Till now, whenever the Indian authorities tried to get details of bank accounts in Switzerland, as in the Bofors case, the standard response was that since there had been no criminality under Swiss law (which does not look askance at currency violations and tax evasion), the information could not be divulged. In most cases, this has been enough to stymie investigators back home. Going by last week’s agreement between the US authorities and Swiss banking giant UBS, however, there may be new hope on this front; the Swiss may finally be ready to dilute some of their famous banking secrecy laws.
The US-UBS agreement follows the charge that UBS’ offshore practices helped American citizens hide an estimated $18 billion in 19,000 accounts from the Internal Revenue Service. UBS has agreed to pay a fine of $780 million to settle allegations that it helped defraud tax authorities in the US. More importantly, it has agreed to stop offering offshore banking services to clients in the US. These would still be able to access UBS services, but only through units regulated by the US Securities and Exchange Commission. In other words, US authorities will have full access to information on US citizens using the services of this leading Swiss bank. In fact, UBS has also agreed to help the US government identify American citizens involved in tax fraud.
Importantly, the UBS settlement is based on an order by the Swiss Financial Markets Supervisory Authority, which can be approached by any foreign government. Given this development, it is important that the Indian tax authorities study how the Americans approached the matter, and then use all the leverage at their command to get Swiss banks to provide them with similar details. The issue is not a small one; figures that have been doing the rounds by e-mail and on internet websites say that Indians have more money in Swiss banks (about $1.4 trillion, or more than India’s GDP in a year) than the nationals of any other country. The figures have not been authenticated, but no one believes that the sums involved are small.
The truth, though, could be that the government does not want too much information on Indian money in Swiss banks; the manner in which the Bofors matter was handled, and how someone like Ottavio Quattrocchi was allowed to get his accounts un-frozen and to take out the money lying in his bank accounts, should be a cautionary tale to India’s investigation agencies. Not much, for instance, seems to have been heard about the government’s efforts to get the details of Indians who had bank accounts with the LGT Bank in Liechtenstein; the subject had surfaced when a former employee of the bank sold data on 1,400 customers to tax authorities across the world. While countries like Germany, the US, UK and others started investigations immediately, little is known of what kind of investigative work began in India, and what was done. Some letters were written by the finance ministry to the German authorities, but there the matter seems to rest. Transparency International tried to get some details from the ministry, but got nowhere. There is a new window of opportunity after the UBS deal, but India’s tax and other authorities will have to work at exploiting it. The US, for instance, provided details of the amount of tax losses it had suffered. Can India do the same?
