Postcolonial loot of the nation's wealth has reached serious proportions endangering the sovereignty and integrity of the nation. Stashing away Rs. 25 lakh crores of Indian wealth abroad -- as reported by Director, CBI in his public speech on 13 Feb. 2012 -- has created a situation of unprecedented financial instability in the country, apart from the dangers of associated terror financing.

If the rot is not stemmed immediately, with effective action by Indian Parliament, the already impoverished state of people below poverty line in the nation will seriously worsen further, which may result in a peoples' revolt of the type witnessed recently in Egypt against Mubarak and in Libya against Gadhafi (both of whom had stashed away their nations' wealth abroad).

The forthcoming 2012 Budget session should provide for focused attention of the Parliament on the serious financial situation the nation faces, caused by the announcement by a responsible official of the Govt. of India, Director CBI -- that 500 billion dollars (or Rs. 25 lakh crores at the rate of Rs. 50 per dollar) of Indian wealth has been stashed away abroad. Full text of his speech is in Annex B.

Rs. 25 lakh crores is a large sum of money. This is about 14 times the 2G scam which is estimated to be about Rs. 1.76 lakh crores.

If this sum of Rs. 25 lakh crores is brought into the nation's financial system, there can be a big boost to the poverty eradication programs of the country.

There are 6,38,596 villages in the country in 640 districts (2011 census). If this amount is distributed to these 640 districts equally, each district will get Rs. 3,906 crores for strengthening the Panchayati Raj institutions at the corporation, municipality, village levels for projects such as maintenance of village roads, village irrigation tanks, to finance primary health care and to provide for teachers in all schools. The funds can also be used to strengthen national security along the international borders and to forge an Indian Ocean Community as a developmental, an economic multiplier engine to finance Trans-Asian Railway and Trans-Asian Highway Projects and implement the amended Law of the Sea extending territorial waters to 200 nautical miles (as against the present 20 nautical miles from the shoreline).

The following demands should be made in the Parliament in the context of the serious financial emergency-type situation (Article 360) which has arisen in the country:
Declaration of Politically Exposed Persons' responsibility to strengthen the nation's financial system
Ban on participatory notes which facilitates the hawala routes mentioned by Director CBI for the post-colonial loot of the nation's wealth
Nationalisation of illicit wealth stashed away abroad consistent with the suggestion made by Senior Advocate Fali Nariman in his Rajya Sabha speech (Annex A)
Short of a Proclamation of Financial Emergency, there can be an orderly process to recover the illicit wealth stashed away abroad. Two months' notice can be given to owners of such assets to bring the monies into the nation's financial system, failing which, the assets should be deemed to be national property and transferred into the Consolidated Fund of India.

RBI restrictions on the definition of PEPs to Accounts of Politically Exposed Persons (PEPs) resident outside India should be revised and uniform standards should be announced to apply to both foreign and domestic PEPs. Individuals covered under Definition of Politically Exposed Persons (PEPs) for due diligence of ‘Know Your Customer’ Guidelines and Anti-Money Laundering (AML) regulations to include both domestic and foreign PEPs and their close associates and family members.

Definition of PEPs should be extended to cover all citizens of India who are are individuals (and their associates) who are or have been entrusted with prominent public functions e.g., Heads of States or of Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc. This definition should govern the financial transactions to be reported by financial institutions under the KYC (Know-Your-Customer) Guidelines.

India should reconsider the special diplomatic and financial status given to tax haven countries such as Mauritius (which accounts for nearly 50% of foreign fund flows into the country). Financial sanctions can be imposed in addition to specific measures. For e.g., Tax haven countries should be asked to enact on the lines of the Restitution of Illicit Assets Act (2010) of Swiss Federation to assist in the restitution of illicit assets as was done recently for such assets of Mubarak, Gaddafi and earlier for the assets of Ferdinand Marcos of the Philippines.

There is need for a global approach to combat high-level, large-scale public corruption. “Public corruption erodes democracy, rule of law, and economic well-being by undermining public financial management and accountability, discouraging foreign investment and stifling economic growth and sustainable development…Corruption by senior officials in executive, judicial, legislative, or other official positions in government can destabilize whole societies and destroy the aspirations of their people for a better way of life.” See http://georgewbush-whitehouse.archives.gov/news/releases/2006/08/20060810-1.htmlA PM should announce a similar national strategy to international efforts against kleptocracy which, like terrorism, is a threat to the governments and citizens alike.

FIU of RBI should report to other financial sentinels of the nation, all suspicious financial transactions. It is unclear if FIU has done such reporting on transactions which have come to light in the context of the 2G scam – transactions involving, DB realty, Kusegaon, Cineyug and Kalaignar TV. Director, CBI in his speech to the First Global Programme on Anti-Corruption and Asset Recovery in Delhi said on 13 February 2012: :"In some of the recent important cases being investigated by CBI such as 2G/CWG/ and Madhu Koda, we find that money is taken to Dubai/Singapore/Mauritius from where it goes to Switzerland and then British Virgin Island/Caymen Islands and other such tax havens. For the criminals all it involves is setting up of a few shell companies and then making layered transfers from one account to another in a matter of hours as there are no boundaries in banking transactions. For the investigators, however, each layer has to be peeled by sending an L.R. through judicial channels, and obtaining information from each leg of the transaction can take in many cases several years."

