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Security filter for dirty foreign money

The Govt asks a committee to finalise security guidelines to vet foreign investment and investors by the end of the year, reports Arun Kumar.

india Updated: Nov 30, 2007 09:55 IST
Arun Kumar

The Centre, alerted by intelligence agencies about possible flow of dirty money into Indian companies, has asked a committee of top officials to finalise security guidelines to vet foreign investment and investors by the end of the year, officials said on Thursday.

All foreign direct investment (FDI) would have to conform to the new guidelines that are being drafted by the committee that includes representatives of various government agencies, including the Intelligence Bureau (IB), Research and Analysis Wing (R&AW) and the Financial Intelligence Unit (FIU). The home secretary chairs the committee.

<b1>"The committee will finalise the guidelines of the screening procedures in a month’s time, taking into account the existing institutional and legal framework. It will also look into the requirement of a comprehensive umbrella legislation for the purpose," a senior government official said. There are currently no specific guidelines to address security concerns related to foreign investors.

Security agencies have urged a revision in FDI guidelines so that a security-vetting mechanism can be put in place to fish out anti-national investors. "The security scrutiny should also follow a threshold criteria. If the proposed FDI amount is above the threshold value, it should attract scrutiny," another official said. There is a limit of foreign investment in certain key sectors such as telecommunications, media, banking, insurance and aviation.

The FIU, created by the finance ministry last year to monitor money laundering and terrorism financing, has forwarded hundreds of cases of suspected terror financing and doubtful foreign remittances to IB, R&AW, the Central Board of Direct Taxes, Securities Exchange Board of India and the Reserve Bank of India. The Centre is examining records of more than 600 financial transactions that it believes could be linked to terror funding and other suspicious activities in the country and the region.

National Security Adviser MK Narayanan had earlier this year underlined the rising threat of people misusing legitimate financial enterprises and channels to fund terrorist activities in India. He had also said that legitimate banking channels were being regularly used to fund terrorist operations.