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Regulating funds

Regulating funds
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Money moves across the world borders for purposes ranging from business, trade and loans to humanitarian needs. But all monetary transaction has to take place with government’s consent. It would be a violation of law, if transactions are done without its approval. When the governments are kept in dark, the transactions are known as syndicate or hawala deals. Such transactions hold multifarious threats to a nation.

In order to reduce foreign influence in monetary transactions, the centre in a recent move has asked the Home Ministry’s Foreign Contribution Regulation Act (FCRA) Department for tighter control before releasing funds into NGO’s account. The move comes after the Intelligence Bureau reportedly claimed that funds with such organisations are a threat to the country’s economy.

But funds into the account of NGOs are not the only threat to the country’s economy, political organisations too are involved in the alleged violation of FCRA norms. In a sub judice matter before Delhi High Court, Aam Aadmi Party and its members are facing charges of being promoted and funded by the Central Intelligence Agency (CIA) of the United States through various companies and trusts such as Ford Foundation, in violation of FCRA.

Election Commission prohibits parties from getting funds from foreign sources, but the AAP says the donations did not violate EC rules as the money was given by non-resident Indians and not foreigners. ‘AAP is the only party whose financial records and other details were open for public view and it got donations of Rs 30 crore from Indian citizens only, out of which Rs 8.5 crore came from NRIs,’ AAP has said in its submission.

Now the question that arises is does the funding coming from people who are of Indian origin, not under the ambit of FCRA? Senior advocate, Rebecca John, who is defending DMK MP Kanimozhi, accused in a money laundering case under the 2G scam, said that anyone or any organisation can put money into any country but must follow certain norms such as filling of yearly report with Home Ministry. 

‘Since the act governs receipts of contributions from foreign sources, it is important to understand what such foreign sources are. FCRA defines foreign sources which include foreign companies, corporations and MNCs, Indian companies with foreign ownership in excess of 50 per cent, foreign trade unions, trusts, foundations, clubs, organisations, societies of individuals founded abroad, foreign citizens,’ said John.

FCRA debars receiving any foreign funding without Home Ministry’s approval. After the recent IB report, MHA has directed the Reserve Bank of India to take prior permission from the Home Ministry’s FCRA Department before clearing any foreign aid to any organisation. Now with this direction, NGOs in addition to FCRA clearance, will also have to inform the RBI in detail about the nature of foreign funds and its usage.

Bharti Sinha, communication director at Greenpeace India, talking to Millennium Post said that according to FCRA norms, we are required to submit our account details to MHA every year and we do it and that is why our FCRA registration has never been cancelled. ‘We believe in transparency and that is why we have put the exact details submitted to MHA on our website, however, according to FCRA, we are not required to do that,’ said Sinha.

Naveen Mata, noted prosecutor for money laundering cases, said that purpose of FCRA is to check the reason for money being invested into the country. ‘Other countries may have any motive. They can put their money and start controlling the system. The act bars business and political interest of other countries. It also acts as a shield against funding terrorism activities,’ he said adding, ‘It is very important that foreign-funding should be strictly checked. But the sad part is that the authority responsible for it is incompetent to do it. The reason is that there are so many NGOs and many of them are not registered with the FCRA department.’

According to MHA records, only 1,205 NGOs (less than three per cent of the total) had submitted their statements of foreign contributions received during 2013-14. According to these statements, these NGOs received Rs 326.84 crore in foreign donations during the aforementioned period. None of these 1,205 NGOs is among the 22 mentioned in the IB report. A total 17,362 NGOs submitted their foreign contribution declarations for 2012-13 to the MHA. The cumulative funding received by them, as per the declarations, was Rs 10,906.39 crore.

As per FCRA, foreign contribution means a donation, delivery or transfer made by any foreign source. According to advocate Akram Khan, ‘When any person receives total foreign contribution in excess of Rs 1 crore in a year then s/he would have to provide summary of receipts and utilisation of such contributions for the relevant year and the year that follows.’

There is also a provision in the Act which prevents certain individuals from accessing foreign contributions to restrict foreign influences on key elements of administration. As per the Act, entities which cannot access any foreign contributions include: candidates for elections, correspondents, columnists, editors, owners, publishers of newspapers, member of legislatures, political parties or any organisation of a political nature, association or company engaged in the business of news broadcast through TV or internet or an individual associated with such organisations.

Rebecca John also said that any organisation with a definite cultural, economic, educational, religious or social programme can accept foreign contributions, however, to do so they have to register themselves with the central government under section 11 of the FCR Act. ‘To be so registered with the government the organisation must be in existence for a period in excess of three years,’ John said. On being asked whether she think FCRA needs to be amended, she responded in affirmative.

‘My objection is why law is being applied only on some organisations. I am not in support of or against any NGO, but such organisations that are generally working in the social sector are being comparatively more regulated than corporates and political organisations. This discrimination needs to be abolished. Under the existing law every NGO submits its report annually, which is put up on the MHA website. If money is being misused, they should be prosecuted under the same law,’ said John.

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