Voices Tuesday, April 07, 2015 - 05:30
Chitra Subramaniam| The News Minute| May 29, 2014| Earlier this week the Union government announced the setting-up of a high level Special Investigating Team (SIT) to track, trace and retrieve black money from India deposited in foreign countries, this based on a Supreme Court ruling asking for formation of an SIT. Led by former Supreme Court judge Justice M.B Shah, the team comprises the Directors of the IB, ED, CBI and RAW in addition to the Deputy Governor of the RBI. As the process of notification begins, Union Home Minister Rajnath Singh has said money will be returned to India in 150 days or five months. This is welcome, but whether this political promise is doable will depend on how and what the SIT prioritises. Other politicians have promised deadlines they have failed to meet. If the science (scope of enquiry and method of data gathering for example) and economics including the cost of the entire exercise is secured, the scope of the legislation and possible litigation will fall into place in a comprehensive manner. What needs to follow is a cold head and clear thinking about what is achievable in the medium term. Plugging loopholes in the law, discouraging easy anonymity and personal discretion and denouncing criminals all activated simultaneously will make for a comprehensive solution. The international climate today is not for clemency to money launderers and tax evaders as criminal and terror funding through tax havens comes into focus and economies starved for cash punish their corrupt politicians. For a country like India that has long-hidden under false pretexts to punish the guilty, there is an additional challenge now. It has to be firm, not punitive as it seeks investments to spur the Indian economy. The raging debate in India about bank accounts and names of Indians is as understandable as it is uninformed. Understandable as corruption is at the root of many problems India faces. Uninformed as the search for India’s unaccounted wealth in foreign countries is couched in terms of revenge. Getting money back to the country is not an end in itself – ensuring that money stays in the country and is accountable is equally if not more important. A country that cannot punish its criminals domestically starts on a weak wicket as it seeks to punish criminal Indians abroad. Tax evasion is one of the main reasons why people go to tax havens like Switzerland and Singapore, the British Virgin islands (BVi) and the Cayman, Delaware in America and Dubai. Gains from criminal activities – money laundering, cash through arms and drug running and bribes – are also deposited in secret bank accounts. Estimates of how illegal money held by Indians in Swiss banks ranges from US$1.42 billion to US$2.18 billion and the CBI and Finance Ministry do not have the same numbers. Another estimate places illegal Indian money and assets in all foreign banks at US$ 500 billion. On May 6th 2014, Swiss banking secrecy officially ended when the country signed on to the OECD convention requiring countries to automatically inform each other about accounts held by their nationals. Singapore signed on too. Read here- What The End of Swiss Banking Secrecy Means For India For now, the SIT has been asked to ready an action plan which includes the creation of an institutional structure to address generation of unaccounted monies and their hoarding in foreign banks or in various forms domestically. In an interview Justice M.B Shah has said clarity on the work will emerge as soon as the notification (loosely terms of reference) is issued. We at The News Minute asked people for their questions/views on the SIT and black money. We have grouped the questions under appropriate headings and tried answering them. SIT The team’s purview will be known once the notification process is complete. In a process of this nature that involves several agencies and jurisdictions, personal ambitions and public probity cannot be allowed to clash as what is at stake is India’s wealth. It belongs neither to a political party or groups of individuals. Swiss banking secrecy is dead, but what about BVi and Cayman, not forgetting tax evasion by countries starved for cash and jobs couched as tax benefits. At the time of writing reports are coming in that though the notification has not been issued SIT will look into pending and new cases and will look at a comprehensive structure to deal with unaccounted money. However, if no time frame is set, this could turn out to be a long drawn process with the SIT making recommendations, which in turn have to be accepted and implemented by the government. The SIT's first step could be to approach other countries like Switzerland for information. In the interest of transparency and accountability and limitations, the SIT must explain, among other things- Inter-agency reporting mechanismsData protection Protection for whistle-blowers, national and international. When it comes to tax evasion and money laundering, there are no big fish and small fish. There is fish. Bank