Sebi, RBI on watch for illicit Swiss money coming back home

23 Jan, 2011, 06.30PM IST,PTI

NEW DELHI: Financial regulators Sebi and RBI have enhanced vigil on Indian entities routing their funds from secretly-held Swiss bank accounts to India through Dubai and other locations, on fears of getting exposed for stashing the money in the European nation.

The stepped-up vigil for money laundering activities by the country's two financial regulators comes in the midst of suspicion that there could be some Indian entities in the list of over 2,000 Swiss bank accounts that are expected to be disclosed soon by whistle-blower website Wikileaks.

While banks in the Middle East have seen a sudden spurt in their deposits in past few months, queries mailed to Swiss Bankers Association remained unanswered on whether the banks there have seen a rise in withdrawals.

It is feared that the Indian entities having accounts in Swiss banks might move their funds to Middle East and other locations and then route them back to India, either into the stock market through FIIs or the FDI route.

While Sebi is responsible for oversight on funds flowing into or out of capital markets, RBI approval is needed for FDI (Foreign Direct Investment) inflows for many sectors. Besides, RBI also monitors flow of overseas funds into stock market through foreign or overseas banks.

Sources said that Sebi and RBI are taking a pre-emptive stance to guard against any possible flow of illicit money to the country and would broaden the scope of their oversight by indulging other institutions such as banks and brokers, only after firm indications of such capital flows.

The sectors suspected to be vulnerable for such funds could be real estate, agriculture and infrastructure, which are among the 'sunrise' segments of the Indian economy and have large-scale fund requirements, they added.

Sources said that all the funds held by Indian entities in Swiss banks might not necessarily be illicit wealth, but include genuine funds that are not willing to take a chance given the negative publicity generally associated with Swiss banks.

The issue of money lying in Swiss banks has become a matter of intense debate in India, with opposition parties and even the courts asking the government to take concrete action against those having stashed black money overseas.

Besides the expected Wikileaks expose, there are also fears that revised tax treaties that India is working on with various countries including Switzerland might lead to some stern action against the tax offenders in the country.

However, the government might not make public the names of entities it gets through the information exchange mechanism of these treaties, as this might lead to breach of the treaty and also hinder the enforcement actions.

Source : The Economics Times

Unearthing Indian black money in Switzerland

HP Agarwal / January 24, 2011

The Government of India has signed a Protocol with the Government of Switzerland in August 2010 for the purpose of amending the Tax Treaty between the Swiss Confederation and the Republic of India. The protocol has been signed with the intent to enable the Government of India to access the accounts maintained in the Swiss banks by the Indian tax evaders and to gather such other informations as may be necessary to tax the unaccounted money stashed in Switzerland. The Government of India took note about the money kept by the Indian tax eva-ders in Swiss Banks, which is estimated at around $462 billion. The effort of the government is to bring the money back to India and also to collect due taxes which might have been evaded.

However, this protocol which was intended to take effect from 01st Jan, 2011 has not entered into force yet, since the entire legal requirements and other procedures which are necessary for giving effect to the amending protocol have not been notified by the Governments of the contracting States. The amendment is still to be approved by the Swiss Parliament.

The above step of the Government has been widely acclaimed by the public at large. Infact, a Public Interest Petition is also being heard by the Hon’ble Supreme Court these days where the Apex Court has taken this problem very seriously and has questioned the government by observing “it is a pure and simple theft of the national money. We are talking about mind-boggling crime. We are not on the niceties of various treaties”.

It is however felt that unearthing black money kept in Switzerland may not be as simple an exercise as is being communicated by the Government circles. Amendment of Tax Treaty with Switzerland will certainly help, but this alone will not be enough and sufficient to rope in those who have stashed money outside India.

Let us not forget that a particular individual’s money may infact be lying in the name of a different person, quite often a foreigner to India. It is unthinkable that any clever Indian would keep money in a Switzerland Bank in his own name. It is also reported that the money in Switzerland may also be in the name of some discretionary off-shore trusts. Likewise, there would be difficulties in tracing the trail of money if the money is invested by the person concerned outside Switzerland or in circuitous manner with the protective layer of several tax haven countries. It is also possible that the money is kept in safe custody like locker etc. instead of bank accounts. In all such cases, a mere amendment to the tax treaty may not be sufficient.

The protocol involves a cumbersome procedure whe-reunder the Indian compe-tent authority has to provide exhaustive and exact details about the persons in respect of whom information is required from Switzerland. What about the cases where such an exhaustive information is not available with the Indian authorities?

It is also to be kept in mind that a person who maintains bank account in Switzerland for the purpose of parking the unaccounted money earned in India by dodging the Indian tax and other authorities must be an intelligent and powerful man. Such a person will also know how to close his account and transfer all his funds to other places without leaving any trail. For this he does not require much time.

In this context the action of the government to announce an amendment in August 2010 and to give it wide publicity is more than enough to give a chance as well as time for transfer of funds to other safe tax havens. It is like an intimation of the raid before the raid is actually conducted.

It is felt that all this publicity about amendment in the tax treaty will only help the offenders to escape.

