During the current election campaign, there has been a debate initiated by the Bharatiya Janata Party (BJP) on the action taken or not taken to identify the secret overseas bank accounts of Indian nationals and to bring the money back for use in our development projects. The BJP and the Congress (I) have been accusing each other of inaction in this regard.
The banking secrecy laws of countries such as Switzerland protect the secrecy of only the accounts of individual account-holders. Nations do not enjoy the protection of secrecy. Thus, while the Swiss Federalgovernment in Berne protects the secrecy of individual accounts, it has been publishing every year since the 1980s the total value of the deposits held in Swiss banks by residents of different countries.
The government of India became aware of this in the 1980s when a Sindhi nationalist organization of Pakistan got hold of this annual statement, made an analysis of the deposits held by residents in Pakistan and came out with serious allegations against some Pakistani political leaders and military officers. Since then at least till I was in service in 1994, thegovernment of India was getting a copy of this annual statement giving the total value of the deposits held in Swiss banks by residents in India. The figure, however, did not include the value of the deposits held in Swiss banks by Indians residing abroad. It is my recollection that the total value of the deposits from India used to be much less than that from Pakistan. More money from Pakistan was flowing to secret Swiss bank accounts than from India.
The information that the equivalent of billions of rupees was held by residents in India in secret accounts abroad is, therefore, not a secret. What needed to be found out was the identities of the account holders and the modus operandi by which they were sending the money to the secret accounts. Since the Swiss laws protected individuals unless there was strong evidence that the deposits came from criminal proceeds, successivegovernments in New Delhi could not make much progress in identifying these individuals.
In India, the collection of financial intelligence and the use of such intelligence to deal with organised crime groups, money-launderers and holders of secret overseas accounts were essentially handled by the Central Bureau of Investigation (CBI), the Directorate of Revenue Intelligence (DRI), the Enforcement Directorate and the Central Narcotics Control Bureau. There was no mechanism for a co-ordinated assessment of their intelligence, identification of gaps in their coverage and initiation of steps to fill such gaps.
This lacuna was sought to be filled up by P.Chidambaram, when he was the financeminister under Deva Gowda and Inder Gujral between 1996 and 1998 and his Revenue Secretary, M.R.Sivaraman, through the setting-up of a re-constituted Economic Intelligence Council chaired by thefinance minister. During its first meeting on July 22, 1997, it was reported to have set up a core group to monitor trends in financial crime and keep the Council informed. The Economic Intelligence Council, which used to act as a Joint Intelligence Committee to analyse and assess economic and financial intelligence and initiate follow-up action on it, used to meet regularly under the chairmanship of Chidambaram and Sivaraman was initiating the required follow-up action.
The Special Task Force for the revamping of the Intelligence Apparatus, under Shri G.C.Saxena, former head of the Research & Analysis Wing (R&AW),which was set up by the government of the then Prime Minister Atal Behari Vajpayee in 2000, found to its surprise that after Chidambaram and Sivaraman left office in 1998 the EIC and its core group had not met regularly and that many of the senior functionaries of thegovernment were not even aware of their being set up by Chidambaram. In its report, the Task Force included a separate chapter on economic and financial intelligence and made recommendations for revamping the machinery for the collection, analysis and assessment of the required intelligence.
Since the report of the Task Force has not been declassified and made available to the public, the public is not aware of the state of our financial intelligence set-up in 2000, the recommendations made by the Task Force to improve it and the action taken on them.
The attached annexure gives my observations on the state of financial intelligence in India as extracted from my book titledIntelligence: Past, Present & Future published by the Lancer Publishers of New Delhi in 2001. There have been some changes and improvements since then such as India becoming a member of the Financial Action Task Force (FATF) etc.