Revealing the names in public, without launching prosecution will hamper the Government’s effort to get more information about the persons stashing the illicit money in overseas banks. Rather than looking for overseas unaccounted accounts, the directive should be viewed in the angle of waging a war against the unaccounted money accumulated in India before it is transferred abroad. Revealing the names of the overseas bank account holders will amount to the breach of the bilateral treaties India has executed by exercising its sovereign function, with regard to double taxation. This will have impact on the signing of Foreign Account Tax Compliance Act (FATCA) with US and ultimately will have catastrophic effect on the inflow of funds from US. As Finance Minister said, “Whether revealing the names is not an issue, the issue is when to reveal”. The Government finally gave a list of some 627 accounts, which is already there with Supreme Court mandated SIT. The point to be discussed here is the direction of SC will amount to encroach in the sovereign power of the state? The treaties are executed by the Government by exercising its sovereign power. The present directive of the Apex Court can be seen as manifestation of its earlier statement “Sky is our limit”. But the same Apex Court in 1969 in Maganbhai Ishwarbhai Patel vs UOI (1969 AIR 783) case held that “The question is one of authority. Who in the State can be said topossess plenum dominion depends upon the Constitution and the nature of the adjustment. As to the necessity of it, the Courts must assume it as a matter of law. It is scarcely to be thought that the validity of the action can ever depend upon the judgment of a court.”
Black Money issue is governed in India by money laundering regulations. The Financial Intelligence Unit (FIU) within the Ministry of Finance in India has been empowered under the money laundering regulations to investigate such matters. The responsibility of dealing with the challenge of unaccounted wealth and its consequences is jointly and collectively shared by a number of institutions belonging to the central and state governments. These include various tax departments which are assigned the task of enforcement of tax laws. Among them the important ones are the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC). However, there are various other regulatory authorities undertaking supervision and policing. They include the Enforcement Directorate (ED), Financial Intelligence Unit (FIU), Economic Offences Wing of the State Police, Central Bureau of Investigation (CBI), Serious Frauds Investigation Office (SFIO), and Narcotics Control Bureau (NCB). In addition, there are coordinating agencies such as the Central Economic Intelligence Bureau (CEIB), National Investigation Agency (NIA), and the High Level Committee (HLC), which also play an important role in fighting the menace of black money
Other than that India has specific Act, i.e. Prevention of Money – Laundering Act, 2002 (PMLA) to deal with the issue of Black Money. As the definition of Black Money is not very clear under this Act, it attracts so many other regulations like Tax Laws, Industrial Dispute Act, and Minimum Wages Act and so on. All other Acts are attracted to PMLA is to find out the how illegal wealth is accumulated by evading the payment of statutory duties under those regulations. Laws in India regarding money laundering are not so feeble. PMLA absolutely places the burden of proof on the accused to prove that he holds untainted property. Furthermore, any bank involved in such operation can be compelled to disclose such information.
“Tax evasion is not a criminal offence in Switzerland. Holding an account in an overseas bank is not actually a crime in India. So, defining Black Money is difficult, it doesn’t have well distinguishable legal definition, however, it can safely be termed as the unaccountable money or money accumulation without reporting to tax authorities. So, for disclosing the names of persons having the money in foreign banks will have tremendous effect on the bilateral pacts regarding taxation treaties between two countries.”
Under Section 12 of PMLA, all Banking Companies, Financial Institutions and Intermediaries are required to maintain a record of all transactions, including information relating to transactions for a period of 5 years, in such manner as to enable it to reconstruct individual transactions, and furnish to the concerned Authorities under PMLA, all information relating to such transactions, whether attempted or executed; the nature and value of such transactions; verify the identity of its clients and the beneficial owner, if any; and maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence.
Obviously, the PMLA provision casts obligation on the Banks to share the info regarding their client to an authority, if there is a prima facie doubt. However, It is not applicable to the overseas Bank, the banks cannot leak the information of its account holders to a third party by violating the Banking secrecy. Switzerland has introduced a new Tax Administrative Assistance Act (TAAC) with effect from 1 February 2013 governing the exchange of information in relation to Swiss bank account holders. If anything at all, the TAAC will act in relation to exchange of information with Indian regulators in relation to Indian tax evaded monies in Swiss bank accounts? And share their info with SIT? Recently, Valentin Zellweger, Director and Legal Adviser, Swiss Department of Foreign Affairs, asserted that there is no banking secrecy in case of illegal acts. He said that “There’s no banking secrecy if we talk about illegal acts. So if we get a request from a prosecutor in another country, there’s no banking secrecy. We have very stringent know your customer rules. So we are quick in being able to give the information,” Hope the recent meeting of representatives of various countries in Berlin to agree on a way to enhance exchange of banking information will end the era of Banking secrecy. However, the tax evasion is not a crime under Swiss Law, so one has to see, if the Government can get the required details from Swiss Banks, so quickly by clearing all the administrative rules attached to TAAC. It clearly says the request for divulge the details will not be entertained, if the information regarding the account holder is obtained by the acts that are punishable under Swiss Law including the illegal acquisition of data. In other words, the stolen Bank data of a person is illegal under Swiss Law and it is a delicate issue. We have to wait and see the names given by the Government will help SIT in gettingmore info with regard to Black Money of those account holders. The TAAC has a saving provision which provides for a completely separate regime for requests from the US, which are not subject to the TAAC. Perhaps, it is time to consider whether India should negotiate a separate agreement with Switzerland which exempts them from some of the dilatory requirements of the TAAC. Generally, the data regarding the black money investigations are confidential tip-offs or from whistle Blowers within the organization. It is important to assess the Double Tax Agreement between Switzerland and India, which allows for exchange of information in this front. Under DTA the evidence of acquisition of data is required to be supplied to Swiss authorities to probe the case effectively and will shift the burden to prove the legality of wealth on the account holder.
“The Supreme Court’s directive to the Government to disclose the names having accounts in Banks situated outside India, and appointment of Special Investigation Team (SIT) is a major debate amongst the think tanks.”
As stated in the white paper submitted in 2012 by the then Finance Minster: It is therefore necessary to create awareness about these aspects and encourage understanding about the lack of any universal panaceas or magic remedies for this complex socio-economic problem .Prevention of unacceptable aberrant behaviour needs strong policy deterrence. The need of the houris to create effective administrative systems, using technology-based data processing, to generate actionable intelligence. In a federal structure of governance, this will require cooperation between agencies of the central and state governments. Moreover in an increasingly globalized environment, it would need strong initiative son part of the Indian state to develop and strengthen mutual cooperation with the rest of the world.
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