could consider bringing a short pre-remittance window. There could be a gap of, say, three working days, between filing prescribed remittance information and documents and release of funds. This need not become an approval mechanism, but rather a tech-driven risk assessment.

During this period, the tax system could automatically examine the remitter's profile - age, turnover, tax filings, GST activity, past foreign remittances, and other information available with GoI. A transaction consistent with the taxpayer's profile should pass without intervention. A transaction that is not, should generate an alert. The time gap can make a difference when the alternative is trying to recover money after it has left the country.

Banks probably possess the most valuable information in this chain: the customer's financial behaviour. RBI's KYC framework requires risk categorisation based on factors such as the nature of business, financial profile, geography and type of transactions. This intelligence should be brought more meaningfully into the remittance process. The bank's screening should also consider beneficial ownership, sanctions, adverse information, and the profile of the overseas beneficiary and jurisdiction, wherever such information is available. A large payment by an established exporter may be routine. The same payment by an entity whose account activity and stated business don't support it shouldn't be.

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Import-related remittances provide an even clearer opportunity. The authorised dealer bank has a role in establishing bona fides of import payments, while customs has the corresponding import data. The two should be linked.

An advance remittance should not become a closed transaction merely because the money has gone overseas. The system should match the remittance with the relevant 'bill of entry' and establish whether the goods entered India. In other words, the chain should be capable of being followed from remittance to import and back to the importer.

GoI should bring these individual checks into a common risk framework. I-T, GST, corporate affairs ministry, customs and banks possess information that, when viewed together, can reveal patterns invisible to any one institution. A new entity, low turnover, common ownership across multiple companies, sudden imports, large outward remittances and repeated payments to the same overseas beneficiaries may each appear harmless in isolation. Taken together, they may warrant attention.

This doesn't require unrestricted sharing of databases. What's needed is controlled interoperability. One agency need not see another agency's entire database. It needs to know when that database has generated a material risk signal.

India has built much of the information infrastructure. FATF's assessment has also recognised India's progress in using fintel, access to beneficial ownership information and inter-agency cooperation. Objective of reforms should be simple: don't make every transaction difficult; make suspicious transactions difficult to execute.

The right time to ask whether the transaction makes sense is before the money leaves India. Not after it becomes a recovery exercise.

The writer is a chartered accountant.