Corruption Unlimited
FREDDY DIAS
When the Indian economy was being opened up two decades ago, it was perceived that with the end of the license and permit raj, India would emerge as a less corrupt nation. The entry of foreign money, however, opened a Pandora’s box instead. Politicians and bureaucrats started tweaking economic policies to make money through underhand deals. Some dishonest Indian businessmen found ways to evade taxes–routing money through tax havens was one of them. The country’s regulatory framework started firming up, but every time they found some way or the other to commit fraud.
There is ample evidence to substantiate that India witnessed a growing number of frauds over the last few years. The staggering rise shown in the ECIR or Economic Case Information Report from just 16 in 2008-2009 to 538 cases in 2011-12 has amply confirmed that activity revolving around money from the proceeds of crime is growing substantially. What is more, according to a survey on frauds, three out of every four companies in India believe that there is a rising graph in the incidence of fraud in the country. And so long as graft and corruption are concerned, India is way ahead of many countries across the globe.
The Union government has introduced various measures, mainly the Right to Information (RTI) Act, to make the system of governance a more transparent process, but the statistics have vindicated the stand of skeptics that India will remain a corrupt nation even after it may enter into the big league of developed nations by 2020.
It may be noted that between 2007 and 2012, the country’s key investigating agency CBI (Central Bureau of Investigation) registered 3,439 cases under the Prevention of Corruption Act against public servants, including senior officers. And the number has been increasing steadily. Whereas the track record of Indian Civil servants on the transparency front has not improved at all, their political masters have not fared well either. In fact, the involvement of politicians in corrupt practices is so prevalent in India that it is no longer an election issue any more as no political party in the country today is free of corrupt elements. This can be clearly gauged by the facts in various scams that have come to light in the last few years involving politicians from the ruling as well as from opposition political parties. This situation underscores the point that wherever there is money or power involved, corruption is a constant threat.
The rampant corruption in the governance and the consequent spike in the incidence of fraud in the business sector, has resulted in large scale black money laundering within and across the country’s borders. Money laundering involves disguising financial assets so that they can be used without detection of the illegal activity that produced them. There is no single method of laundering money. Methods can range from purchase or resale of a luxury item (e.g. cars or jewellery) to passing money through a complex web of legitimate business and fictitious companies. Investigations have revealed that billions of rupees are being laundered inside and outside the country annually through a number of methods, including hawala transactions, part of which reach terror groups.
There has been a growing concern on the issue of billions of black money taken illegally abroad and stashed in tax havens by India’s corrupt, after Global Financial Integrity (GFI), a US-based organization, ranked India fifth in the list of 160 developing countries suffering from the outflow of huge amounts of money through illicit channels. A US State department report, which, while finding chinks in India’s efforts to combat money laundering and financial crimes, had sought more participation of this country’s law enforcement agencies to bring in transparency in foreign trade as this has often been used as a backdoor channel to an underground financial system or hawala. The US report mentioned the role of hawala transactions in financing terrorism and the magnitude of illegal money transfers in India. The report estimates such transactions in the region of USD I2-I5 billion annually.
The US report specifically mentioned the abuses in the diamond trade while urging India to join the Financial Action Task Force (FATF), an inter-governmental body based in Paris, France. It was pointed out that by joining the FATF, it would become binding on India to share information relating to a financial crime registered by any member country in any jurisdiction even when the inquiry relates to a country’s VIP . All FATF members have the obligation to not only share information relating to an accused, but the law provides for attachment of property and arrest of an accused anywhere across national boundaries.
Investigation reports by India’s own intelligence agencies have revealed that through under and over-invoicing in a large number of cases, entities had been laundering money big time. In fact, India’s Financial Intelligence Unit (FIU) in its report had pointed out that the number of suspicious transactions through banking channels having escalated considerably in the last few years, and that at least 130 suspected cases related to terror financing.
Besides, in over 500 cases, the FIU-IHD found that banks and other financial institutions were not aware of the identity of the clients or their background, These accounts had been opened by fictitious entities. Parliament having passed the Money Laundering (Prevention) Act, India has effectively become a full-time member of the FATF which meets every four months. The amendments passed in the Act have expanded the scope of the money laundering (prevention) law by bringing in its ambit diamond traders, international wire transfer agencies and payment gateways like Visa and Master Card to compulsorily report transactions to FIU-IND. Casinos are among the other businesses brought under the Act.
(To be concluded)
