Catching Corporate Fraud: SFIO on the Job

Catching Corporate Fraud: SFIO on the Job

Corporate frauds adding up to more than Rs.10,800 have been found by the investigation agency SFIO over probes spanning the past three and half years. SFIO or Serious Fraud Investigation Office has completed probes in a total of 78 cases of corporate frauds since the year 2011-2012 to about June end this year . This information was disclosed in the Parliament. “During 2011-12, 2012-13, 2013-14 and during the current financial year that is from April 1, 2014 to June 30 2012, SFIO has completed investigations in 78 cases,” Minister of State for Corporate Affairs Nirmala Sitharaman told the Lok Sabha in a written reply as per media reports. “In these investigations, frauds amounting to Rs 10,818 crore involving 31 companies has been detected,” she is quoted as having added.

Sitharaman informed the House that a Market Research and Analysis Unit/MRAU has been organised in the SIFO to analyse media reports pertaining to financial frauds and conducting market surveillance of such corporates . “In order to strengthen MRAU’s functioning, an expert committee was constituted and on the basis of its recommendations a forensic lab with appropriate technology and skilled technical manpower has been set up in SFIO,” the minister indicated as per media reports.

SFIO does not have the power to settle cases on its own, according to the minister indicating that it was “continuous endeavour of the government to upgrade skills, systems and knowledge through improved coordination mechanisms with other investigating agencies to deal effectively with corporate frauds”. The alleged ponzi schemes run by the 34 companies in Madhya Pradesh for which the query had been made was also responded to . The minister indicated that the market regulator SEBI has proceeded on action against these entities. Of the total 34 companies , the regulator examined 25 entities and passed interim orders against 4. A final order has been placed against one entity.

Another 4 cases had been closed or referred to other agencies for initiation of necessary action. The minister also indicated that the CBI had found in its primary probe that 13 of 33 businesses referred to it were not conducting business legally. 8 of these have been charged and FIRs have been registered against them.

Another query was on unfair trade practices by MNCs to which the minister replied that the Competition Commission of India had not received any data nor taken any suo moto action pertaining to this matter. The minister has been quoted as saying: “The Competition Commission of India has neither received any information nor taken any suo moto action in the matter pertaining to adverse impact of the predatory pricing strategy adopted by MNCs on Indian industries especially those related to trade of undervalued import of butyle acrylate and methyl methcrylate”.

The SFIO is a multi-disciplinary organisation under the Ministry of Corporate Affairs which comprises experts in fields of accountancy as well as forensic auditing, law, information technology and company law . It especially focuses on white collar crimes and criminals. It takes up cases where there is involvement of public interest and a clear case of fraud. To further prevent fradulent activities, the ministry has set up not only an MRAU but also an Early Warning System for generating alerts for analysis and early detection of potential frauds.