FinCEN Files And International Crimes

FinCEN Files And International Crimes

An American news website, Buzzfeed recently released its investigation reports of FinCEN files. Financial Crimes Enforcement Network (FinCEN) is a US-government body that keeps track of money laundering and similar illegal financial activities. Buzzfeed’s investigation reveals how numerous global banks, financial institutes, companies, and individuals were involved in such illegal financial activities. Let us find out which big names are out and what did they do. Did you know it also included the names of Indian financial institutes?

Crux of the Matter

What Is FinCEN?
Financial Crimes Enforcement Network (FinCEN) works under the US Department of Treasury. Its aim is to collect and analyze financial records to keep a track of money laundering, terrorist financing, etc. They keep track of domestic as well as international doubtful financial transactions in US dollars ($).

What Are FinCEN Files?
FinCEN files are a collection of 2,657 documents. A whistleblower leaked files to Buzzfeed News, which distributed them to 108 news organizations in 88 countries.

A bank reports a suspicious transaction or a client to FinCEN in Suspicious Activity Reports (SARs); 2,121 files of the total leaked are SARs. These documents containing
guarded secrets of many banks were sent to US authorities between 1999-2017.

Documents reportedly reveal how big banks allowed money laundering worth $2 trillion. It also revealed how Russian oligarchs or businessmen supplied money to the West and avoided sanctions that prevent them from using banks.

Leaked files gave insight into what banks know about the vast flows of dirty money across the globe.

Fergus Shiel, International Consortium of Investigative Journalists (ICIJ)

What Did It Reveal?

  • Fraudsters used HSBC to move millions of dollars of stolen money around the world. HSBC despite knowing about the Ponzi scheme of transfer of millions of stolen dollars, just filled SARs and didn’t intervene to stop it.
  • JP Morgan was accused of allowing a company to move more than $1 billion through a London account without knowing its owner.
  • UK’s governing Conservative Party secretly received £1.7 million from a Russian oligarch with close ties to President Putin.
  • One of Vladimir Putin’s closest associates used Barclays bank in London to supply money to the West and avoided sanctions that prevent him from using banks.
  • SARs of over 3000 UK-based companies – more than any other countries – found in the leaked documents.
  • Roman Abramovich, the owner of Chelsea, used an offshore company to fund footballers not owned by his club.
  • Standard Chartered was moving money which was used to fund terrorism.
  • Deutsche Bank found moving money of money launderers, organized criminals, terrorists, and drug traffickers.

India Under Radar?
Files revealed the names of at least 44 Indian correspondent banks involved in the money transfer. SBI, Kotak Mahindra, HDFC Bank, Punjab National Bank, Canara Bank, etc have been named. Files contain critical information on doubtful money transactions carried out in these banks from a bankrupt steel plant, a multinational conglomerate, an IPL sponsor, etc. The report says that Indian banks received $482,181,226 from outside the country and transferred $406,278,962 from India.

  1. WikiLeaks is an international non-profit organization that publishes news leaks and classified media provided by anonymous sources. Its website, initiated in 2006 in Iceland by the organization Sunshine Press, claimed in 2015 to have released online 10 million documents in its first 10 years.
  2. The Steele dossier, also known as the Trump–Russia dossier, is a political opposition research report written from June to December 2016 containing allegations of misconduct, conspiracy, and co-operation between Donald Trump’s presidential campaign and the government of Russia during the 2016 election. The draft dossier was published in full by BuzzFeed News on January 10, 2017, noting that it was unverified.
  3. The Pulitzer Prize is an award for achievements in newspaper, magazine, and online journalism, literature, and musical composition within the United States. It was established in 1917 by provisions in the will of Joseph Pulitzer, who had made his fortune as a newspaper publisher and is administered by Columbia University.

What Is Sugar Tax?

What Is Sugar Tax?

Nations across the world are imposing sugar tax or soda tax on sweetened beverages to tackle the problem of diabetes type II and obesity. Let’s understand what sugar tax is and its impact.

Crux of the Matter

Sugar Tax
Sugar tax or soda tax is a tax on carbonated soft drinks, sports drinks, and energy drinks. It has been introduced with the aim to reduce the consumption of drinks with added sugar. Global companies like Coca-cola, PepsiCo, Red Bull, etc. have opposed it.

