Frontier India Current Affairs

Written on May 24, 2008 – 12:27 pm | by P Chacko Joseph |

Transparency International, India which exposed the attitude of the Indian Government in seeking information from the German Government about millions of dollars of un-accounted-for money, belonging to the people of India, lying in Liechtenstein, a small country near Germany, is not the only source pointing out to Indian slush money overseas. A book `Who Owns CBI: The Naked Truth’ written by Sh. BR Lall, former Jt. Director CBI, a Manas Publications book exposes the presence of Black Money of Indians in Foreign Banks. Below is excerpt from the Book.

Banking Secrecy Laws abroad

There is no doubt that slush money moves abroad in bulk from the third world into the banks of advanced nations. It is not possible to know its extent, nor can it be recovered by any indigenous government agency. The kickbacks are often credited into the accounts abroad in order to avoid detection. Money, duly laundered, may sometime be brought back to India through normal banking channels, by showing it as gift from some relative or friend, or simply the payment earned through exports. There are innumerable ways prevalent in murky export-import market. Several other advantages may be drawn by way of incentives and even the money can be remitted back if that serves their financial interests. Even if the money comes back, it is sure to get lost into the blind alleys of black economy. The countries of the third world suffer heavily on this account as it causes a great drain on their economies and they have no option but to borrow strong doses from abroad. If outflow of their resources could be checked, some of the countries of the third world, like India, may have enough of foreign exchange as also the resources and may not borrow at all. This drain will continue unabated unless there are certain structural changes.

Indian resources get transferred abroad where these are invested to generate employment and incomes. Other countries develop and prosper at our cost. No wonder Switzerland has the second highest per capita income, with banking industry in the lead.

The holdings abroad, whether in cash or in real estate, or in any other form, cannot be checked as banks cover themselves with the veil of secrecy. This aspect has been discussed earlier also, but is worth recapitulating in brief even at the cost of repetition. However the slush money arising out of drug trade is being treated as different. If it is suspected that the money in a bank has some relation with the drug trade, the secrecy laws stand automatically relaxed, as these have been amended to that extent. It was done on insistence of the big western powers, as drugs are their problem. After attack on World Trade Centre in New York on 11th September 2001, money held by terrorists has also been frozen. For countries like India, all economic offenders including the corrupt are the ‘Financial Terrorists’. The major problem of the third world is corruption, and the secrecy laws aiding and abetting it. It would not be an exaggeration to say that the people of countries like Switzerland are acting like receivers of stolen property and are leading parasitic existence. This hypocrisy does not go well with their famed high stance on morality. They should abandon such laws and throw their banking business open and transparent. India should take up this question with Swiss banks, the western world and with all possible international organisations, including the U.N. The countries of the third world, and India in particular, should agitate for relaxation of banking secrecy laws in cases of corruption.

Apart from bank accounts, another dimension is that property or some other assets could be purchased abroad. Since the agency of one country cannot conduct investigations in another country, some rules need to be framed so that the particulars of deposits or properties held abroad could be known to the mother country, in the name of whose citizens these may stand.

BR Lall then goes on to suggest remedies. In the book he say, following measures are suggested in the Indian context, but the same hold good for all other countries similarly placed:

a) Whenever a bank account is opened by an Indian citizen abroad, the particulars of such account should be communicated to the Indian authorities, through its embassy/high commission in that country. The account number and other details should be fed into the National Property Register (NPR) immediately and could also be compiled in the CBI.

b) If the person is found involved in some crime or a criminal case, particularly of corruption or any other white-collar crime registered against him in India, then the particulars of balances in account and the copy of the account, if asked for authentically by an investigating agency, should be supplied. In this context the authorised agency should only be CBI. If any state agency or any other agency of the government of India needs some information, it could approach the CBI. The foreign bank/government should have no discretion but to supply duly certified copies of accounts/ information whenever demanded by the nodal agency, CBI in this case.

c) Whenever an Indian purchases a property abroad, its details like those of bank accounts be informed by the registering authority there, to the Indian Embassy/High Commission, who will transmit the same to India. This information could also be fed into the National Property Register and also compiled in CBI and used when required.

d) Details of all the properties and the bank deposits held abroad by the Indian citizens at present should be supplied to Indian Embassy/High Commission in the respective countries.

e) Further, on instructions from CBI, the accounts should be frozen, the lockers, the properties and other assets sealed and ultimately these assets be disposed of as per directions of the Indian courts.

f) For obtaining/supplying such information, the dual criminality may not be insisted upon, as corruption is a crime everywhere, only some technical details may differ. Similarly, the blanket sovereign guarantee of reciprocity may be executed once at the level of the governments and should not be insisted upon for every case as that causes tremendous delays.

Once this happens, hiding black incomes abroad will become very difficult and practically impossible. India will start looking up immediately. But to get such amendments to their rules, India has to take other countries of the third world along, prepare a lobby and initiate very persuasive and aggressive propaganda underscoring the point that we are readily helping them in their fight against drug and terrorism.

The government could fall

As per Transparency International, German Government had offered to provide information on accounts to various nations, world over including India, without charging any fees. USA, Finland, Norway, Sweden, Canada, Italy, U.K, Ireland and other nations expressed interest in obtaining this data. The Indian Government however has maintained a stoic silence over the issue and has not approached the German Government for looking into this data. It is alleged that this money belongs to the rich and powerful politicians, industrialists and stock brokers and that is why the reluctance on the part of Government of India, since the revelation of names could lead to the fall of Government.

Transparency International has pointed out that the Indian Ministry of and PMO have however not shown much interest in finding out about those who have their lockers in the secret banks of Liechtenstein which prides itself of their banking system. India is a responsible member of various world forums and a time when we are talking of transparency and accountability, should it not be the duty of our Government to seek information and reveal the names of the people who have stashed away their ill gotten wealth abroad, in a bid to evade tax?

Coincidently the Indian Finance Minister P Chidambaram has also been named by Arun K Agarwal as a key defender of Reliance Industries in his book Reliance - The Real Natwar, which exposes the connection between Congress (I) and the Iraqi “oil for food scam” which is a UN Report by Volker committee. Arun K Agarwal is a lawyer and a financial activist who also exposed stock market scams, Cogentrix Power Project in Karnataka, Alamatti power project, Prasar Bharti Scam and so on. He writes “P. Chidambaram and Kapil Sehgal, the two Congress (I) parliamentarians were cover up for Reliance Industries.”

Chidambaram’s efforts on Bofors are very explicit. During a debate in parliament Ex Foreign and Finance Minister Jaswant Singh had this to say about Chidambaram “He pleaded the case of Bofors and he had engineered a Letter Rogatory to Switzerland calling it not fraud, or corruption or bribery but he called tax avoidance, deliberately.”

BR Lall writes that the elites will oppose such a move, “It will not be easy to take any step in this direction, as the first obstacle will come from Indian elites, who are holding such accounts/ assets abroad. They will oppose any such move tooth and nail. But no meaningful fight against corruption, black money and plethora of economic offences can be really successful without such radical measures.”

Liechtenstein, like many other countries including Switzerland, St Kitts, Antigua and Bahamas, is a haven for moneyed people to hide their ill gotten wealth. The crown prince of this country is alleged to be angry with Germany for spearheading a crackdown on tax evasion investigation involving funds hidden away in his country’s vaults. It is being said that the German intelligence agency, BND, has details of more than 700 clients of the LTG Bank and German prosecutors are using this information to target hundreds of suspected tax evaders.