Swamy and experts demand CBI to register FIR against persons with illicit assets abroad



Read the complaint (embedded document) submitted by Swamy today to CBI Director AP Singh on behalf of Action Committee Against Corruption in India (ACACI).

CBI should act with urgency and conviction to demand restitution of illicit wealth held in tax havens.

For instance, Switzerland is bound by its laws to enforce restitution of illicit wealth held by politically exposed persons (PEPs) defined clearly under an Act called RIAA (Restitution of Assets of Politically Exposed Persons obtained by unlawful means)(See embedded document with explanatory note by M.R. Venkatesh). This is effective in Switzerland from 1 Feb. 2011. PEPs have been defined under the UN Convention against Corruption to which India is a signatory.

Article 52 of the UN Convention Against Corruption states that: “…Each State Party shall take such measures as may be necessary, in accordance with its domestic law, to require financial institutions within its jurisdiction . . . to conduct enhanced scrutiny of accounts sought or maintained by or on behalf of individuals who are, or have been, entrusted with prominent public functions and their family members and close associates….”

“Politically exposed persons (PEPs), such as Head of States and high public Officials, who illegally enrich themselves through state funds, deprive their state of capital and hinder the development of their country. These sometimes called potentate funds are frequently sent out of the country and invested in international financial centres. Switzerland has a fundamental interest in ensuring that assets of criminal origin are not invested in the finance centre Switzerland. Swiss laws and procedures to combat money laundering, corruption and the financing of terrorism are effective means of keeping out illicite funds of PEPs.”

“Identification: banks must be able to identify their clients and the origins of the monies
The strict provisions of Switzerland’s anti-money-laundering legislation oblige Swiss banks and all other providers of financial services not only to identify the party to the agreement, but also to establish the economic beneficiary (“Know Your Customer”). Moreover, the Swiss Money Laundering Act makes provision for a special duty of clarification with regard to PEPs. Swiss banks are regarded as pioneers in keeping out illegal funds; already in 1977 they drew up their own strict due diligence rules. Reporting and freezing: suspicious transactions are reported.
The banks and other financial intermediaries are obliged to report any suspicious transaction to the Money Laundering Reporting Office (MROS) and if substantiated to immediately block an account. Swiss banking secrecy does not offer any protection against criminal prosecution either within Switzerland or in respect of international legal assistance. Additional measures prevent assets from being withdrawn before foreign authorities submit a formal request for legal assistance “http://www.eda.admin.ch/eda/en/home/topics/finec/intcr/poexp.html

Subramanian Swamy demands filing of case against black money defaulters

PTI / Monday, November 28, 2011 14:40 IST

Janata Party President Subramanian Swamy Monday met CBI Director and demanded registration of cases against Indians who have allegedly stashed away money in foreign banks.

Swamy, who heads Action Committee Against Corruption in India (ACACI), met Director AP Singh in the morning in Delhi with his complaint, demanding registration of cases.

Singh assured him that his complaint would be “examined” and action would be taken if it came under CBI’s domain.

“Subramanian Swamy had requested a meeting with Director, CBI today. He handed over a complaint regarding alleged illegal bank accounts of Indians abroad. The Director told him this will be examined and acted upon if CBI has jurisdiction,” CBI spokesperson Dharini Mishra said.

Swamy told reporters after the meeting that the CBI Director has given an assurance that the agency will take a decision on his complaint within a fortnight.

Recently, the Central Board of Direct Taxes had given a list of 18 individuals, received from German authorities, to CBI to ascertain if they have any pending cases with it.

CBI, in its reply, had informed CBDT that except one individual, none of the rest 17, whose names have been provided to it, had any case against them.

The agency said a preliminary inquiry was intitiated in 1999 against one of the individuals mentioned in the list and it was closed for the want of evidence.

The government has imposed a penalty of Rs 24.66 crore on these 18 individuals who have bank accounts with Liechtenstein’s LGT Bank on the basis of information provided by the German authorities.



