No money laundering probe into info under compliance scheme

NEW DELHI: The government on Monday clarified that authorities will not use information furnished under the one-time compliance scheme for undisclosed overseas assets to launch an anti-money laundering probe unless it is established that there is a “predicate offence”, or an act that results in the proceeds being used for money laundering purposes.

“We have said that for money laundering enquiry, there has to be a predicate offence. There will be no roving investigation to find out if there has been violation of the money laundering law,” a senior government official said amid concerns from tax experts that the government may use the information furnished under the compliance window to launch money laundering investigation.

While the finance ministry issued a set of frequently asked questions (FAQs) on Monday, tax experts appeared unsure about the possible use of the anti-money laundering law. The ministry clarified that the black money law provides for immunity from prosecution under five laws — the Income Tax Act, Wealth Tax Act, FEMA, Companies Act and Customs Act.

“It does not provide immunity from prosecution under any other Act. For example, if the undisclosed asset has been acquired out of the proceeds of sale of protected animals, the person will not be eligible for immunity under the Wildlife (Protection) Act,” the 13-page document, dealing with 32 questions, said.

The FAQs also clarified that anyone who had acquired an asset out of undisclosed wealth and has now disposed it of will also have to make a declaration using a prescribed valuation method, Further, it explained how disclosures related to deposits in undisclosed bank accounts had to be made – another area where tax practitioners had some concerns. They said even if someone had only $5,000 in the account, the government wanted him to disclose all deposits made over the years but did not account for the withdrawals.

The clarification from the finance ministry also said an individual will be able to make use of the one-time disclosure opportunity to come clean on undisclosed assets which were not part of an income tax enquiry or about which no information had been received by the government till June 30, 2015. So, if someone declares five assets, and information regarding one of them has been shared with Indian tax authorities under double tax avoidance treaties then, only four would be eligible to qualify under the compliance window and escape action under the black money law enacted by the NDA government.

Non-disclosure of assets even if acquired from taxed and legitimate income will attract a penalty of Rs 10 lakh, the FAQs said. But an asset acquired out of income not chargeable to tax in India will not be defined as undisclosed asset.