Transparency ‘cop’ can help trace black money

The Special Investigation Team (SIT) constituted by the government to “bring back black money” is likely to help India plug its wealth draining to offshore tax havens with Swiss global tax activists saying that the government can put pressure on Switzerland by blacklisting it as a non-cooperative jurisdiction and complaining to the transparency supercop — Global Forum on Transparency.

The Paris-based organisation has the power to pull up Switzerland on its domestic law that allows it to reject requests based on information that authorities receive from whistle-blowers. India and Switzerland are both members of the peer review group of the Global Forum. The Swiss are worried that if they fail to clear the peer review, they could be branded as a “non-cooperative” jurisdiction, which will be bad for their business.

Switzerland has declined Indian requests for information on HSBC accounts based on a list of account holders sourced from a whistle-blower. The big challenge for SIT is that Switzerland says its laws don’t recognise “stolen data”.

However, in 2010, the US also received information from a whistle-blower on accounts in UBS, Switzerland’s biggest bank. Despite being the “stolen data”, Swiss lawmakers approved a deal in which data on thousands of accounts was given to the US.

India doesn’t wield the same influence over Switzerland as the US where some of the biggest Swiss banks have half of their business.

A recent report revealed that a $32 trillion (about Rs. 1,920 lakh crore) were hidden in more than 80 tax havens across the world. The author of the report, James S Henry, senior advisor, Tax Justice Network told HT, “We hope India will focus on investigating the key players in the global haven industry, including banks and accounting firms, and put people in jail. India could assist and protect whistleblowers, like Hervé Falciani, who is in France and who knows all about HSBC”.

The biggest obstacle for Indian investigators will be those who don’t leave data worth exchanging on the big accounts and who are either not paying interest or are hiding behind structures where there is no “beneficial ownership” data to exchange, he added.