Part 1 of Operation Red Spider was just the tip of the iceberg!
Cobrapost’s Continuing Shocking Expose: Twenty-Three Major Indian Banks, Both Public and Private, and Insurance Companies, are Running a Nation-Wide Money Laundering Racket, Blatantly Violating the Laws of the Land.
And the culprits being exposed this time are:
Life Insurance Corporation, State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, Indian Bank, IDBI Bank, Yes Bank, Federal Bank, Reliance Capital, Birla Sunlife and many, many others.
New Delhi, May 6: In its continuing undercover operation, spanning several months, Cobrapost finds dozens and dozens of major public sector banks, and many more private banks, across the country are blatantly involved in money laundering, as are major insurers. In all, 23 banks and insurance companies have been exposed, namely, State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, Indian Bank, Indian Overseas Bank, IDBI Bank, Oriental Bank of Commerce, Dena Bank, Corporation Bank, Allahabad Bank, Central Bank of India, all public sector banks, and their insurance associates; Yes Bank, Dhanlaxmi Bank, Federal Bank, DCB Bank, HDFC Bank, ICICI Bank and Axis Bank, all private banks, and their insurance allies; besides the state-owned LIC of India, Reliance Life Insurance and Birla Sunlife, and Tata AIG, among private sector insurers.
Operation Red Spider 2 establishes beyond doubt that money laundering is not confined to private banks, and is not an aberration, as is being made out in certain quarters in the wake of the first expose on March 14 in which HDFC Bank, ICICI Bank and Axis Bank were shown involved in money laundering; it is rather endemic overarching the entire banking system and insurance sector, without exception, however shocking it might be. The scale is vast and unfathomable.
Our undercover investigation conducted for more than half a year, and spanning many states including Uttar Pradesh, Rajasthan, Delhi, Haryana, Andhra Pradesh and Karnataka, bring to the fore some glaring facts about the banking and insurance business in India that
• Money laundering practices are part and parcel of banking and insurance business across the board;
• Even a walk-in customer can avail of such services that help him launder all his unaccounted cash;
• Money laundering services are being offered openly as a standard product across the board.
But The Cover Up Has Been An Even Bigger Scandal:
However, even more shocking than the Expose itself has been the ease with which the Reserve Bank of India, The Finance Ministry and the Banks themselves have handed out clean chits, on the premise that “there were only violation of KYC norms” and as such “no money laundering took place because no transaction took place”.
This is facile, euphemistic and absurd to say the least. The officials caught on tape in Episodes 1 and 2 have demonstrably stated that they would engage in money laundering for our reporter. The proceeds of corruption, tax evasion and worse are sought to be invested and made legitimate. According to the officials of banks and insurance companies, they have done this plenty of times in the past and are only too eager to do it again. This amounts to crystal clear offenses under IPC as well as the PMLA (Prevention of Money laundering Act). There is no ambiguity on this account whatsoever.
The other question to ask is: Why were KYC norms NOT being followed? Were these dozens and dozens of cases mere oversight on part of the bankers ... or were KYC norms DELIBERATELY not followed because in money laundering, there can be NO KYC done at all! That was the reason no documents were asked for, no paper trail was left, no transactions were reported.
In addition, these transactions are not confined to a few low-level front-office staff members as is being made out in all the so-called ‘inquiries’. Our interactions with all officials, some with the ranks of divisional manager, territory manager, assistant general manager and vice presidents, with scores of branches under their charge, bear it out clearly that they are parties to and facilitators for these transactions and are conducting their questionable business with nonchalance that only crooks show when they find they are above law or when they find the powerful are on their side.
Finally, given Mr. Chidambaram’s repeated warnings to money launderers and tax evaders that “we are watching you and will come after you”, till date, no investigative agency has launched any investigation into the heaps of evidence submitted by Cobrapost. Why is the FM himself overeager to declare innocence on part of the banks, as he did on March 14?
Has the FM (or the RBI for that matter) not read the PMLA?
Make no mistake: this is Money Laundering and nothing short of that. If any common man had been caught on phone or tape professing to do these things, can you imagine what might have happened to him?
