FinMin looks at data saved on foreign servers

Worried about the fact that many companies are increasingly storing information and business-related data on servers abroad....

Worried about the fact that many companies are increasingly storing information and business-related data on servers abroad creating problems for investigating agencies like the CBI,Enforcement Directorate and SFIO the Central Economic Intelligence Bureau (CEIB),a department under the finance ministry,is looking for ways to address the problem.

According to official sources,the ministry has constituted a working group to study the feasibility of accessing data from servers located outside the country. The working group,which has representations from the information technology department and the corporate affairs ministry among others,will study the magnitude of the problem being faced and the legal remedies available. Many people are forming companies in such a way that all data including confidential information like money invested through participatory notes is stored in cyber space linked to servers abroad. When we try to seize the information,companies claim that we cant access it as it is located outside the country and not with them, the sources said.

Sources said firms usually store their data on servers abroad to evade tax or if they are involved in some illegal activities. The money involved may have terrorism links or it may be laundered. The move is to track businesses which are keeping data outside the country and see if the money involved is being used for illegal activities.

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Switzerland also faced the same problem two years ago. However,the Swiss Federal Finance Administration issued a circular in 2007 stating that if a company retains its relevant records electronically in servers abroad,it must either keep them on a server located in Switzerland or maintain an up-to-date electronic copy or hard copy of the records in Switzerland. According to the circular,the copy should be updated at least on a monthly basis.

Sources added that this would facilitate the audit trail which is undertaken by investigating agencies to trace out hawala transactions. Audit experts said many companies maintain disaster recovery plans under which they also store data in other servers for various unforeseen contingencies. So,the potential for storing data abroad and using it for hawala transactions is not a distant possibility. Though from the IT point of view,it makes sense,the government can notify certain conditions in the IT Act to address the issue.

The Central Economic Intelligence Bureau (CEIB) was set up in 1985 with the intention of creating a body which would coordinate and strengthen intelligence gathering activities as well as investigative efforts of all the agencies that enforce economic laws. The CEIB mainly collates information regarding black economy and keeps an eye on different aspects of economic offences and the emergence of new types of such offences. It is the nodal agency for coordination at the international level with other customs,drugs,law enforcement and other agencies in the area of economic offences. The corporate affairs ministry has been made a part of the working group so as to find if new laws can be framed or the existing legislations need to be amended to address the issue. The ministry would provide details of the other kind of nefarious transactions which take place.