FIU, RBI, Finance Ministry should provide information on: 1) the list of Banks which provided information these transactions to the FIU; 2) investigations conducted by specific agencies; and 3) details – including dates -- of follow-up action.

Government should ban the Participatory Notes and institute an immediate probe on its original ownership, as suggested by the Tarapore Committee. Participatory Notes, routing hawla transactions is a major contributory cause of galloping inflation affecting the common man and further impoverishing people. National Security Adviser had warned against the terror link in stock exchange manipulation through this mechanism.

An ordinance should be issued to nationalise all foreign accounts held by Indian citizens. On the lines of the Banking nationalisation Act of 1969, an ordinance to nationlise illicit wealth held by Indian citizens and entities in tax havens.on the following lines:

Title. Nationalisation of Illicit wealth held in tax havens.

An act to provide for the acquisition of the foreign currency accounts held outside India in order to serve better the needs of development of the economy in conformity with national policy and objectives and for matters connected there with or incidental there to, with particular reference to Article 39 of the Constitution.

39. Certain principles of policy to be followed by the State: The State shall, in particular, direct its policy towards securing
...
(c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment...

1. Short title. This Act may be called the Foreign Accounts (Nationalisation) Act, 2011 .
2. Declaration as to the Policy of the State. It is hereby declared that this Act is for giving effect to the policy of the State towards securing the principles specified in clause (c) of article 39.of the Constitution.
Explanation.–In this section, “State” has the same meaning as in article 12 of the Constitution.
3. The acquisition is intended to enable foreign countries to restitute the illicit wealth to the Consolidated Fund of India.
4. A custodian will be appointed with immediate effect to release the accounts held by Indian citizens and entities which do not constitute illicit or stolen wealth - if the concerned account holders provide documents to substantiate to the satisfaction of the Custodian that the amounts held in the concerned accounts do not constitute illicit or stolen wealth..
The draft can be amplified further by legal experts by adding the usual sections such as Definitions and juridical requirements.

Kalyanaraman
Annex A

Excerpts from Fali Nariman's interview with Deccan Chronicle on 12 June 2011.

Q. Why aren’t things moving?
A. All parties are dragging their feet. Ten years ago, the Law Commission, headed by Justice Jeevan Reddy, drew up a draft bill to confiscate the property of those convicted under the Prevention of Corruption Act. I am surprised the National Democratic Alliance (NDA), United Progressive Alliance-1 and UPA-2 governments haven’t looked at this. This makes me believe that corruption in high places is not being tackled because high-level folks are involved.

Q. Would you have a concrete suggestion on the issue of Indian money parked in foreign banks, which most people think is unaccounted money on which tax has been evaded?

A. I have suggested when I was in the Rajya Sabha — some others have also said similar things: Why doesn’t the government try to introduce legislation to take over the accounts of all Indian nationals in Swiss banks?
A custodian can be appointed for such accounts. In effect, nationalise those funds with the specific provision that the custodian will release the money of people who can prove that it was officially remitted from India. The title will then re-vest in them. All this has nothing to do with tax treaties. This is not a tax matter.

Q. How will this work? The government cannot know who has parked money in a Swiss bank. Which particular accounts will the government refer to the Swiss authorities for action?

A. Pass the law, and the custodian will write to the foreign authorities to say that now I am the holder of all accounts (as per India’s law) and please give me the list of the Indians whose accounts are with you.
At least try it. If there is a better idea, then tell us.

http://www.deccanchronicle.com/editorial/op-ed/%E2%80%98keep-pm-judiciary-outside-lokpal%E2%80%99-822

Annex B
Updated Feb 13, 2012 at 05:45pm IST

Full text of the CBI Director's speech on black money

New Delhi: Indians are the largest depositors in banks abroad with an estimated $ 500 billion (nearly Rs 24.5 lakh crore) of illegal money stashed by them in tax havens, the CBI Director AP Singh said on Monday.

Here is the full text of the CBI Director's speech:

On behalf of the Central Bureau of Investigation, I extend a very warm welcome to all of you present here today for the inauguration of the 1st Interpol Global Programme on Anti-Corruption and Asset Recovery.

Full text of the CBI Director's speech on black money

This is a great moment for us because this is the first time that CBI has been given the privilege of jointly organizing a Training Programme with the Interpol Anti Corruption Office for which I must thank the Secretary General of the Interpol and Shri Jaganathan, who is present here.

I am grateful to Hon'ble Minister for Personnel for not only having spared his time to grace this occasion here today, but also for his support in organizing this training programme. Without the administrative support from the Ministry of Personnel, the programme would not have taken shape.

I am also grateful to the Director General, BPR&D for his gracious presence as well as for extending all assistance from the BPR&D for this training programme.

I also extend a very special welcome to all our guests from abroad. I hope your journey was comfortable and that you have a pleasant stay during the week here in India. You have come to India at the best time of the year and am sure will enjoy your stay with us and will be enriched professionally to strengthen international cooperation in the efforts to fight corruption and recovery of illegal assets.