Some experts argue that it is an example of Pigouvian taxation aimed to discourage unhealthy diets and to counter the growing economic costs of obesity. In simple terms, Pigouvian tax means a tax imposed on any market activity to suppress its demand and consumption or to have a desired negative outcome.

This tax is also termed as a policy intervention to tackle the critical problem of obesity and overweight. However, sugar tax has remained a matter of public debate in many countries. Some experts argue that there are no impactful results and medical evidence to support the benefits of a sugar tax on health.

Similar To Tabacco Tax
Tobacco tax was introduced to tackle the problem of cancer caused due to Tobacco. Tobacco tax proved to be successful in many developed countries. Thus, proponents of sugar tax are hopeful that it will help to tackle diabetes. Soft drink companies are also adapting strategies that were implemented by tobacco companies such as funding research that downplays the health risks of their products, introducing alternative products, etc.


  • As per one study, sales of soda in Mexico declined 6% after the imposition of the soda tax in 2014.
  • In 2018 Australian Beverages Council announced that to cut sugar content by 10% by 2020, and by another 10% by 2025.
  • In 2017 United Arab Emirates announced a 50% tax on soft drinks and a 100% tax on energy drinks to tackle health problems
  • In 2016, a comparative study of consumption of soft drink and water before and after the imposition of the soda tax was conducted in Berkeley, San Francisco, and Oakland, a drop of 26% in soda consumption was observed in Berkeley (where sugar tax was imposed) and a 10% increase in San Francisco & Oakland (where sugar tax was not imposed), while water intake increased by 63% in Berkeley and 19% in the two neighboring cities.

Taxation Methods
Countries use different methods to impose Sugar tax. Some countries tax it on the basis of volume. For instance, France applies a tax of 0.0716 euros per litre of regular or diet soft drinks, flavored mineral water, and fruit juices with added sugar. Whereas some countries tax it on the basis of sugar content. For instance, in Britain drinks with total sugar content above 5g per 100 milliliters are taxed at 18 pence per litre and drinks above 8g per 100 milliliters at 24 pence per litre (100 pence = 1 pound).

Did you know that consumption of carbonated drinks in US and some developing countries has been declining over some years, whereas in developing countries its growth is giving positive signs? What could be the reasons? Go read this data-studded piece to understand what soft industry looks like: A Look At Soft Drinks Industry

  • Costa Coffee is the second largest coffeehouse chain in the world and the largest in the UK. Coca-Cola Company acquired Costa Coffee in 2019 for $5.1 billion.
  • Coca-Cola sponsored the 1928 Summer Olympics and has subsequently remained a sponsor to the current time. Coca-Cola Olympic City was an 8-acre plaza in downtown Atlanta, Georgia, built in concurrence with the 1996 Centennial Olympic Games in Atlanta.
  • Campa Cola is a soft drink brand in India. It was a market leader in the Indian soft drink market in the 1970s and 80s in most regions of India until the advent of the foreign players Pepsi and Coca-Cola. Campa Cola was created by the Pure Drinks Group in the 1970s.

A Look At Soft Drinks Industry

A Look At Soft Drinks Industry

When the global soft drink market, especially in developed countries is slowing down or contracting, its demand in developing countries like India seems to indicate faster growth. Let’s have a comprehensive look at the global and Indian soft drinks industry.

Crux of the Matter

Global Soft Drinks Industry
In 2019-20, the global revenue from soft drinks was $667.4 bn in 2020 and the US contributed $200.29 bn to it. Moreover, the soft drinks market is expected to grow annually by 6.5% (CAGR) from 2020 to 2025. In relation to the total population, $89.67 per person were generated from soft drinks revenue in 2019-20.

Reasons For Declining Trend

  • Nourishment Based Food – Consumers are focusing on nourishment and nutrient-rich food.
  • Sugar a slow poison – A big impact on purchasing decisions due to awareness among people about the anti-sugar movement.
  • Shift in preference for ‘naturally healthy’ – Consumers preferring natural and organic products for better health. Carbonated beverages are being replaced by Fermented drinks, ready-to-drink teas, and products with natural sweeteners.
  • Business model promoting Sustainability – Consumers making more conscious purchasing decisions keeping in mind a business’ values so as to have a positive impact on the world.
  • Increasing Prices and Tough Competition – Profit margin on carbonate-sugar contained drinks is shrinking.

