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Cobrapost sting evidence not quite enough for anti-money laundering penalties on 15 banks: raft of firms and seniors defend bank appeals

Karanjawala, SAM, Harin Raval, Dayan Krishnan, Vikas Pahwa & 13 others bat away more than Rs 12 crore anti money laundering penalty on 15 banks, that resulted from Cobrapost’s Operation Red Spider

Sting operations are weak to nil evidence: Anti-money laundering tribunal
Sting operations are weak to nil evidence: Anti-money laundering tribunal

The Prevention of Money Laundering appellate tribunal set aside penalties imposed on 15 banks, in 2013, by the Financial Intelligence Unit (FIU) for alleged failure to prevent money laundering as revealed in a purported expose by news media Cobrapost.

Tribunal chairman justice Manmohan Singh stated in his order that the FIU failed to investigate the allegations completely and only relied on electronic evidence submitted to it by Cobrapost, whose video reportage of the allegations was incomplete and misleading.

Cobrapost had conducted a sting operation – Operation Red Spider - on the banks and had submitted its evidence to the FIU, however forensic tests run on Cobra’s video tapes revealed that it had captured events incompletely.

Karanjawala & Co partner Samarjit Pattanaik, senior associates Arjun Mahajan and Puneet Relan and associate Mridul Yadav acted for YES Bank whose penalty of rs 3 lakh was struck down by the appellate tribunal.

Senior advocate Harin Raval was briefed for Axis Bank which, as reported by PTI in 2013, faced the largest penalty – Rs 5 crore.

Shardul Amarchand Mangaldas senior associate Ayush Sharma and principal associate Smarika Singh briefed senior advocate Dayan Krishnan for HDFC Bank which faced the second largest penalty – Rs 4.5 crore.

Senior advocate Vikas Pahwa was briefed by advocates ER Kumar and Ritesh Isaac for ICICI Bank which faced the third largest penalty – Rs 1 crore.

Senior advocate and additional solicitor general Neeraj Kishan Kaul and advocate Satish Aggarwal were appearing for the director of the FIU.

Electronic evidence merely corroborative

According to the judgement:

The entire case of the Respondent is based on electronic evidence, i.e. video recordings and their transcripts uploaded online as the proceedings were initiated on the basis of sting operation conducted by Journalists of Cobra post in respect of allegation on the banks are not complying with (RBI) Master circular dated 01.07.2013 regarding reporting of attempted suspicious transactions to the department, therefore the penalty was imposed.

The video-recordings and the transcripts are electronic records and hence governed by Sections 65A and 65B of the Evidence Act. In the present case, admittedly the electronic records are not accompanied by a certificate required to be issued under Section 65B of the Evidence Act.

The said evidence are therefore inadmissible. The Counsel for the respondent has not denied the said fact.

In the present case, the conversation has been recorded in the recorder. It is a settled law that tape recorded evidence is merely corroborative and cannot form the basis of a finding.

Sting operations by private individuals have not been recognized as a legal method of law enforcement in India. In the present case, the sting operations by private individuals is not a recognized legal method of law enforcement in India and that such operations even by the enforcement agencies are yet to be experimented and tested in India and legal acceptance thereof by our legal system is yet to be answered.

bad quality evidence

Singh also added in the order

The Ld. Director could not have relied upon inadmissible evidence in passing the Impugned Order without such compliance. Further, it is also a matter of fact that original equipment used in the recording of the evidence were not produced in order to establish the case for the purpose of imposing the major penalties u/s 13(2)(d) of PMLA, 2002. Not only that the journalists who has conducted the sting operation of cobra post has not been examined and the department is merely relying on certain video tape recordings of the conversations between the bank officials and the journalists of cobra post.

It is also the admitted position that the transcripts and videos were not re-produced in the same condition. It was rearranged and sliced versions of the actual conversations and cannot be considered as conclusive proof of the actual conversations, certain Cobrapost reporter had with the featured employees of the Appellant Bank. The Cobrapost transcripts not only reflect selective conversation, the video and written transcripts do not match in entirety.”

It is evident that the Ld. Director before passing the Impugned Order even failed to investigate beyond the edited tapes and transcripts. Admittedly, the FIU, till date has not received the complete and unedited tapes.

The FIU has not produced the original recorded tapes and has sought to rely upon the incomplete version as broadcasted by the Cobra Post Reporter. The transcripts of such incomplete versions of purported sting operation cannot be considered.

Thus it is apparent that the respondent has failed to establish its case on electronic evidence. The transcripts uploaded online is not admissible and authorized under the law in the absence of proving its case as alleged by the respondent.

Read judgment (PDF)

Picture by: Cobrapost

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