Why the various investigating agencies and regulators need to work more closely in India?

December 5, 2018

It is said that if the Indian investigation agencies and financial regulators worked more closely and share information at an early stage without indulging in one-upmanship, frauds would not have escaped by gaming with the system.

Lack of information sharing:

  • Over eight months before the scam in the Punjab National Bank involving Nirav Modi became public, an investigation report by the income tax department had red-flagged bogus purchases, huge overvaluation of stocks, suspicious payments by the diamond jeweller to relatives besides dubious loans.
  • These findings of the IT department were not shared with other agencies such as the Central Bureau of Investigation, the Enforcement Directorate, the Directorate of Revenue Intelligence or the Serious Fraud Investigation Office until the PNB scam of Nirav Modi was exposed.
  • Jewellers Nirav Modi and Mehul Choksi had fled India in the first week of January 2018, before the scam became public. This left the government and its agencies red-faced and with the only option of desperate legal and diplomatic effort to get them to face trial.
  • The Directorate of Revenue intelligence had found out how Nirav Modi’s firms were indulging in the overvaluation of diamonds and diverting diamonds meant for exports to the domestic market in 2015 itself.

The episode of PNB scam has shown that how the Lack of communication between various agencies and financial regulators has allowed frauds to game the system. It’s time for India to plug these loopholes.

   

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