Panama is the new black – what next?

Panama papers Why Arun Jaitley is only partly right about action on black money
Voices Opinion Tuesday, April 05, 2016 - 07:39

Between Sunday night and Monday morning, the world woke up to a journalistic investigation that was large in its sweep and minute in the details it placed in public. Hundreds of journalists collaborated with each other around the world under the aegis of the International Consortium of Investigative Journalists  (ICIJ). The stories started rolling out as the clock struck the agreed These were the Panama papers and they were the latest in the series of leaks which had started with Swiss leaks, went through Liechtenstein leaks, the HSBC leaks, a few more stories and then the big Panama leaks this week. That is a lot of material for journalist to secure where governments and their agencies have systematically failed.

In a brief interview to Ritu Sarin who led the investigations for The Indian Express (ICIJ works with designated news media in countries and reporters are expected to do their own groundwork once documents are received), Finance Minister Arun Jaitley said nothing new except one thing – he Prime Minister Narendra Modi had intervened seeking swift action and this would be done. The Finance Minister’s strike own rate in this matter has been lack-lustre. Maybe with the Prime Minister’s full backing, this will change. It should. As proof, he pointed to a freshly minted Special Investigative Team (SIT) that was set up in 2015 with a robust mandate under new money laundering laws. Read here.

Committees don’t scare people or stop them from hiding their monies and other assets. Commitment does and on that note, India does not frighten anyone, least of wealthy Indians who use many routes to dupe the national exchequer. I have lived in Europe long to know this and have interacted with many money managers at top levels as well as national bureaucracies to know India is not a heavy hitter. Talk is easy in Delhi and action is rare. Most importantly, illegal money flies whereas committees and commissions are on snail mail. This is something that has not yet sunk into the nervous system of Indian investigators either by design or choice. Expect the committee to say it will take time.

The Finance Minister cited the commitment of the Group of Twenty (G-20) to make the toing and froing of black money more difficult. Indeed there are several resolutions that this toothless group has passed as has the United Nations (UN) which is also a paper tiger here. The sum total of all this is moral power, but what is the moral power that countries exercise over each other? The strongest ones win. It would be childish to think that global money laundering rules have changed because of India. Germany and the United States and France to a lesser extent, are the three countries that have gone hammer and tongs after tax-evaders and money launderers. The Switzerland of the year 2000 is not the country of 2016 – the rules are tough. Secret Swiss bank accounts are simply no longer possible. Over the next three to five years, automatic transfer of information to India from Switzerland will see light of day.

So, Finance Minister Arun Jaitley is partly right in saying times are tough for criminal money and international and multilateral cooperation in matters of money laundering and hiding assets is getting tougher. It is no longer easy to come with millions of dollars to a bank and hope it will be accepted without the usual compliance forms ranging from residence verification to Know Your Customer (KYC) gigs.

But that too has been ‘regularised’ for want of another word. The best jobs in banks today are in the compliance division which shorn of verbiage is an extended fig leaf. I know of no banker or financial expert who will refuse money. What they will do is to re-route it either through Dubai or Panama, British Virgin Islands (BVi) or Florida. The burgeoning of Swiss banks in the Middle East bears this out.

Opening an account in these places is a song. In Panama, for example, you need three directors to sign off. Some of them do it for $100 a signature and you can call them Tom, Jerry and Uriah Heep for all they care. In fact, accounts holders rarely meet directors of their companies. In return you get an office address, a bank account, no smell, no colour and no noise. The same thing used to be possible in Switzerland via the offices of a fiduciary or an intrepid lawyer, but the Alpine nation has lost the top spot for black money to London, especially BVi and Panama.  

The attitude of governments to investigative journalism will change not because political leaders have suddenly grown a conscience or a spine or both, but because of two reasons. There is less and less money in the world and there are more and more people asking for accountability. Most importantly let us not underestimate the work of the ICIJ.

They have got the pulse of the people as well as the mechanisms to cut the flak. They have brought journalists from around the world to cooperate and share, discuss and debate without turf wars. This is new and this is something they must guard preciously. Their enemies – politicians and businesspeople – will try and break their solidarity, try and set up one against the other. So far this has not happened. My guess is it will never happen. That is the nature and commitment of the team that has now come together globally to start exposing the corrupt and the venal. Their job will be difficult, but they know they will not – and cannot  - look back

There are 500 Indian names in the Panama papers. Some of them are involved in legitimate business, others not. Indian investigators will have to swim fast and furiously if they mean business. One way of separating the legal accounts from the illegal ones is to press the banks to spill the beans. If the G-20 resolutions matter, here’s a chance to prove they mean business. Some countries will lag, other will go faster, but eventually we may be looking at a list of people and countries that have nowhere to run and nowhere to hide. Where India will figure in this developing global scenario is something I will be watching very closely from my vantage point. Maybe I will stumble on something. Maybe not – but nothing can be worse than losing hope. In the meantime, hearty congratulations to Ritu Sarin and her team.   Read Part 1 of the Panama Papers here

Chitra Subramaniam investigated accounts in Panama and other destinations as part of her Bofors- India Investigations. She has a deep understanding of how banking and financial services work between and in countries.

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