MUMBAI: A Supreme Court-appointed special investigations team said Indian regulators need to provide greater oversight of money laundering in stocks as well as “black money” being repatriated to the country through investments in equity derivative products.

The recommendations were part of a report detailing the need for greater oversight across a variety of activities that have long been suspected of being fronts to avoid taxes, including via shell companies, imports and exports, or even cricket bets.

India has long suffered from so-called black money, or funds illegally deposited in banks outside the country to avoid tax. A report by Washington-based think-tank Global Financial Integrity estimated that India suffered $344 billion in illicit fund outflows between 2002 and 2011.

The special investigations team was set up last May to investigate black money, a key priority for Prime Minister Narendra Modi’s government, which this year unveiled tougher penalties against people convicted of illicitly stashing wealth abroad.

Among the proposals, the panel said India’s market regulator, Securities and Exchange Board of India (SEBI) needed to ensure it can better identify owners behind overseas investments into participatory-notes (P-notes), or popular derivative products that track domestic equity markets.

Regulators have long suspected flows into P-notes are in reality domestic money being repatriated back into India because of looser registration standards for owners of these products.

Published in Dawn, July 25th, 2015

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