HERE, WE HAVE CULLED SOME SELECTED BYTES WHICH GIVE HOW MONEY LAUNDERING IS A STANDARD PRACTICE ACROSS THE BANKING AND INSURANCE SECTOR
LIC Of India, Delhi and Gurgaon
D. Luther, Chairman Club Member; T. Chopra, Development Officer; R. Nagpal, Assistant Branch Manager, LIC of India, North-West Delhi, Kapoor LIC Associate
T. Chopra
“Nahin nahin … abhi peeche pachees lakh kisi aur ke karaye hain (No, no … only recently I have got Rs. 25 lakh invested for another fellow).”
D. Luther
“Aisa kuch nahin aata … yahan se koi aisa nahin jaata … yahan toh croron croron aata hai (Nothing of that sort [income tax notice] comes … nothing is sent from here … crores of rupees are slipped into it [LIC]).”
R. Nagpal
“Sir … koin nahin … aaj Sir bees lakh rupaye diye hain (Sir … nothing of that sort … [pointing to Luther] Sir, today itself he has given Rs. 20 lakh [for a case]).”
“Haan, bees lakh rupaye abhi cash jama karaye hain … raseed bhi hai inke paas aap dekh lo (Yes, [he has] got Rs. 20 lakh deposited a short while ago … if you want he can show you the receipt).”
M. Khanna, Assistant Branch Manager, LIC of India; K. Joshi, LIC Agent, Gurgaon, Haryana
K. Joshi
“Usse pahle Pankaj Sharma ne lagaya tha baees laakh lagaya tha (Before that Pankaj Sharma had invested Rs. 22 lakh).”
M. Khanna
“Main aapko naam disclose nahin karoongi … dekhiye wo toh humara confidential hota hai … agar koi aapka poochega hum usse bhi nahin batayenge … koi problem nahin hai (I will not disclose you the names … look that is confidential for us … if someone asks us we will never tell him … there is no problem).”
Reliance Life, Hyderabad and Bangalore
K. Madhumathi, Territory Manager; Chandrashekhar, Sales Manager, Reliance Life, Hyderabad, Andhra Pradesh
K. Madhumati
“See many of my clients they give cash because they cannot invest directly through cheque because its ….”
“Yesterday evening only I picked up one 50 lakh cash … aapke jaisa hi … he was not a politician but a businessman … very big businessman … toh unko kya hai ki his name should not come out (Yesterday evening only I picked up Rs 50 lakh … same as yours … he was not a politician but a businessman … a very big businessman … all he wanted is that his name should not come out).”
“Because we block the names … because customer ka naam bahar nahi aana chahiye (Because the names of the customer should not be revealed)… because many of the customers are having black money where they want to make it as a white) … name aane se ek baar Income Tax ko pata chal jayega na toh un logon ki life kharab kar denge (if their names come to the knowledge of the Income Tax officials they will make their lives miserable)
“Croron ka karte hain bhai sahib … ek crore to bahut chota amount hai … hum log yahan 50 crore 80 crore ka karte hain … and Reliance mein Ambani ke group mein to itne saare karte hain poori yeh Rajasthani log hai na … Rajasthani log zyada karte hain … Marwari (We do it for crores [of rupees] … Rs. 1 crore is a very small amount … we here do it for around Rs. 50–80 crores … and there are many customers who invest with Reliance of Ambani group … these Rajasthani Marwari people do the most).”
Chandrashekhar
“Insurance mein aisa hai na aap jo bhi details dete hain (It happens in insurance that whatever details you give us) … we never show it to the IT Department.”
M. Raghu, Territory Manager, Reliance Life Insurance, Hyderabad, Andhra Pradesh
“Safety safety … bahut saara paisa aisa hai (It is safe … a lot of money is [invested this way] there).”
R. Shankar S, Senior Territory Manager, Reliance Life Insurance, Bangalore
“Darasal baat ye hai dekhiye kar to hum sakte hain, karte bhi hain lekin itna… dus lakh toh … (See the thing is we can do it … we had done it before … but this much … but Rs. 10 lakh is …).”
“Aaj savare ji saath lakh cash collect kar ke laaya tha … yehi same thing (Today morning itself, I collected 60 lakh cash … for the same thing).”
Yes Bank, Gurgaon and Jaipur
A. Pal, Financial Advisor/Senior Manager, Yes Bank, Gurgaon, Haryana
“Politicians ko nahin diya lekin bahut bade bade logon ko diya hai (I haven’t sold it to politicians but I have given it to many big shots).