Accounts and Numbers The fact that money has moved out of unsafe havens and procedures is not an issue as all movement is tracked and traced. Waving lists to pacify debates on black money is silly as it takes away from the gravity of the issue. Tracking and tracing of all bank transactions – legal and illegal – is just a click away today. Money can run from Geneva to Delaware or Singapore, but hiding is extremely difficult though not impossible. The need for India to “extract” names and “divulge” them in public frames the debate in a false perspective. The same applies to names available with the Indian government or leaked by the French and Germans as the case maybe. The moot point is and has always been – what is India doing? India’s inability to punish one fraud or one national loot logically, is also under question which hopefully the SIT will address. Follow the money. Illegitimate money will always travel faster than legitimate money. The SIT can address this through calibration and escalation of enquiry and tracking. Tax Havens It is possible to bring looted money back to India. Peru and Tunisia have done so therefore there is really no excuse for India to pretend it is helpless. Foreign governments and agencies will cooperate now for two reasons. One, they see India as a major market for their goods and services. Secondly, many governments are under severe pressure by their people to stay in the straight and narrow. There is nothing called too big to fail any more. The SIT comes at the right time when traditional means as well as unorthodox ways can be explored to retrieve money and assets illegally parked. Only India can come in India’s way now. Governments will understand that secrecy agreements cannot override national interest. Institutions Legal, economic, diplomatic and intelligence gathering institutions have to speak to the same remit. Today where cross border and international terrorism is funded through slush funds, the need to focus on the fraud from multiple angles cannot be overstated. Prevention of criminal activity is critical. Verify bids and tenders, strengthen due diligence to include tax evasion and criminal complicity, extend responsibilities of board members of institutions both private and public are some of the expectations from the government. The SIT is slated to propose institutional mechanisms. This must be welcomed. The left hand must know what the right hand is doing. Switzerland and Swiss accounts The Alpine nation is not full of criminals and contrary to what most people seem to think, the Swiss economy is not based on black money. It is a country of seven million people where SMEs are the largest employment generators (80 percent) and where ten global brands are housed. For example, the Swiss watch industry employs some 60,000 people across six states and generates billions in revenue. However, it is also a fact that the country’s banks assisted the Nazis, apartheid in South Africa and money laundering for 5000 Americans for which major banks have been punished. The Swiss are equally unhappy with their country being used for criminal activities and a record number of laws have been voted in over the past 15 years. Litigation  Technically, the Government of India can sue an errant bank. This option has not been adequately explored as it will require assiduous heavy-lifting at a time when India is seeking FII. There are precedents to this type of action. The most recent is the US government punishing Crédit Suisse – Switzerland’s second largest bank and France’s Banque Paribas for aiding and abetting tax evasion and related activities by American nationals. Several instruments are available for the SIT to explore and implement. But, just like there is a law for every crime, there are criminals behind laws – something the SIT would be well advised to look out for. Time Frame and Punishment In the interest of accountability and for the sake of its own credibility, the SIT has to evolve a time-frame and a reporting to the public mechanism. Thirty days to define the process, 30 days to develop it and another 30 for verifiable action. The quantum of punishment – cash and others – will also need to be agreed upon as discussing crime without punishment is meaningless. Will the SIT be empowered to probe politicians whose assets multiplied many folds while in power? The SIT probe covers all Indians. Can India legally force Swiss Banks to divulge names of Indian account holders ? Yes. Force is an inappropriate term. There are laws for this to happen and other countries have done so. Yesterday CNBC Awaaz reported that most of the money have been moved to Singapore & Dubai.Do laws of these countries permit India to bring back money? This is not a wild-goose chase. Money may have fled, but tracking and tracing is possible. Is there any precedent of any country having got into a treaty with a tax haven to get back their black money ? There are several such examples. The recent OECD agreement is one such.

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