Experts estimate that non-carbonated drinks are expected to overtake their carbonated rivals.

Soft Drink Market In India
Experts say that the soft drink market in India seems promising and might continue its “robust growth trajectory”. Carbonated beverages account for 51% of PepsiCo’s sales volumes in India. Demand for lemon-based soft drinks is expected to increase rapidly in the Indian market.

The bottled water category is expected to see a robust volume growth with increasing awareness among consumers about water-borne diseases and shortages in drinking water in the urban areas.

Varun Beverages Limited

Covid-19 Impact
Indian Beverage Association’s (IBA) preliminary assessments for full 2020 indicate a contraction of ~34% in the soft drink industry, i.e. of ~₹70,000 crores. Due to lockdown, the industry suffered a loss of ~₹1,200 crore as raw material expired. Recently IBA sent a letter to the Finance ministry to reduce GST on beverages.

  • Costa Coffee is the second largest coffeehouse chain in the world, and the largest in the UK. Coca-Cola Company acquired Costa Coffee in 2019 for $5.1 billion.
  • Coca-Cola sponsored the 1928 Summer Olympics, and has subsequently remained a sponsor to the current time. Coca-Cola Olympic City was an 8-acre plaza in downtown Atlanta, Georgia, built in concurrence with the 1996 Centennial Olympic Games in Atlanta.
  • Campa Cola is a soft drink brand in India. It was a market leader in the Indian soft drink market in the 1970s and 80s in most regions of India until the advent of the foreign players Pepsi and Coca-Cola. Campa Cola was created by the Pure Drinks Group in the 1970s.

Understanding NGOs In India

Understanding NGOs In India

Lok Sabha recently passed the Foreign Contribution (Regulation) Amendment (FCRA) Bill 2020, changing rules regarding funds for Indian NGOs from foreign while tightening the existing laws. Before we get into the details of the Bill, let’s understand definition of non-governmental organizations in India, what are their types, difference between NGOs and non-for-profit organizations, and see some interesting stats around it.

Crux of the Matter

What Are Non-Governmental Organizations (NGOs)?
There is a lack of clear definition of Non-Governmental organizations (NGOs) since it represents a variety of different interests and a multitude of not-for-profit activities. However, the general definition says that NGOs are organizations formed by people on a voluntary basis working independently of government intervention in India.

The term NGO is used to denote an umbrella of not-for-profit organizations. NGO may be a non-governmental, quasi or semi-governmental, voluntary or non-voluntary, partisan or non-partisan, formal or informal, non-profit, or profit-oriented bodies, with legal status and registered under different Acts.

Non-for-Profit Organizations (NPOs) are formed as a legal entity working for welfare but no working member takes part in part in profit or loss. NGOs can be trust, society, or non-profit making company but NPOs can only be non-profit-making companies, i.e. NPOs are a category of NGO.

The working spectrum of NGOs is very wide i.e. betterment, upliftment, and development of society and economy as well, bringing awareness of human rights, women empowerment, etc. Whereas, NPOs work in particular fields like promoting art, science, research, commerce or any other useful purpose.

Types Of NGOs On Legal Basis

  • Trust – Trusts, private or public, can be charitable organizations registered under the Indian Trust Act, 1882; Public charitable trust is exempt from Income Tax.
  • Society – It is another form of NGO that can be registered under the Societies Registration Act, 1860. It may be entitled to Income Tax exemption if it falls under certain charitable aspects as directed by the Income Tax department.
  • Section 8 Company – Not-for-profit organizations (NPOs) can be formed under Section 8 of the Companies Act, 2013.

Section 8 companies, trust, and societies are exempt from income tax if registered under 12AA (tax exemption) of the Income Tax Act. To get fund from abroad NGOs are required to register under the Foreign Contribution Regulation Act (FCRA) with the Ministry of Home Affairs.

