Enforcement Directorate Charges BCCI of Foreign Exchange Violations

The Enforcement Directorate has charged the world’s richest cricket body, its top officials and bankers with a welter of foreign exchange violations running to over Rs 1600 crores.

The BCCI has been accused of illegally “routing” crores worth of foreign exchange through an account in South Africa where the IPL tournament was shifted in 2009

The crux of the ED case involves a sum of Rs 243.45 crores worth of foreign exchange which the BCCI transferred to Cricket South Africa (CSA) between 2009-10. The CSA was meant to assist the BCCI in organising the matches for a fee. Of the sum received, the CSA transferred Rs 203.38 crores to a bank account it had formed on behalf of the BCCI, called IPL South Africa. An account whose operations were to be controlled solely by the BCCI according to an agreement inked with CSA on March 30, 2009 before the tournament. 

This involved a maze of transactions which the ED says was intended to circumvent the law.
The ED says setting up the IPL South Africa account was a “device engineered to create a veil in respect of the foreign exchange transferred by the BCCI and was designed to circumvent the provisions of FEMA.” The only purpose of forming the account,” it points out, “was to enable the BCCI to transfer substantial amounts of foreign exchange and simultaneously prevent its bank in India and the Reserve Bank of India to monitor foreign exchange transactions.” 

The BCCI responded to the ED through N Srinivasan who( was then its honorary secretary)claimed the BCCI had nothing to do with the IPL South Africa account. He said the account was operated by the CSA and that it had no knowledge of its transactions. “We are not aware of the amounts transferred by Cricket South Africa to IPL South Africa since the BCCI is not controlling the bank account of IPL South Africa. (That) bank account is operated and controlled by Cricket South Africa,”in a statement to the ED of August 2011

The ED report also points out that the BCCI’s argument just doesn’t add up, financially. The CSA was meant to receive a fixed fee of $ 30 lakh (Rs 18 crores) from the BCCI. Its services did not match the sum of Rs 243.45 crores which the BCCI transferred. The BCCI also did not have a budget projection showing the sum would be required during the tournament for other expenses. This meant the bulk of the money sent by the BCCI to CSA was meant to be transferred to the IPL South Africa account. The ED report draws this significant conclusion: “The only purpose of the remittances was to place the money at the disposal of the BCCI itself.”

The probe had hit a wall as two officials issued show-cause notices approached the Bombay high court. But highly placed ED sources say the case is going to resurface soon as court hearings wind up.
 “The charges are very serious and involve huge sums of money,” sources from the ED Special Director’s office told

Violations of the Foreign Exchange Management Act (FEMA) can lead to penalties three times the amount of the sum involved.