While the past year has been unprecedented amidst the pandemic, Indian enforcement, and investigative agencies, continued to be active in terms of high-profile investigations/arrests and dealing with cybercrimes. We have also witnessed regulatory changes in governance norms and increase in accountability by way of reporting and disclosure requirements. The year also started with India being ranked 86th among 180 countries, in the Corruption Perception Index (CPI) for 2020, prepared by Transparency International. Below is a broad overview of the enforcement, regulatory and judicial trends in 2021:

Enforcement landscape:

On the very first day of 2021, the Enforcement Directorate (ED) attached assets worth INR 72 crores of an individual based in Maharashtra as part of the PMC Bank money laundering investigation. Among other cases, the ED also provisionally attached assets worth INR 35.48 crores in a money laundering case linked to an alleged bank fraud. The ED has already seized assets worth INR 18,170.02 crores, amounting to 80.45% of the total loss to banks in cases involving three fugitive businessmen, Vijay Mallya, Nirav Modi and Mehul Choksi and transferred a part of the attached / seized assets to the banks and the Central government. The ED, in a statement in June 2021, mentioned that it has handed more than INR 9,000 crores worth of assets, mostly in shares, to Indian banks that lost over INR 22,585.83 crores to bank frauds by the afore-mentioned fugitive businessmen. The Mumbai Economic Offences Wing (EOW) also arrested the promoter, former chief financial officer and internal auditor of a leading travel company for their alleged role in an ongoing investigation concerning non-repayment of a loan of INR 1,030 crores.

Separately, the Central Bureau of Investigation (CBI) filed a chargesheet against the then chief managing director (CMD) of a Mumbai-based branch of Corporation Bank and 2 then senior officials, after they allegedly sanctioned working capital limit of INR 60 crores to a private firm, overlooking the norms. In December 2021, the CBI registered a corruption and forgery case against its own employee (a lower division clerk), at Mumbai's Anti-Corruption Branch, in a case linked to the Yes Bank corruption scandal.

Interestingly, the Reserve Bank of India (RBI) also reported bank frauds amounting to INR 1.38 trillion in 2021,. The Delhi Anti-Corruption Branch (ACB) conducted 5 successful raids on corrupt officials in 2021, the highest in last 5 years. Further, the ACB registered approximately 12 cases under the Prevention of Corruption Act, 1988 (POCA) and the Indian Penal Code, 1860, against officials of the Delhi Government – out of which, in 5 cases, 9 persons were arrested after being caught red handed while accepting bribes. There was also significant activity at the Delhi Police's Intelligence Fusion and Strategic Operations (IFSO) Unit. According to the reports, approximately 344 cybercrime cases were registered, and a total of 439 persons were arrested by the IFSO unit for cybercrime cases in 2021.

Regulatory changes and other developments:

On the regulatory front, to strengthen corporate governance practices and disclosure requirements, SEBI through a notification dated May 05, 2021, made amendments to certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR). Among others, key amendments relate to extending the requirement of constitution of Risk Management Committee (RMC) to a larger number of listed entities (from top 500 to top 1000), defining the role and responsibilities of RMC and increasing the frequency of its meetings to at least 2 meetings in a year.

Separately, in March 2021, SEBI issued a circular to all Stock Exchanges, Clearing Corporations and Depositories (collectively, MIIs), requiring all MIIs to formulate a code of conduct to regulate, monitor and report trading by designated persons and their immediate relatives, administration of which must be carried out by a compliance officer. MIIs are also required to establish an institutional mechanism for prevention of fraud or market abuse by the MII or its designated persons and their immediate relatives, with a system of internal controls as well as effective whistle-blower policy.

The Central Vigilance Commission reconstituted its advisory board for Banking and Financial Frauds (Advisory Board). All public sector banks and public financial institutions must now refer all the matters of fraud involving sums of money above INR 50 crore to the Advisory Board, prior to instituting criminal investigation(s) / action under Section 17A of the POCA. Also, the Ministry of Personnel, Public Grievance and Pensions issued the Standard Operating Procedures in line with Section 17A of the POCA, for seeking mandatory prior approval before conducting investigation against the corrupt public servants.

In addition to this, the Standing Committee on Finance recommended that, the Serious Fraud Investigation Office must be armed with "sufficient teeth" to exclusively probe and prosecute cases related to complex corporate frauds that could impact the economy and various stakeholders. In December 2021, the President also approved extending tenure of the directors of the CBI and ED from 2 to 5 years.

Judicial decisions:

Early in 2021, on the judicial front, the Supreme Court (SC) observed that, before directing freezing of bank accounts under Prevention of Money Laundering Act, 2002 (PMLA), the ED has to record the belief of commission of the act of money laundering. The SC, in a separate matter, also held that conducting a preliminary enquiry was not mandatory for the CBI for filing FIR in corruption cases. The present appeal arose from an order of the Telangana High Court which quashed an FIR in a disproportionate asset case, holding that the CBI should have conducted a preliminary enquiry before it could register an FIR, as mandated by the CBI Manual of 2005. Considering precedents, the SC set aside the Telangana High Court judgement and held that the FIR would not be vitiated because of the CBI not conducting its preliminary enquiry and the accused could not ask for a preliminary enquiry as a matter of right.

In December 2021, during hearing on an appeal of a Jharkhand-based company in a money laundering case, the SC held that indiscriminate use of the PMLA by the ED will affect the "value" of the legislation and it cannot be wielded as a weapon to put people behind bars.

In addition to this, the Delhi High Court held that while imposing fines under POCA, the courts must provide due consideration to the value of the property obtained through the crime committed. In the present matter, overseas accounts of the accused petitioner were frozen by the order of the CBI Special Court and the Delhi High Court deliberated on whether the entirety of the frozen amount could be considered as proceeds of crime and therefore be liable for confiscation upon conviction. The court held that any amount in an account attached under criminal proceedings such as POCA is liable to be confiscated only up to the extent of amount involved in the criminal proceeding.

Where are we headed? With the continuing pandemic and digitalization, we expect to see an increase in cybercrimes and white-collar crime activities resulting in investigations and robust enforcement over the next 12 months.

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