S. Maheshwari, Senior Vice President; S. Singh, Manager; K. Khatri, Investment Head, Yes Bank, Jaipur, Rajasthan
K. Khatri
“Nahin, nahin Sir humare paas aise bahut se accounts hain jisme bees–bees crore ki investments maine karayi hai (No sir … we have a number of accounts with us where I have got investments of Rs. 20 crore each).”
“Sir bahut hain … Sir bahut hain (Sir... there are many) but we can’t disclose … don’t worry… that’s why I am not disclosing … I can understand that.”
Birla Sunlife, Moradabad
S. Sharma, Branch Manager, Birla Sunlife, Associate Partner, Moradabad, Uttar Pradesh
“Bahuton ka dalwaya hai … kaisi baaten kar rahe ho aap Number do ka dalwaya hai … number ek mein hota kahan hai (I have done such deals for a lot of people [in the past] … what are you talking? … I have got Number two [black money] slipped in … [tell me] … where does it happen in Number one [white money] nowadays)?”
Canara Bank, Delhi
D.K. Prasad, Manager, Trade Finance, Canara bank, South Delhi
“Nahin … isase pehle hua tha toh kareeb chhe per cent chhe sawa chhe percent … chhe per cent ka generally hota hai (No, when it was done earlier it was 6 or 6.5 per cent … it is generally 6 per cent).”
M. Goel, Senoir Manager, Canara Bank, South Delhi
“Saare hi asie aadmi hain … apne paas mein (We have all such clients with us).”
“Policewale hain kyon ki wo bhi … doh teen policewale hain … ya doh teen builder ke hain (There are some policemen because they too … there are two-three policemen … there are two-three builders).”
Birla Sunlife, Moradabad
S. Sharma, Branch Manager, Birla Sunlife, Associate Partner, Moradabad, Uttar Pradesh
“RM ko le aoonga … usse kya hai na ki saara kaam aur bhi 25–30 lakh jitna bhi maximum hota hai … bahut log karte hain yahan par (I will bring the RM [to the meeting] … that will help us to invest another Rs. 25–30 lakh to the extent maximum [amount of cash] … a lot of people do such investments here [with us]).”
“Bahuton ka dalwaya hai … kaisi baaten kar rahe ho aap Number do ka dalwaya hai … number ek mein hota kahan hai (I have done such deals for a lot of people [in the past] … what are you talking? … I have got Number two [black money] slipped in … [tell me] … where does it happen in Number one [white money] nowadays)?”
Federal Bank, Moradabad
C. M. Duggal, Regional Head, Federal Bank; R. N. Munjal, Relationship Manager, IDBI–Federal, Moradabad, Uttar Pradesh
R. N. Munjal
“Meerut ... Dehradun mein bhi kaafi hain ... paise log laate hain kehte hain ... number do ka paisa hai ... ye karwao (In Meerut ... many in Dehradun as well ... people bring Number two [black] money ... ask us to get it done [convert the money into white]).”
“Unki baat hai kareeb ek saal pehle ki ... unka daala near about ek crore rupaye ... aath–nau lakh rupaye barh gaya hoga ... aise case to bahut hain Sir (His case is about a year old ... I put in near about Rs. 1 crore for him ... now it has grown by about Rs. 8–9 lakh ... there are many such cases).”
“Teen kare the unhone ... do mein 20-20 lakh, ek mein unhone kara tha ... 35 lakh ke aas paas (He had bought three policies ... two for Rs. 20 lakh each ... one around Rs. 35 lakh).”
IDBI Bank, Delhi
V. Joshi, Assistant Manager, IDBI Bank, Central Delhi
“Main jab Lucknow mein tha toh main Gomti Nagar ki branch mein hi tha ... wahan pe jitney bhi syndicates the ... investments karwate the ... unke saath kaafi dealing hoti rahti thi ... aur wahan pe aapne dekha hi hoga ... ya toh wahan IAS officers ke ghar hain ... sub constructors ke ghar hain ... bureaucrats hai ... wahan black money ka flow kaafi zyada rehta tha (When I was in Lucknow, I was in the Gomti Nagar branch ... all the syndicates there ... would make investment ... I used to see through a lot of dealings there ... and as you must have seen ... IAS officers have their residences there ... [almost] all constructors have their homes there .... bureaucrats live there .... there is a lot of flow of black money there).”
“Wahan pe ek client the, uska naam to nahin le sakta ... unhone humhare through 1.5 crore ka transaction kiya (I had a client there ... I can’t tell his name ... he did a transaction of 1.5 crore through me).”
