Kerala for new law to curb money laundering

By T.G. Biju, New Delhi, Sep 12 : Kerala has urged the central government to introduce a new law to curb illegal money laundering (hawala) rackets, saying that the existing Foreign Exchange Management Act (FEMA) had many loopholes.

'There are so many loopholes in FEMA. After introducing it (in 1999), hawala rackets operating in the country have extended their activities at home and abroad. So the introduction of a fresh law is necessary to control the illegal money transfers,' Kerala Home Minister Kodiyeri Balakrishnan told IANS.

Balakrishnan, who said that hawala rackets were active in his state, had raised the demand when he met the central Home Minister Shivraj Patil in New Delhi Sep 5.

Kerala has been demanding the introduction of a new law since the Left Democratic Front (LDF) government came to power in the state, the minister said. He added that the loopholes in FEMA help the culprits escape legal action.

'After arresting people engaging in hawala transactions, we hand them over to the FEMA officials. We are not authorised to initiate legal proceedings against them,' a senior police official in Kozhikode, Kerala, said on telephone on condition of anonymity.

'The District Crime Record Bureaus (DCRB) are not keeping any records of any such arrests,' the officer said.

He held that the number of money laundering cases had increased after the introduction of FEMA.

Communist Party of India-Marxist (CPI-M) state secretary Pinarayi Vijayan had recently urged both the central and state governments to investigate the income sources of a few organisations like the National Democratic Front (NDF), suspected to be an Islamist outfit.

'Some fundamentalist outfits, including the NDF, are allegedly engaging in hawala business in Kerala. We are investigating their income sources,' said Balakrishnan, who is also a CPI-M politburo member.

The minister added that the old Foreign Exchange Regulatory Act (FERA) had ensured strict action against the violators, while FEMA - which has succeeded FERA - just dealt with the 'management part'.

A detailed discussion on the hawala cases in Kerala was held in the state legislature recently, Balakrishnan said.

Earlier this year, the state police had cracked an international hawala racket, run by fake godman Santosh Madhavan.