Fronting: It may take some time for the Anti-Corruption Commission (ACC) to net more ‘fronting’ cases in Phuentsholing due to a tussle with the prosecuting agency, the Office of the Attorney General (OAG).
The OAG has converted criminal charges against 29 licence holders for a fronting case, into a civil suit.
This has left the ACC, which is now winding up four cases of tax evasion involving millions of Ngultrums in Phuentsholing, in a dilemma on whether to pursue the next phase of investigation.
When the OAG filed a civil restitution suit against 23 more business entities in connection with the fronting of trade licences at the dungkhag court in Phuentsholing on March 18, Attorney General Shera Lhundup wrote to the ACC stating that OAG took cognizance of certain elements of “commercial bribery” in the commission of fronting.
However, the ACC still considers fronting as commercial bribery and that criminal charges against the defendants must be pursued. “We stand by our principle. It is a case of corruption. If it is a civil case, ACC has no mandate to investigate,” a commissioner said. “Our hands are tied because we do not have the authority to prosecute the case.”
Further investigation into fronting is being deferred until the court decides on the on-going cases.
The ACC’s letter to the OAG highlighted its justifications as to why the case should be considered criminal and commercial bribery. It stated that despite an abundance of regulations, signed undertakings, expanded capacities of enforcement institutions like the regional revenue and customs office, regional trade and industries office, some of the Bhutanese “obsessed by greed” have continued to resort to unlawful solicitation and amassing of wealth, leading to widespread progression of illicit businesses in Phuentsholing over the years.
“As a result, the intensity of evil of fronting continued to remain a chronic problem with situations worsening year on year as is evident by Rupee crisis that hit the Bhutanese economy in 2011,” it is stated in ACC’s letter to the OAG.
Through intelligence gathering and surveillance for more than a year, the ACC learnt that fronting was providing a breeding ground for commercial bribery, deflection of goods across the border and an avenue for money laundering and forgeries.
While analysing the bank statements of these business entities, the commission found that the volume of cash transactions ran into several millions regularly, leaving a meager bank account balance at the end of the day. Non-Bhutanese who ran businesses on the hired Bhutanese trade licences deceitfully remitted millions of Indian Rupees through forged invoices and customs declaration forms.
Recognising the danger to the country’s sovereignty besides social and economic implications, the ACC felt the need to clean the situation once and for all. “Therefore, a massive operations never attempted before was launched in April 2015,” the letter stated.
According to the OAG’s letter, the Anti Corruption Act of Bhutan (ACAB) 2011 does not define the term “fronting” to fulfill law enactment due process of notifying public of that applicability which, in turn, constitutes a legitimate defense for an accused under Section 77(a) of the Penal Code of Bhutan. It makes no reference to “fronting” as a criminal offence nor has it repealed any of the cited rules and procedure, by reference or implicit.
However, the commission believes otherwise. According to ACC, any facets of business essence involved in fronting is clearly captured in section 66 (1) of ACAB that says: “Any person who, in course of economic, financial or commercial activities, promises, offers or gives, directly or indirectly, of an advantage to any person who directs or works, in any capacity, for a private sector entity, for the person himself or herself or for another person, in order that he or she, in breach of his or her duties, act or refrain from acting shall be guilty of an offence”.
ACC officials said that detection of fronting cases in Phuentsholing was a strenuous task had it not been for the powers enshrined in the ACAB 2011 to raid, arrest, seize and detain those indulged in fronting businesses. “Despite all odds, with all conviction, this is exactly what the ACC investigation has proven,” the commissioner said.
According to the ACC, the OAG was consulted while compiling the initial investigation reports and that the OAG agreed to charge defendants under offence of commercial bribery defined under section 66 and 67 of ACAB. “Therefore, ACC remains fully confident that defendants have no ground not to believe that trading their business licences was not an offence,” the ACC letter stated.
ACC and OAG are meeting tomorrow to resolve their differences. They will review the Memorandum of Understanding (MoU) and are expected to discuss the implementation of the Supreme Court directives issued on July 23, 2014.