The author is a Sr Partner in S S Kothari Mehta & Co. E-mail: hp.agrawal@sskmin.com

Source : Business standard

Indian Swiss accounts now proven

20 Jan 2011,

It's now proven there are Indian acounts with almost trillions stashed away in Swiss bank acounts. There is global pressure for India to act and nail those who've stashed away billions in secret Swiss accounts. In the first direct confirmation of Indian black money in Swiss Banks, John Christiansen, the director of Tax Justice Network, the tax evasion watchdog - says India can do a lot more if it wants to get back Indian money in Swiss accounts. Swiss Finance Ministry has promised to help India with details of particular accounts if the government provides proof that tax evasion has taken place. Meanwhile, even as the global pressure builds, the issue was reportedly also discussed in the Cabinet meeting. Global watchdogs say it has been proven beyond doubt that a large chunk of the money in Swiss banks is from India. Leading international tax advocacy groups are now demanding that India act to ensure that India use its international clout to access the information on these accounts. In a clear indication that the government is buying time on the black money controversy, both the Cabinet and Central bureau of direct taxes says, it is working proactively to get details of the Swiss black money. The Supreme Court pulled up the Government for withholding information on black money stashed in foreign banks, saying it is not just limited to tax evasion but a "mind boggling crime" amounting to theft and plunder of national wealth having security ramifications. The apex court made the observation while hearing a petition filed by noted criminal lawyer Ram Jethmalani, who along with some retired bureaucrats and police officers, approached it seeking directions to the government to take steps to bring black money to the tune of one trillion dollars stashed in foreign bank back to the country. The Centre's contention before the court is that it was a case of tax evasion and it cannot make public the names of Indian account holders. Source : Times Now SC pulls up govt on black money issue Dhananjay Mahapatra, TNN, Jan 19, 2011 NEW DELHI: The Supreme Court on Wednesday chided the government for restricting names of those with black money stashed abroad to Liechtenstein Bank account details disclosed by Germany. It said the government was wrong in treating black money as a tax issue when it was simple and pure theft of the Indian economy. The court said information from banks in all countries was needed. ( Read: Ex-Swiss banker gives secret documents of super rich to WikiLeaks ) Criticizing the government for not making public all the names on the list, the apex court said plunder of the nation had taken place. ( Read: Indian names in Swiss bank disclosure to WikiLeaks ) "It is a pure and simple theft of the national money. We are talking about mind-boggling crime. We are not on the niceties of various treaties," remarked a bench comprising justices B Sudershan Reddy and S S Nijjar, while hearing a petition by former law minister Ram Jethmalani and others for retrieving Indian black money stashed in foreign banks. The remark by the bench came when Solicitor general Gopal Subramanium was explaining various steps taken by the government under the Double Taxation Avoidance Act. The court was unhappy that the government filed an affidavit restricting information relating to the money amounting to Rs 43 crore deposited by 26 persons in Liechtenstein Bank in Germany. "This is all the information you have or you have something more?," the bench asked. The apex court said since it was dealing with a serious issue in a public interest litigation, it would not hesitate to expand the scope of the petition. Meanwhile the government said it was ready to share information with the Supreme Court but not make it public since it was in the process of getting more details of foreign accounts of Indians from other countries under the DTAA regime. A Congress spokesperson said the government was doing everything possible to bring back the black money stashed abroad. ( Read: Declare names of Swiss bank account holders: BJP ) On Tuesday, senior BJP leader L K Advani referring to the issue had said he had great hope that the Supreme Court would act on the issue of black money stashed in foreign banks as people like Ram Jethmalani and K P S Gill have taken up the matter. ( Read: BJP, Congress spar over black money issue ) "Eminent people like Ram Jethmalani, Subash Kashyap and K P S Gill have approached the court on the issue. I have a great hope in the Supreme Court," Advani had said. "An international organisation has said that more than Rs 20 lakh crore of Indian money is stashed is foreign banks. If it is brought back, it will satisfy infrastructure needs of the country," Advani said. ( Read: Black money trail: 'India drained off Rs 20 lakh crore during 1948-2008' ) Times of India Karat slams laxity in seizing black money in foreign banks 2011-01-23 ccess insightful information... ...now Free, Instant & Unlimited www.worldstreetfundamentals.com Agartala, Jan 23 (IANS) The United Progressive Alliance (UPA) government is not taking any steps to bring back black money stashed away by Indians in foreign banks, Communist Party of India-Marxist (CPI-M) general secretary Prakash Karat said here Sunday. 'The Supreme Court is also not satisfied with the central government's inaction over the black money issue,' Karat told reporters. 'The laxity of the government in unearthing black money stashed (away) in Swiss Bank accounts and other tax havens has been exposed by the recent observations of the apex court,' he said. 'Unaccounted and ill-gotten wealth, amassed through tax evasion, money laundering and other illegal means, put in Swiss Bank accounts should be confiscated by the Indian government,' the CPI-M leader said. The money should be brought back to India and the 'details of the account holders must be made public', he said. According to Karat, any delay in undertaking these steps would be unacceptable. Criticising the UPA government's decision to allow foreign investment in retail trade, the CPI-M general secretary said that the Left parties would resit forward trading by foreign companies in essential items. He said to agitate against the price rise, a week-long agitation would be held from Feb 3 across the country. A mass gathering would be held in New Delhi Feb 9, in which leaders of nine non-Congress and non-Bharatiya Janata Party parties would participate. Source : Sify