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Black money probe gets trickier as trail goes beyond Switzerland

The information collected by the Special Investigation Team on black money stashed abroad is throwing up cash trails that go beyond Swiss banks.

Mail Today Bureau | November 20, 2014 | Updated 19:07 IST
Retired Supreme Court Justice MB Shah (left) heads the SIT on black money.
Retired Supreme Court Justice MB Shah (left) heads the SIT on black money. (Photo: Reuters)

The information collected by the Special Investigation Team (SIT) on black money stashed abroad is throwing up cash trails that go beyond Swiss banks into various other financial centres like Dubai, Singapore and Luxembourg and tax haven islands such as St Kitts and Cayman Islands. According to sources, some foreign banks are also under scanner for helping Indian entities to round-trip black money into the stock market.

According to news agency PTI, while Switzerland has agreed to cooperate and share details in instances where probe by domestic authorities have independently established cases of 'tax crimes', the information obtained in these cases involves entities and transactions that are linked to accounts in other tax havens. The government does not have Mutual Legal Assistance Treaties with tax havens like Cayman Islands, British Virgin Islands, Lichtenstein, Monaco, Bermuda and Malta and others where a number of investigations are being carried out by India.

"The Special Investigation Team on black money is expected to soon send a report to the government in this regard with a request to ink mutual legal assistance treaties with tax haven jurisdictions," a senior official confirmed. Treaties like Double Taxation Avoidance Agreement provide only for obtaining documents and not help Indian authorities to attach funds or assets of a suspect black money holder.

Role of some banks, including those outside Switzerland, has also come under scanner for acting in concert with the suspected black money hoarders and also for making 'safe haven' promises for their funds. The suspected lapses on the part of these banks are also being probed for allegedly facilitating rerouting funds of certain Indian corporate houses back into their listed companies as foreign investments. Such transactions are suspected to have taken place in case of at least 15 Indian firms, a senior official said.

However, the official did not disclose the names of the entities as it could hamper the investigations. Some banks are also reported to be advising clients to use 'layering' methods which apart from the share market include fudging export-import transactions to show transfer of funds from Switzerland to other locations including India. A senior official said that "apart from corporate, some cases of corruption being investigated against government officials by the Central Bureau of Investigation (CBI) and Enforcement Directorate have also shown cash trails to foreign accounts but the long drawn-out legal procedure to get these accounts is proving to be major hurdles".

BEYOND ALPS

>> The black money trail appears to have gone much beyond Switzerland to various island nations and global financial centres like Dubai, Singapore, Luxembourg and Cyprus.

>> The ongoing cooperation between Swiss and Indian authorities is generating many more leads for further investigations and they suggest routing of funds through various other jurisdictions.

>> A number of island nations in Caribbean and other parts of the world figure among such locations.

>> India has also signed information exchange pacts on tax matters with a number of such locations, including Saint Kitts & Nevis, Bahamas, Bermuda, Liechtenstein and Gibraltar.

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