Why is India’s pursuit of offshore black money so confusing?

One of the lists was stolen by a former HSBC employee.
One of the lists was stolen by a former HSBC employee.
Image: Reuters/Denis Balibouse
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Those following the coverage of India’s black money problem over the years will know one thing too well—it can all get confusing after a while, with multiple lists, multiple agencies making statements about varying number of suspects, and multiple court proceedings.

So how many lists are there precisely and how many suspects? What did they do to be on this list and what is their destiny? What was the list the government gave the Supreme Court yesterday, and why is it being said that a court-appointed Special Investigation Team already has this list?

We have the answers.

Broadly, there are two lists. One is the HSBC list that is currently in the news. The second is the list of 26 account holders at the LGT Bank in Liechtenstein, a landlocked country between Switzerland and Austria. Both lists have been stolen by errant employees. At LGT Bank, a data entry clerk, Heinrich Kieber, leaked the list. And at HSBC Geneva, a former employee stole the list in 2006 before selling it to French authorities. There is a third category of people about whose overseas accounts the government has information, thanks to more than 72 bilateral treaties, known as Double Taxation Treaty Agreements, that India has signed with other countries.

But for now, about the two lists.

The list of 26 account holders in LGT Bank was handed to the Indian government by German authorities in 2008. In April this year, the Supreme Court forced the government to disclose the names of the account holders. The Germans have protested, saying that such disclosures are in violation of the treaty agreement under which countries agree to exchange sensitive financial information. A senior law officer of the Indian government said that while the government has nothing to hide in revealing the names of account holders in HSBC Geneva, it worries that such disclosures, even to the court, will impede the flow of such information in the future.

It was in 2011 that the ‘HSBC list’ containing 628 names was shared with the Indian government by the French authorities.

Now there is a problem. How can this information be verified, given that India has neither received it from Switzerland, nor from the bank that actually holds these accounts?

So India has been pressing both Switzerland and HSBC to verify the information provided in the list. Recently, the Modi government achieved a breakthrough when Switzerland agreed to provide information if the government can show evidence that an independent investigation under money laundering laws has been initiated against an account holder.

HSBC has separately agreed to part with information by devising a consent waving mechanism in its negotiations with the Income Tax department. But this requires that the individual account holder has to sign a form before HSBC will give Indian authorities information about the account.

But what is really there in the list that contains information on 628 Indians? The Indian Express has reported about the details in the list and notes the following: The list comprises 613 individuals and 15 entities (companies and trusts). No amount has been specified against 289 of them and 122 are repeated entries for joint account holders. Indian tax authorities have not been able to track 96 of them. Discounting for all of these, the list has some 120 names against whom India can launch investigations.

And yes, the full list had been given to the Supreme Court-appointed SIT this June.

But then comes the question of culpability.

Holding an account in an overseas bank is per se not a crime. In fact, if a person has ever been a non-resident Indian, he is legally allowed to operate a bank account overseas. So ultimately, the number of persons that India might successfully prosecute might be a small number. And at the end of a lengthy process involving multiple court proceedings and bilateral negotiations, how much money will eventually be repatriated to India? Nobody can tell.

In addition, this August, according to data provided by the finance ministry, India received classified information from a dozen countries on foreign accounts and statements, “with a basic fledgling domestic connect in each of them,” from New Zealand, Spain, the United Kingdom, Sweden and Denmark, Finland, Portugal, Japan, Slovenia, Australia, Mexico, Italy and Trinidad and Tobago. Almost 24,000 instances of alleged tax evasion were found in the last financial year. What will become of those connections is yet unknown.