Officials confident PM Modi will prevail over 'Swiss Club' -- Madhav Nalapat

Officials eager to actualise Prime Minister Narendra Modi's vow of the return to legal channels of an estimated $500 billion-plus held illegally by Indian nationals and their nominees abroad warn that a secretive "Swiss Club" comprising corrupt officials, businesspersons, as well as some lawyers and politicians, is working behind the scenes to try and ensure the failure of the PM's mission. This group comprises influential individuals in India, across different spheres of authority, who possess undeclared bank accounts in Switzerland and other tax havens, and are consequently eager to ensure that information on such accounts never reaches India, lest their guilt get exposed. In view of the immense clout wielded by the Club's members — many in high positions — officials in the relevant departments prefer to remain unnamed. However, they appear confident of the Prime Minister overcoming such sabotage to bring to book those guilty of the loot of the nation on a scale not seen since Robert Clive was active in his piracy of the subcontinent two centuries ago.

Officials eager to implement the Prime Minister's promise say that the UPA's exclusive reliance on Double Taxation Avoidance Agreements (DTAA) to seek information from foreign governments on undeclared moneys held abroad "participated in the fiction that such deposits were the consequence of lawful work, when in reality such deposits stemmed from income earned through unlawful means" and hence did not require any assurance of secrecy.

A mid-level official revealed that "almost all such funds have been generated from criminal activity, such as participation in scams such as 2G, Commonwealth and others, or from banned trades such as narcotics or the under-invoicing of exports and the over-invoicing of exports. Even the method of transmission of such funds to overseas locations, in cases where rupees get converted into other currencies, is illegal, in that it is done through hawala channels, most of which are controlled by the same syndicates that operate narcotics and terror hubs." Such funds would not be bound by the secrecy codes prevailing in matters of routine tax compliance.

His senior added that "what needs to be done is to pass an ordinance declaring that all funds held abroad by Indian nationals and their nominees, which is not reported to the RBI, be made a criminal act, rather than be treated as a simple concealment of income". He claims that such a move would enable the speedy transmission of information even from established tax havens, "as secrecy is not necessary for moneys made illegally, such as from bribes or through fudging of export or import figures".

The officials were unanimous in the view that the Foreign Account Tax Compliance Act (FACTA) with the US should get signed immediately, "as otherwise those with US accounts — many to take care of the expenses of their college-going children — will clear such accounts and escape detection". They were also in favour of "immediate signing" of the OECD Global Tax Information Pact, in view of the fact that 51 countries, including several tax havens, have signed on to the protocol, which facilitates exchange of information about funds parked in different locations. "Delay will only give time to those with such accounts to cover their tracks", a senior official said, adding that "the confidentiality condition would apply to only a very few of such accounts" and hence need not be a ground for delay of signature.

Official sources pointed out that there were basic differences between unaccounted-for money held abroad and black money hidden away within the country, as the latter had a complex of laws and procedures designed to facilitate discovery. In contrast, they say that the legal and administrative structure for dealing with funds illegally held abroad is close to zero. An official was confident that "Prime Minister Modi will take expeditious steps to ensure success despite the attempted sabotage by the 'Swiss Club' of the BJP's 2014 poll promise of return of such funds". Politically, "a significant chunk of Prime Minister Modi's support came from the belief among voters that he would succeed in ending corruption and in getting back money salted away abroad, and should the results of such a policy prove disappointing, the political repercussions would be immediate, including a fresh dose of oxygen to the Aam Aadmi Party", an official pointed out, adding that "what is needed is to fast-track criminal prosecutions against all those known to have clandestine bank accounts abroad", something that the UPA failed to do, and which the newly-constituted SIT also does not seem to have done.

An official familiar with tracking illicit financial flows pointed out that "disclosure (of names) is beneficial in that members of the public would then come forward to give additional information". He said that "the UPA's policy of keeping such names secret only assisted the perpetrators to clear out their accounts and escape accountability". According to him, "in databases in different departments, there are over 6,000 individuals known to be having a foreign account that has yet to be declared to the RBI". This is nearly ten times the number disclosed to the Supreme Court by the government a few days ago.

It was pointed out that "existing laws are sufficient to identify criminal proceeds, and once an offence gets registered (under IPC, PCA, UAPA, etc), the Prevention of Money Laundering Act (PMLA) can get activated to attach properties". A senior official asked "Why Hassan Ali is being proceeded against only for a passport violation and not more serious offences?" He said that "during the past 15 years, there have been several cases of perpetrators who have had action taken under statutes which dilute the offences and enable them to escape".

He added that there was immediate need for an ordinance to facilitate the seizing by the government of illegal black money held overseas by Indian nationals and their nominees. In this context, he warned that "excluding close family members from disclosure of assets and scrutiny would enable the guilty to escape", as spouses and children are usually the preferred nominees of those holding black money abroad and within the country.

Stating that the Supreme Court-mandated SIT was not enough, and that the government could not surrender its executive prerogatives to any other branch of government, it was desirable that the entire matter not get outsourced to the Shah-Pasayat SIT, but that a new agency get created. They called for a Unified Black Money Retrieval Authority (UBMRA), which would be comprised of dedicated officers of the Enforcement Directorate, Directorate of Revenue Intelligence, Central Board of Direct Taxes, Central Bureau of Investigation, Intelligence Bureau, Research and Analysis Wing, Reserve Bank of India and other agencies involved in tracking financial flows. Their suggestion was that each of the proposed authority's task forces operate around separate round tables, with the officer of each agency having in front of him a computer screen with data from his agency, so that "quick and complete exchange of information on suspects can get done" within the room. The task forces, which should be located in the same building to facilitate exchange of information and coordination of investigation, would each look into matters such as (a) money laundering, (b) non-tax paid black money through genuine business; (c) terror financing; (d) narcotics, and so on. After leads have been discovered, each could be assigned to a particular agency (such as ED or CBI) for follow-up and prosecution.

According to the officers queried, within six months, "several thousand" prosecutions could get launched should the UBMRA get set up, a number which could accelerate rapidly in subsequent months. The officers spoken to were confident that any perception of slowness or disarray in the battle against black money, especially that held abroad, would soon get dispelled by decisive action on this front by Prime Minister Modi.