The saga of Participatory Notes (PNs) dates back to 2006 with a pious report by a Committee of the Reserve Bank of India and the secretive means for making them legal in the country by the intervention of the Ministry of Finance, thus allowing kaalaadhan to be converted into safed or swacch dhan.
Kaalaadhan: Participatory Notes (PNs) are kaalaadhan. NaMo, issue an ordinance for restitution of this illicit wealth.
This suggested ordinance should also cover the identified looters charged under the Money Laundering Act, Prevention of Corruption Act, serious Corporate frauds and other criminal law enactments in force in the country such as those for Prevention of and/or Fighting Terrorism, Gun-running, Drug-smuggling, Gold-smuggling.
Let me cite Article 52 of the UN Convention to which India, that is Bharat, is a signatory:
“…each State Party shall take such measures as may be necessary, in accordance with its domestic law, to require financial institution within its jurisdiction to verify the identity of customers, to take reasonable steps to determine the identity of beneficial owners of funds deposited into high-value accounts and to conduct enhanced scrutiny of accounts sought or maintained by or on behalf of individuals who are, or have been, entrusted with prominent public functions and their family members and close associates. Such enhanced scrutiny shall be reasonably designed to detect suspicious transactions for the purpose of reporting to competent authorities and should not be so construed as to discourage or prohibit financial institutions from doing business with any legitimage customer.”
The key objective of this Article is thus to identify the customer and establish the legitimacy of the customer who claims to be the beneficial owner of the wealth.
A good instance of such prima facie illicit wealth is what was reported in Schweizer Illustrierte (November 19, 1991) as wealth owned by the late Rajiv Gandhi, whose heirs may continue to be beneficial owners of this wealth. http://bharatabharati.wordpress.com/tag/rajeev-gandhi/
Thus, the gen![]()
eration of kaalaadhan is facilitated by allowing PNs without verification of the identify of the customer and the source of the wealth before allowing PNs to be transacted in the nation’s financial system.
eration of kaalaadhan is facilitated by allowing PNs without verification of the identify of the customer and the source of the wealth before allowing PNs to be transacted in the nation’s financial system.Continuing the operation of illicit wealth through PNs of unidentified beneficial owners of the wealth is an act of treason more serious than mere tax avoidance, either double or single taxation.
I suggest that the PNs should be scrapped WITHOUT ANY FURTHER DELAY in consonance with Tarapore Committee recommendations. It is accepted by all financial experts that many PNs are likely to be owned by Indian nationals though PNs were originally justified for attracting investments from Non-Resident Indians. Even if they are from NRIs, there is no reason why the identity of the beneficial owners of the PNs should be kept secret by the brokerage houses which issue these financial derivative notes called PNs, as though they are as sovereign as the sovereign-backed legal tender issued by Central Banks such as RBI of India or Fed Reserve of USA.
There is no other country in the world which operates this spurious derivative called PNs. Clearly, PNs are generated and rerouted into the financial system (stockmarkets, SEBI regulated) by converting corruption monies using hawala routes to convert them as convertible currency wealth, say, US Dollars denominated PNs.
If the issue of PNs are not dealt with firmly, NaMo will not be able to fulfil his promise of restitution of the kaalaadhan into the Central Treasury for distribution to the poor of Bharatam. One simple caution: much of the PNs wealth could belong to terrorists and other criminal, anti-national elements. So, it would be prudent to demand of countries wich whom Inter Government Agreements are sought to be signed to issue a specific type of Interpol financial disorder notice on such wealth floating around in the world financial system.
S. Kalyanaraman
Second Report of Tarapore Committee recommended in 2007 Banning Participatory Notes (PNs) and phasing out the existing PNs within one year. http://www.slideshare.net/pankajbaid17/snapshot-of-tarapore-committee-report
http://journal.asci.org.in/Vol.36(2006-07)/36_2/02.%20M.%20Narasimham.pdf Fuller Capital Account Convertibility in the Liberalized Financial Architecture by M. Narasimham in ASI Journal of Management 36 (2), 2007 This account assumes that Tarapore Committee recommendation to scrap Participatory Notes (PNs) would be implemented by Govt. of India.
With the wisdom of the former FM P. Chidambaram, this recommendation was quashed and PNs are allowed to flourish in Bharatiya financial system ever since, making it appear as though PNs are here to stay for ever.
In most countries, the currency notes are issued by the Central Banks with the full sovereign backing of the State (Central Governments). This sovereign backing is what lends legitimacy to currency notes as legal tender.
In the marketplace, some financial institutions who are essentially brokerage houses handling clients' wealth issue what are called Participatory Notes (PNs) without indicating who the owners of the underlying wealth are.
This is the crux of the problem with PNs which are financial derivative instruments, rendering them to be kaalaadhan (Black Money).
A central canon of financial propriety to be observed by any financial institution is the Principle called Know Your Client. That is, the financial institution (including Banks, Governments, Central Banks) should ensure that this Principle is honored while dealing with any financial instrument incluing PNs.