NGOs can be misused to convert black money to white or legal money. To do so, black money is donated to NGOs and later NGOs return it as payment for goods or services it was supposed to purchase. By doing so, a taxpayer gets tax exemption for the “contribution” and trust gets tax exemption for the money received. The government can reject an NGO’s permit if it is found guilty or can also charge it with a hefty fine.

To know about the recently passed FCRA 2020 Bill, read this story: What Is The FCRA 2020 Bill Recently Passed In Lok Sabha?

  • International non-governmental organizations date back to at least the late 18th century, and there were an estimated 1,083 NGOs by 1914. International NGOs were important to the anti-slavery and women’s suffrage movements, and peaked at the time of the 1932–1934 World Disarmament Conference.
  • Social entrepreneurship is an approach by individuals, groups, start-up companies or entrepreneurs, in which they develop, fund and implement solutions to social, cultural, or environmental issues. For-profit entrepreneurs typically measure performance using business metrics like profit, revenues and increases in stock prices. Social entrepreneurs, however, are either non-profits, or they blend for-profit goals with generating a positive “return to society”.
  • The International Red Cross and Red Crescent Movement is an international humanitarian movement with approximately 97 million volunteers, members and staff worldwide which was founded to protect human life and health, to ensure respect for all human beings, and to prevent and alleviate human suffering.

What Are Mutual Funds?

What Are Mutual Funds?

Recently, SEBI announced a major change in mutual funds investment. Now multi-cap mutual funds have a compulsion to invest 25% each in mid, large, and small capitalization funds. But before we delve into that, let us understand what mutual funds are, their various aspects, and how to calculate their value.

Crux of the Matter

What Are Mutual Funds?
A mutual fund (MF) is an investment company, which brings together money from many people and invests in stocks, bonds, or other assets. Fund’s portfolio includes combined holdings of stocks, bonds, or other assets it owns. Generally, a professional Fund Manager manages the fund.

The entire amount of investment is distributed in units. Investors buy these units instead of buying stocks directly. Therefore, mutual fund investors are sometimes called unitholders. Mutual Funds based on flexibility of investing are categorized as:

  • Open-ended – Can invest and redeem anytime.
  • Closed-ended – Can invest only at the start and redeem when its tenure ends.
  • Interval – Can invest or redeem only at some predefined dates.

Active & Passive Management
Portfolio management is the process of managing underlying assets (equity, debt, gold, etc) through buying, selling, and holding. Mutual Funds can be Passively or Actively managed.

Passive fund management generally involves replicating a benchmark index, in which a
fund manager tries to match the returns of the set benchmark. For instance, a benchmark for a Mutual Fund can be NIFTY 50, in which the fund would try to match the returns of that index.

In active fund management, a fund manager actively looks after which assets to buy, sell, or hold based on quantitative, technical, and/or fundamental analysis.

The cost of the passive fund is less whereas the cost of active funds is more. Generally, Open-ended MFs are passively managed, whereas Closed-ended MFs are actively managed.

Types Based On Investment

  • Equity MF – Invest in equities, and are considered risky but with a potential of a higher return.
  • Debt MF – Invest in bonds of Governments, banks, and corporates and are considered safe but with a low potential for returns as bonds fetch a fixed amount of interest.
  • Hybrid MF – Invest in both equity and bonds, and are considered to have a moderate risk with moderate returns.
  • Other MFs – Invest in gold, real estate, commodities, etc. individually or have mixed assets. These funds are also considered to have a moderate risk with moderate returns prospects.

NAV states the per share/unit price of the mutual fund on a specific date or time.

Now that you have a basic understanding of Mutual Funds, you can read about SEBI’s major announcement for mutual funds: SEBI Announced New Norms For Mutual Funds

  • An index fund is a mutual fund designed to follow certain preset rules so that the fund can track a specified basket of underlying investments. The first theoretical model for an index fund was suggested in 1960.
  • Dollex 30 is the USD version of the SENSEX. It is designed to measure the performance of the 30 largest, most liquid and financially sound companies across key sectors of the Indian economy that are listed at BSE Ltd.
  • The first modern investment funds were established in the Dutch Republic. In response to the financial crisis of 1772–1773, Amsterdam-based businessman Abraham van Ketwich formed a trust named Eendragt Maakt Magt (“unity creates strength”).