ACACI complaint to CBI for FIR against persons holding illicit assets abroad


First Information Report

A complaint under Prevention of Corruption Act, Prevention of Money Laundering Act, Foreign Exchange Management Act to be read with Sections under Indian Penal Code against unknown offenders.

FIR Complaint under Prevention of Corruption Act, Prevention of Money Laundering Act, Foreign Exchange Management Act to be read with Sections under Indian Penal Code against unknown offenders (2011)

Restitution of Illicit Assets Act, RIAA
How Indian black money in Swiss banks can be brought back

Last updated on: June 27, 2011 14:35 IST

M R Venkatesh

Swiss banks, thanks to their legal mandate for maintaining secrecy, have gained a notorious reputation over the years in favouring politically exposed persons (PEPs) to deposit their loot in such banks.

Now, the good news is that Switzerland is ‘poised to become an example of one of the most forward-leaning countries in the quest to return stolen assets to developing countries’.
The Swiss Parliament, it may be noted, passed a new law in February 2011. Termed as the Restitution of Illicit Assets Act (RIAA), this law has the potency to make and mar the reputation of several PEPs across continents.

What is pertinent to note here is that, among other things, the law according to some experts allows the Swiss cabinet to freeze contentious assets of PEPs even if a country has not formally asked Switzerland to do so.

The maximum impediment till date in such cases was that the requesting state was invariably found to be extremely short on evidence in providing the Swiss authorities the necessary details in laying bare an account, especially of someone in power.

Interestingly, media reports suggest that this law has been tested in cases involving some of the dictators in the Middle East. “I can confirm that Switzerland has frozen possible assets of the former Egyptian President with immediate effect,” a foreign ministry spokesperson told news agency Reuters recently.

The spokesperson neither confirmed how much money Switzerland froze nor provided any other details in the case involving the Egyptian dictator. Crucially, the change to Swiss law makes it easier for a country to freeze dictators’ assets even if their countries are in disarray.

Other dictators have lately found themselves unsuspecting victims of this Swiss law as well. For instance, the Swiss government has reportedly frozen the assets of Laurent Gbagbo, the President of Cote d’Ivoire (who lost the elections but has refused to step down), and that of Zine el-Abidine Ben Ali, the former President of Tunisia, who was deposed earlier this year.

Experts opine that Switzerland’s decision to freeze any assets of former Egyptian President Hosni Mubarak was made faster than anywhere else as the nation no longer wants to be perceived as a place where dictators can stash ill-gotten money.

Further, they point out how Switzerland, where about 27 per cent of the world’s privately held offshore wealth is managed, has tightened money laundering rules to curb the inflow of illicit funds.

A governmental web site points out how that nation has returned about 1.7 billion francs ($1.8 billion) of dictators’ assets to their countries of origin, more than any other financial centre of a comparable size.

And all this makes it extremely exciting in the Indian context.

Understanding the potency of RIAA and other Swiss laws

The main issue in connection seeking restitution of assets involving PEPs has been invariably the inability of the requesting state to furnish necessary proof or the necessary judgments to Switzerland.

Notwithstanding such lack of evidence (possibly arising from the lack of homework or political pressure in preventing evidence being marshalled in the first place), it is often seen such requesting state expects Switzerland to cooperate and repatriate the illicit wealth.
The Swiss believe that if this legal prerequisite is not met due to the failure of state structures within the requesting state, the RIAA can henceforth provide a comprehensive solution.

In short, the RIAA provides a formal legal basis for the restitution of assets confiscated for the benefit of the country of origin.

Experts note that the law is aimed at undertaking restitution of illicit assets of PEPs because of the inherent failure of State and the judicial structure in the State concerned.

The RIAA also applies when a request for international mutual legal assistance in a criminal matter is unable to succeed in Switzerland due to the state of failure in the requesting country, in which the PEPs exercised or continue to exercise a public function.

The RIAA makes it possible to freeze and confiscate assets which are potentially of illicit origin without the need for a criminal conviction of the PEPs in their country of origin. And that is the crux of the issue and how India can profit from these developments.

