With the quantum of black money held by Indians abroad variously estimated at between $466 billion and $1.4 trillion, the idea is to get a fix on how the network operates so that the government is able to crack the nexus and deliver on its promise of getting back such ill-gotten assets.
“Pervading secrecy, cut-throat competition among private and international banks, along with the organised crime models, have all resulted in giving a boost to money laundering both in India and abroad,” said a government source, requesting anonymity.
“There is also competition. A large number of foreign and private banks operate in secrecy. Then in jurisdictions like Switzerland and Cyprus, dirty money is often pumped in their financial system via organised channels — or even wire-transferred now,” the source told IANS.
“What we also understand is that multiple layers of secrecy in the system helps clients to mask their accounts and transactions. So directives have been issued by the home ministry and the finance ministry to various agencies to study how the system is aiding such offences.”
Among the agencies roped in are the Enforcement Directorate, Serious Fraud Investigation Office, and the related wings of customs and the Reserve Bank of India. Also being studied is: To what extent the secrecy in the banking system is contributing to money laundering, sources said.
Sources explained that such an exercise also became necessary after preliminary reports from the agencies and departments under the finance ministry reported that private banks in large numbers failed to present case studies by themselves about the modus operandi.
“Privacy is at the core of the functioning of private banks. So the government is left with few options when it wants to crack down on leads — also because money laundering involves multiple transactions to disguise the source of funds,” said the source.
Officials said a comprehensive study can also help in understanding how the flow of such money can be curbed, while also equipping banks to themselves have strong anti-money laundering rules for clients, backed by law.
During the latest US visit of Finance Minister Arun Jaitley, coordination and cooperation among various countries to curb money laundering was at the core of his itinerary. Even at the special session of the US on drugs, he dwelt on the nexus between illicit money, drugs and terrorism.
India also wants to give inputs to the Organisation of Economic Cooperation and Development to be able to come up with objective criteria soon to identify jurisdictions that did not cooperate towards a transparent financial system. “Defensive” steps are being considered against them.
The move also comes against the backdrop of the recent global expose of International Consortium of Investigative Journalists (ICIJ) and over 100 global media organisations on off-shore funds of some powerful people globally, based on millions of leaked documents of a Panama law firm.
The team of officers from the Central Board of Direct Taxes’ Financial Intelligence Unit, the board’s Tax Research Unit, and the Reserve Bank of India, is probing the expose about the “Panama Papers”.
