The black money brouhaha is turning rapidly into a whitewash special. Part of the first report of August 2014 submitted by the Supreme Court appointed Special Investigation Team (SIT) to probe the issue of black money stashed in foreign banks reveals very little fire behind all the smoke, saying that 289 of the names in the list of 628 persons or entities holding accounts abroad have no amount mentioned against their name, and that no less than 122 entries in the list are repeats.
There is information about persons holding the accounts but no details regarding bank statements and account opening are furnished, the report states. The lack of information and absence of details about the amounts held by 289 account holders could become a stumbling block for investigators, sources say.
This dead-end seems to have prompted the SIT to ask the government to renegotiate Double Taxation Avoidance Agreements (DTAAs) with countries since it has often become an obstacle in addressing the issue. While probing the black money matter, the SIT received information under the Double Taxation Avoidance Convention by the Central Board of Direct Taxes relating to certain account holders in HSBC bank Geneva.
The SIT in its first report has suggested amendments be made to these pacts so as to address the main issue of sharing information on the amounts of money maintained in foreign countries by Indians. "The amended provision should ensure that there is sharing of information with the enforcement agencies which are competent to deal with these cases and try it, may be for imposing penalty," the report says.
It was the United Progressive Alliance first and the National Democratic Alliance government now that have repeatedly told Supreme Court of their inability to furnish more information because they are bound by the taxation agreements that forbid disclosure of names. SIT Chairman Justice (Retd) MB Shah and Vice-Chairman Justice (Retd.) Arijit Pasayat directed the Central Board of Direct Taxes to prepare a draft amendment to the DTAAs so that information is shared keeping the interest of the country in mind. The Chairman and Vice-Chairman have also asked the agencies to explore whether any action can be initiated within the existing framework if countries do not cooperate and are not forthcoming in sharing information.
The report does, however, drop a brand-new bombshell: eight cases that the Central Bureau of Investigation is pursuing (see accompanying box) have also come under the ambit of the SIT.
Mail Today had earlier reported that stronger laws and punitive measures are some of the ideas deliberated by the SIT in its meetings. "The matter needs to be taken up at the diplomatic level. We need to put pressure on some countries to get the treaties amended and get back the money," said a member in the panel.
SIT has also recommended legislative reforms: amending the Foreign Exchange Management Act as well as the Prevention of Money Laundering Act. "Greater openness and liberalisation in an environment of weak regulatory enforcing agency resulted in generating more illicit financial flows and black money in the country. It appears that regulatory laws have lost their deterrent effects," the SIT has observed in its first report.
The SIT also includes heads of Department of Revenue (under the Ministry of Finance), Reserve Bank of India, Intelligence Bureau, Enforcement Directorate, CBI, Income Tax department, Narcotics Control Bureau, Directorate of Revenue Intelligence, Financial Intelligence Unit, Research and Analysis Wing and the Central Board of Direct Taxes.
Quoting a report on illicit financial flows by US-based Global Financial Integrity, the SIT noted that between 2002 and 2011 the total illicit financial flows in India were around $344 billion. Between 2006 and 2011 the illicit financial flow increased tremendously, reaching an estimated maximum of $84 billion in 2011.
Stating that illicit financial flows are the "most devastating economic issue" the SIT has listed under-invoicing, hawala transactions, drug trafficking, smuggling and bulk cash deals as most common methods of illicit financial flow. India is ranked fifth among 142 countries on illicit financial flows.
The SIT has recommended that the system needs to be more officer-based than its present clerk-based configuration, saying that the nodal agency for coordinating various departments could be the Enforcement Directorate and other agencies like Directorate of Revenue Intelligence; DG (Investigation) Income Tax could be notified organisations for taking action in cases of money laundering. Currently only Enforcement Directorate probes cases of money laundering under the PMLA. "Undisputedly there is a weak coordination among enforcement agencies. This could only be sorted out by a nodal agency," the report says.
WHAT THE PANEL HAS SAID IN ITS REPORT
>> SIT has asked the government to re-negotiate and amend DTAA
>> It has said that the amendment should stipulate sharing of information on accounts held by Indians
>> The amendment, they have said, should ensure that nations share information with Indian enforcement agencies
>> The HSBC list given to India in 2011 did not contain bank statements, account opening details etc for the 628 listed accountholders.
>> Nature of investigation search and seizure (142 cases), survey (8 cases), open enquiry (418 cases), suo-motu (17 cases), others including discreet enquiry in the remaining cases.
>> Report reveals that senior HSBC officials were pressured by CBDT officials to share information on Indian account holders, which is when the former suggested getting consent waivers from the people in question.
>> The CBDT obtained waivers from at least 174 account holders on the HSBC list; in 75 cases, a CD containing account details was obtained
>> Prosecution proceedings underway in 27 cases where account details were not shared.
>> SIT wants Enforcement Directorate to be given more power and made nodal co-ordinating agency.
EIGHT CASES REFERRED TO SIT BY CBI
>> The PACL Ponzi Scheme, better known as the 'Pearl scam'. The company allegedly invested `650 crore in five-star properties in Australia after cheating investors of Rs 45,000 crore.
>> The case pertaining to the supply of 87 Armoured Recovery Vehicles (ARV), wherein Ministry of Defence officials allegedly willfully ignored the lowest bidder. It is suspected that $2.3 million was paid in bribe.
>> Charges against DSQ Software Limited that it fraudulently allotted 1.70 crore shares worth Rs 147.5 crore during the period 2000-01
>> The rubber plant invoicing case from 2006, wherein Piyush Goyal of MV Enterprises is accused of starting the manufacture of reclaimed rubber by importing machines from China, loans for which were secured on the basis of fake bills issued by the company.
>> Fake Chinese suppliers case: RGR Impex Pvt Ltd obtained a cash credit limit of up to Rs 10 crore on import of electronic goods. Investigation revealed that in 2011-12, 23 advance payments totalling over $3.9 million were sent within four months to accounts of 10 companies in Hong Kong and UAE for the purpose of import.
>> Nafed money laundering case: It is suspected that Rs 233 crore was laundered. It is suspected that sellers/buyers were bogus Indian entities.
>> STC export-import case: The case against Rajat Pharmachem Ltd pertains to allegations that the firm cheated banks in collusion with State Trading Corporation of India. It was revealed that transactions were fraudulent, and neither import nor export of goods had actually taken place.
>> Ketan Parekh Scam: Share prices were driven up using bank money by Parekh for his own as well as the benefit of promoters. The devalued shares were finally dumped with financial institutions like UTI and LIC. An amount of Rs 4,100 crore was remitted to Mauritius-based entities, of which only Rs 877 crore was seen to have been brought back to India. The rest of the money was transferred from Mauritius to the United Kingdom and Switzerland.
(With inputs from Abhishek Bhalla)