It is in this connection, and contrary to the popular belief, that Switzerland claims to have launched several initiatives to promote internationally coordinated action to combat potentate — read, illicitly stashed — funds.

The international community, Switzerland suggests, must form a common front to prevent the inflow of such funds, to quickly freeze assets of criminal origin and return them to the rightful owners. How wonderful!

Further, the Swiss claim that strict provisions of Switzerland’s anti-money laundering legislation oblige Swiss banks and all other providers of financial services to establish the ultimate economic beneficiary.

Moreover, the Swiss Money Laundering Act makes provision for a special duty of clarification with regard to PEPs.

The banks and other financial intermediaries are obliged to report any suspicious transaction to the Money Laundering Reporting Office and, if substantiated, to immediately block an account.
Swiss banking secrecy laws do not offer any protection against criminal prosecution either within Switzerland or in respect of international legal assistance.

Additional measures prevent assets from being withdrawn before foreign authorities submit a formal request for legal assistance.

So, what needs to be done?

Much of what has been stated above is from the official websites of the Swiss government. Naturally, and for the uninitiated, it would seem that getting back our wealth is as simple as sending an SMS to Switzerland, hoping they would do the needful.

The truth of the matter is that it is not as simple as it seems.

Lest the reader believes that the Swiss will be reluctant to part with the details of the accounts, one could be sadly mistaken. It is, of course, another matter that such restitution will ruin their economy and hence would be foolish on our part to expect their full cooperation.
If the Swiss are one part of the story, PEPs in India will be another stumbling block in getting back our wealth.

The RIAA defines PEPs as those who exercise or have exercised a public office. Further, the RIAA applies when a country is able to satisfy the requirement of legal assistance proceedings owing to total or substantial collapse of its national judicial system.

What is crucial is that the RIAA presumes that assets are of unlawful origin, where the wealth of PEPs has been subject to an extraordinary increase connected with their term in office or the level of corruption in the country of origin or surrounding the PEPs in question during their term of office is or was acknowledged as high.

Much as it would be disturbing to an average Indian, the fact remains that our judicial system is in a state of complete paralysis.

Similarly, when it comes to most of our PEPs, their wealth would have recorded extraordinary increase during their term in office. Alternatively, corruption during their term in most cases would be perceived or acknowledged to be high.

That makes India a very peculiar case. Speaking at a seminar recently in Chennai, Janata Party president Subramanian Swamy suggested a brilliant idea: send a list of all Members of Parliament and Members of Legislative Assemblies (all those who had occupied office for the past twenty years), high ranking members of the administration, judiciary and senior executives of all government-owned corporations to Switzerland under RIAA.

At best, they may number anywhere between 20,000 and 50,000. Along with their close relatives, this number may go up to a few lakhs.

But given their involvement in corruption, it would be puerile to believe that our polity — read PEPs — would write, cooperate and coordinate with the Swiss authorities under the RIAA to get back their own illicit wealth from Switzerland.

Unlike banana republics, which got its wealth back, the situation is far serious when it involves India. Unfortunately, in India most political parties (ruling or opposition), some in our judiciary, the intelligentsia, many members of our media are beneficiaries of the illicit wealth parked in Switzerland.

In short, it is akin to a rigged cricket match where the loser contrives to lose — the protests against corruption and the attendant illicit wealth parked abroad by certain political parties, sections of the media and others are more chaotic than meaningful.

Naturally, this is an opportunity and a challenge to our civil society. The extant situation, especially the RIAA, provides a window of opportunity. The issue of nationalisation of all accounts in tax havens, given their numbers and associated legal complexity, is extremely difficult.

For starters, as Subramanian Swamy suggested, how about putting pressure on Parliament to pass a resolution concerning all PEPs to retrieve our wealth through the RIAA? How about the civil society getting its act together and pressing for one such resolution in the forthcoming monsoon session?

Anybody game for this simple yet effective short-haul war on corruption?

The author is a Chennai-based chartered accountant. Comments can be sent to mrv@mrv.net.in



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