The United Nations Convention against Corruption https://www.unodc.org/unodc/en/treaties/CAC/ underscroed the importance of this principle to track down illicit wealth handled by anti-national and criminal elements such as drug peddlers, weapon merchants, terrorists.
Text of the United Nations Convention against Corruption with a preface by Kofi Annan then Secretary General, UN The full text of the English version is here: https://www.unodc.org/documents/treaties/UNCAC/Publications/Convention/08-50026_E.pdf |
This is the central issue related to kaalaadhan: the restitution of illicit wealth, kaalaadhan, back to whom the wealth belongs, the poor people of nations whose wealth has been looted by criminal elements. Double Taxation Avoidance Agreements, Inter-Governmental Agreements are MERE SIDE_SHOWS confounding the central issue of restitution of illicit wealth.
Convention highlights Prevention Corruption can be prosecuted after the fact, but first and foremost, it requires prevention. An entire chapter of the Convention is dedicated to prevention, with measures directed at both the public and private sectors. These include model preventive policies, such as the establishment of anticorruption bodies and enhanced transparency in the financing of election campaigns and political parties. States must endeavour to ensure that their public services are subject to safeguards... Criminalization The Convention requires countries to establish criminal and other offences to cover a wide range of acts of corruption, if these are not already crimes under domestic law. In some cases, States are legally obliged to establish offences; in other cases, in order to take into account differences in domestic law, they are required to consider doing so. The Convention goes beyond previous instruments of this kind, criminalizing not only basic forms of corruption... International cooperation Countries agreed to cooperate with one another in every aspect of the fight against corruption, including prevention, investigation, and the prosecution of offenders. Countries are bound by the Convention to render specific forms of mutual legal assistance in gathering and transferring evidence for use in court... Asset recovery In a major breakthrough, countries agreed on asset-recovery, which is stated explicitly as a fundamental principle of the Convention. This is a particularly important issue for many developing countries where high-level corruption has plundered the national wealth, and where resources are badly needed for reconstruction and the rehabilitation of societies... | ||
Signature/ratification status  The Convention entered into force on 14 December 2005, in accordance with its article 68 (1). For each new State or regional economic integration organization becoming a party to the Convention, the Convention enters into force on the thirtieth day after the date of deposit by such State or organization of the relevant instrument.Status: Signatories: 140, Parties: 172 Authoritative status information on treaties deposited with the Secretary-General of the United Nations, including the United Nations Convention against Corruption, is available on the United Nations Treaty Collection. | ||
Conference of the States Parties to the United Nations Convention against Corruption
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Mechanism for the Review of Implementation of the United Nations Convention against Corruption At its third session, held in Doha from 9 to 13 November 2009. the Conference of the States Parties to the United Nations Convention against Corruption adopted resolution 3/1, entitled "Review mechanism". In that resolution, the Conference recalled article 63 of the United Nations Convention against Corruption, especially paragraph 7, according to which the Conference should establish, if it deemed it necessary, any appropriate mechanism or body to assist in the effective implementation of the Convention. In the same resolution, the Conference adopted, subject to the provisions of the present resolution, the terms of reference of the Mechanism for the Review of Implementation of the United Nations Convention against Corruption... | ||
Open-ended Intergovernmental Working Group on Asset Recovery At its first session, held in Amman from 10 to 14 December 2006, the Conference of the States Parties to the United Nations Convention against Corruption adopted resolution 1/4 entitled "Establishment of an intergovernmental working group on asset recovery". In that resolution, the Conference decided to establish an interim open-ended intergovernmental working group, in accordance with article 63, paragraph 4, of the United Nations Convention against Corruption and rule 2, paragraph 2, of the rules of procedure of the Conference, to advise and assist it in the implementation of its mandate on the return of proceeds of corruption. | ||
Open-ended Intergovernmental Working Group on Prevention At its third session, held in Doha from 9 to 13 November 2009, the Conference of the States Parties to the United Nations Convention against Corruption adopted resolution 3/2 entitled "Preventive measures". In that resolution, the Conference decided to establish an interim open-ended intergovernmental working group, in accordance with article 63, paragraph 7, of the Convention, and rule 2, paragraph 2, of the rules of procedure of the Conference of the States Parties, to advise and assist the Conference in the implementation of its mandate on the prevention of corruption. | ||
Pilot Review Programme Article 63 of the United Nations Convention against Corruption (UNCAC) establishes a Conference of the States Parties with a mandate to, inter alia, promote and review the implementation of the Convention. At its first session, held in Jordan in December 2006, the Conference of the States Parties agreed that it was necessary to establish an appropriate and effective mechanism to assist in the review of the implementation of the Convention (resolution 1/1). The Conference also requested the Secretariat to assist parties in their efforts to collect and provide information on their self-assessment and their analysis of implementation efforts and to report on those efforts to the Conference... | ||
Meetings of the Open-ended Intergovernmental Working Group on Review of the Implementation of the United Nations Convention against Corruption Meetings of the Open-ended Intergovernmental Working Group on Technical Assistance Preparatory and negotiating sessions of the Ad Hoc Committee for the Negotiation of a Convention against Corruption |
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