Indian Overseas Bank and LIC, Moradabad
K. Prasad, Senior Manager, Indian Overseas Bank, Moradabad; A. Agarwal, Manager, Life Insurance Corporation, Moradabad, Uttar Pradesh
A. Agarwal
“Ek ek party chota mota amount nahin deti … pachees pachees, tees tees, paintees paintees lakh rupaye deti hai … araam se ho jaata hai (Each party give us anything between Rs. 20 lakh and Rs. 35 lakh … we do it easily).”
R.K. Singhal, Assistant General Manager, Noida, Uttar Pradesh
“Humare yahan se koi nahin jayegi … aapki kitab kisi ke haath lag gayi to alag baat hai … humare yahan se koi report nahin jaati … bahut saare khate hain is terah ke (No report will go from us … if somebody else lays his hands on your book, then it is a different case … we don’t send any report … we have many accounts like this).”
Tata AIG, Noida
Y. Rana, Sales manager; K. Singh, Branch Manager, Tata AIG, Noida, Uttar Pradesh
K. Singh
“Diya hai Sir pichle saal diya hai … pichle saal humne … isse jyada hi tha (We have done it last year … last year we … it was a bigger amount than what you have).”
Y. Rana
“Abhi baais lakh ka hi hua hai last month (We have done it for Rs. 22 lakh only last month).”
Parliament Street, New Delhi
R. Utreja, Back-Up Branch Manager, HDFC Bank, Parliament Street, New Delhi
“Abhi Sir humne aise ek aur bande ka bhi karwaya hai na … unka bhi tha pachaas lakh ka … unka bhi aise hi tha black to white kara tha unhone (Sir, only recently, we have done this for someone … it too was for Rs. 50 lakh … his case was the same [as yours] of converting black [money] to white).”
Some Interesting Episodes Captured On Tape:
Cobrapost has captured on video-tape these money laundering practices, and the graphic evidence that it has produced is enough to prove beyond doubt that the malaise runs deep. The investigation finds that all these financial institutions and their managements are systematically and deliberately violating several provisions of the Income Tax Act, FEMA, RBI regulations, KYC norms, the Banking Act and Prevention of Money Laundering Act (PMLA). The utter disregard they show to the implications of such gross criminal practices for the country and its economy proves that they are driven by their desire to boost their bottom lines.
Our investigation puts a big question mark on the legitimacy of the business these institutions garner and profits they make, employing such blatantly illegal means. It also makes questionable the legitimacy and origin of funds these banking and insurance institutions raise through their operations. In addition, it is apparent from our investigations that these institutions have been indulging in such unlawful practices for the past several years, unperturbed and undetected.
Among the exposed institutions are some major state-owned banks, behemoths considering the assets they manage and the clout they wield both with the government and with the industry, with public trust always running high on them. The State Bank of India, the flag bearer of Indian banking industry, Bank of Baroda, Punjab National Bank, Canara Bank, IDBI and Allahabad Bank, among others, together manage assets worth thousands of billions of rupees and have equally staggering deposits at their disposal.
Apart from HDFC Bank, ICICI Bank and Axis Bank, we have more banks from the private sectors in our net such as Yes Bank, Dhanlaxmi Bank, Federal Bank and DCB, which too have seen unprecedented growth in a short span of their existence.
In the course of Cobrapost undercover investigation, we came face to face with some shocking, stark realities about the functioning of the entire banking and insurance industry of the country. Our interaction with all officials, some with the ranks of divisional manager, territory manager, assistant general manager and vice presidents, with scores of branches under their charge, bears it out clearly that they are conducting their questionable business with nonchalance that only crooks show when they find they are above law or when they find the powerful are on their side.
Money Launderers on Parliament Street, Home to Parliament and RBI
We have a group of bankers from Parliament Street, the seat of the Indian Parliament, the supreme law making body and upholder of the Indian Constitution, and the Reserve Bank of India, the prefect of the Indian monetary system and the monitor of the banking system. The banks in question are HDFC Bank and ICICI Bank, the usual suspects, as well as the Bank of Baroda, Allahabad Bank and Central Bank of India. These case studies make it clear that such nefarious activities can be carried out with impunity under the nose of the highest legislative body of the country and its central bank, unnoticed, punching gaping holes in the claims of the RBI Governor D. Subbarao that Indian banking system is “safe and secure.”
