Money Back! Black?

Published: January 31, 2011 - 17:45 Updated: January 31, 2011 - 17:46

In 2009, I went to Berne and Geneva to investigate illegal Indian funds squirreled in Swiss banks, especially the case of the mysterious Pune-based stud farm owner Hasan Ali Khan, who had $6 billion resting in UBS. I returned with a scoop and the grim understanding that India would find it difficult to get its money back from Switzerland - the Swiss will promise to share information, but it would be a ploy to buy time.

The scoop exposed the lie that the Indian government was seriously pursuing black money stashed in Swiss banks and tax havens. The evidence: Folco Galli, information chief of the Swiss department of justice and police, claimed that the Indian government had submitted "forged" documents to seek assistance in the Hasan Ali Khan case. This exposure triggered a storm of sorts. Public interest litigants used it to show how the government was lying to the apex court about its seriousness in chasing Indian black money in foreign banks. BJP, too, used the Hardnews scoop to pin down the Congress-led government when the country was poll-bound. There was some noise about Swiss authorities cooperating with New Delhi to reveal Indians with accounts in their banks. Expectedly, nothing really happened. 

The issue of getting back our black money has sprung up again after WikiLeaks promoter Julian Assange was handed over a CD containing a list of 20,000 individuals with accounts in Swiss banks, including some Indian-sounding names. Estimates by Global Financial Integrity revealed that more than $500 billion has flown out of India since economic reforms were initiated in India. The figures had scandal written all over it. If economic reforms meant reducing bureaucracy, lowering taxes and tariff barriers, then why was there such a massive flight of capital? During the same period, China, which has been growing at a sizzling pace, bled more. Germany, France and other countries had many more tax refugees with humongous funds in Swiss banks. Surely, the rich do not like to pay taxes. 

Folco Galli informed me in 2009 that there were more queries about criminal money in Swiss banks coming from neighbouring European countries than India. Circumstances changed in 2008 when the Swiss government was arm-twisted by the US government to shed its banking secrecy and share with them the bank data of 4,450  tax evading Americans. This was after the backbreaking economic recession of 2008. Common wisdom then was that the recession and currency crisis had been aggravated by the flight of capital to tax havens and Switzerland. Meetings of G-20 countries to fight the global economic crisis passed resolutions for ending the perversion of tax havens.  Against the unrelenting Americans, the Swiss could do little. 

Since then many other countries like India are ostensibly demanding similar treatment as the Americans. Viktor Parma, co-author of - Rogue State-Switzerland Tax Evasions: How the biggest banking state of the world is corrupting itself and destabilising other countries, whom I met, made it clear that the Swiss will buy time, but never provide any details. "In my country violating banking secrecy laws is a crime." They could not, Parma says, resist the pressure from the Americans so they coughed up the information. 
In case of other countries like India, hope of getting information about bank account holders or getting the country's black money back is going to be extremely difficult. Parma told me that every year a delegation of Swiss private bankers visits India to lobby for liberal capital flows - which means allowing passage of large funds to Swiss banks. This is mostly money made through tax evasion and not money laundering or kickbacks, as Swiss authorities would tell you. But personalised banking can manage dirty money as well. 

Also, a lot of investments of Swiss companies like Novartis, Nestle, UBS and Credit Suisse are linked to Indians behaving themselves. If they decide to act tough, then investments could become a casualty. Little wonder that since 2009 the finance ministry has done precious little in chasing Hasan Ali Khan. Worse, for people like him who were raided by the income tax department, a window has been opened to sort out their troubled matters: Go to the Settlement Commission, pay your taxes and move on in life. There will be no taint and no questions asked.

The Indian government has taken refuge behind all kinds of international treaties to block information about tax evaders in foreign accounts. One wonders whether the government is with the evaders or with the people.

Editor of Delhi's Hardnews magazine and author of Bad Money Bad Politics- the untold story of Hawala scandal.

Read more stories by Sanjay Kapoor

This story is from print issue of HardNews