Corruption has become a major governance challenge in today's world. Its effect on the economy of a country, more so of a developing country, is debilitating as it hampers socio-economic development. Corruption is a complex socio-economic and cultural phenomena the fight against which not only calls for innovative and localized solutions but also requires the support of the global community through INTERPOL and such other multilateral organizations.

There is no single remedy for fighting the menace of corruption. The battle has to be fought at many levels. The design of development programmes should provide for more transparency and accountability. Systems and procedures which are opaque, complicated, centralized and discretionary are a fertile breeding ground for the evil of corruption. 'Ethics in Governance' would hold key to good governance in any society. I am prompted to recall a famous verse from the ancient Indian scriptures which says "Yatha Raja Tatha Praja" in other words if the king is immoral so would be his subjects.

Development of new methods of financial flows and communication technology have made it easier for the corrupt to conceal and stash away stolen wealth. On the other hand, differences in legal systems, high costs in coordinating investigations, inadequate international cooperation and bank secrecy laws have made the task difficult for the anti-corruption authorities.

The World Bank estimates the cross border flow of money from criminal activities including corruption and tax evasion to be around 1.5 trillion US Dollars annually.

Around 40 billion US dollars of this flow is on account of bribes paid to public officials in the developing countries. Out of this, the World Bank estimates that only 5 billion USD in stolen assets have been repatriated over the past 15 years. That leaves a wide gap between the outflow from the developing countries and its subsequent repatriation.

Tracing, freezing, confiscation and then repatriation of stolen assets is a legal challenge. Managing the asset recovery investigation is complex, time consuming, costly and most importantly requires expertise and political will. There are many obstacles to asset recovery. Not only is it a specialized legal process filled with delays Page 3 of 4 and uncertainty, but there are also language barriers and a lack of trust when working with other countries.

The global financial market allows money to travel further and faster than ever before. In cases in which that money is the illicit proceeds of crime, particularly in the case of organized crime, this makes the tracing, freezing and recovery of assets even more difficult.

One of the most complicated aspects of international asset tracing is the issue of jurisdiction. Generally, the jurisdiction in criminal law is territorial and it is a well established principle that one State will not enforce their legal formalities on another State without following proper procedures. Criminals use these principles to their advantage, often spreading the crime over at least two jurisdictions and investing in a third.

In some of the recent important cases being investigated by CBI such as 2G/CWG/ and Madhu Koda, we find that money is taken to Dubai/Singapore/Mauritius from where it goes to Switzerland and then British Virgin Island/Cayman Islands and other such tax havens. For the criminals all it involves is setting up of a few shell companies and then making layered transfers from one account to another in a matter of hours as there are no boundaries in banking transactions.

For the investigators, however, each layer has to be peeled by sending an L.R. through judicial channels, and obtaining information from each leg of the transaction can take in many cases several years.

53 per cent of countries said to be least corrupt by the Transparency International Index are offshore tax havens, where most of the corrupt money goes. The tax havens include New Zealand ranked the least corrupt country, Singapore ranked No 5 and Switzerland ranked No.7.

There is a lack of political will in the leading tax haven States to part with
information required to trace such assets as they are all too aware of the extent to which their own economies have become geared to this flow of illegal capital from the poorer countries.

India in particular has suffered from the flow of illegal funds to tax havens such as Mauritius, Switzerland, Lichtenstein, British Virgin Islands, etc. It is estimated that around 500 billion dollars of illegal money belonging to Indians is deposited in tax havens abroad. Largest depositors in Swiss banks are also reported to be Indians.

We need to relentlessly pursue asset recovery strategies to make such illegal acquisitions a "No Profit High Risk" proposition.

It is in this backdrop that this Global Programme is being organized. The main
objective of the programme is to enhance the knowledge and skills of the police investigators and prosecutors in tracking the assets created out of corrupt activities, within the country and across the borders in an effective and expeditious manner. It is Page 4 of 4 also intended to sensitize them to mutual legal assistance in international and transborder investigations.

During the training they would be exposed to some of such complex investigations by persons who have actually dealt with tracing the proceeds of crime.

The problems that were encountered during such investigations especially when it related to trans-border issues will also be highlighted.

The participants are also being taken to the Centre for Training in Cyber & HiTech Crime Investigation. This was established by the Government of India in 2010 at the CBI Academy to train personnel from the CBI and from other law enforcement agencies in Cyber Forensics, Mobile Forensics and other such areas. These are an essential and integral part of any investigation related to financial frauds and transnational crimes.

I am sure the deliberations during the Training Programme would lead us all one step closer in achieving the daunting task of "assets recovery" in the emerging global scenario.

I once again wish all the participants a very pleasant and meaningful stay in
Delhi.

With these words, I once again welcome you all to this First INTERPOL Global
Programme on Anti-Corruption and Asset Recovery and wish this training programme a grand success. Thank you.

http://ibnlive.in.com/news/full-text-of-the-cbi-directors-speech-on-black-money/229889-3.html