Of these banks, Bank of Baroda is already under scanner for money laundering practices on foreign soil.
Among the private insurers, Reliance Life Insurance, a subsidiary of Reliance Capital, in a very short span of its existence of less than a decade, has witnessed spectacular growth to become the largest private life insurer in 2012.
However, the gem to fall from grace is the iconic Life Insurance Corporation of India, the largest financial institution in the country. With 30 crore policies under its belt, the insurance giant manages assets worth Rs. 1474 lakh crore, about 15 per cent of India’s GDP. The LIC of India is learnt to underwrite about a-fourth of government bonds and securities, and also acts as a bulwark against unprecedented upheavals on Dalal Street, at the behest of the government, so that investors’ confidence in Brand India and in its amazing growth story does not dwindle.
In some cases, we came across certain bankers who were plain crooks in the mould of bankers.
For instance, we have a senior manager of Federal Bank who without blinking an eye says, “Uske liye to hawala kar deta hoon (I can have a hawala [transaction] done for that),” when we seek his help to send England some of the crores to some of the relatives of our minister’s wife.
The Curious Case of An Andhra Education Minister Standing Guarantor for the Safety of Our Minister’s Black Money Investment in a Real Estate Project, An Orthopedic Surgeon Who Wants Our Minister’s Unaccounted Crores for This Project, A Hawala Operator, Claiming To Be An Ex-Cop, Who Promises To Transfer Our Crores And A Banker Who Leads Us To All These Big Fish:
Again, we have another banker, no less a crook. The banker in question is R. Manohar, Assistant General Manager, Indian Bank, South Delhi. In his zeal to net such client with deep pockets as our to-be-found-nowhere minister who could put on his table Rs. 25 crore of unaccounted cash, Manohar guides Cobrapost investigative journalist, Syed Masroor Hasan, to Dr. H. Prasad, an orthopedic surgeon from Tirupati who wants our minister to invest his crores of black money in his real estate project.
There are many twists and turns to the tale.
We are invited to Hyderabad where we meet Vasu, a hawala operator, who claims to be a former Andhra cop. He would help us deliver Rs. 25 crore to Dr. Prasad at Tirupati for his project through is racket. Our next port of call is S. Sake, who is Minister of Primary Education with the Andhra Pradesh government, with nine other departments under his charge, which shows the power he wields. Sake stands guarantor for the safety of our black money investment in Dr. Prasad’s real estate project. This helps us uncover a nexus between the banker and the hawala kingpin who are running their racket without any fear of law, with active patronage of our political masters.
We don’t know how many bankers are doubling up as henchmen of hawala racketeers.
The Nexus Between the Banks and the Insurance Companies:
Another fact that comes to the fore is a nexus between the banks and the insurance companies. If the banks don’t have their own insurance companies, they have joint-ventures with private insurers. Yes Bank, for instance, has a tie-up with Bajaj Allianz, which would question an investor only when the investment crosses Rs. 1 crore, as we came to know from a Yes Bank official. And such investments can be done in cash. Whenever we went about proposing to bankers, public or private, that we wanted to invest our black money in insurance, they immediately called the managers of the their insurance associates to our presence or sought their advice on phone, making it amply clear that banks and insurance companies are hand in glove.
What the Law of the Land has to Say on Money Laundering?
The videos, through Cobrapost’s undercover investigation in Operation Red Spider Part II, clearly show the gross violation of rules and regulations, framed under various laws of the land, namely, the Prevention of Money Laundering Act of 2000, the Income Tax Act and the Indian Penal Code, among others.
Sections 118, 119 and 120 of the Indian Penal Code which clearly establish an offence in both scenarios: Where an offence has been committed and where an offence has not been committed. If we test the Cobrapost findings on these provisions, although “no transaction” took place, their willingness to conduct transaction establishes their design of committing an offence and hence their culpability beyond doubt. The IPC also establishes concealing the design to commit as an offence and as such holds it punishable to a term defined therein.
Here is what Section 120 of The Indian Penal Code, 1860 says:
CONCEALING DESIGN TO COMMIT OFFENCE PUNISHABLE WITH IMPRISONMENT
Whoever, intending to facilitate or knowing it to be likely that he will thereby facilitate the commission of an offence punishable with imprisonment, voluntarily conceals, by any act or illegal omission, the existence of a design to commit such offence, or makes any representation which he knows to be false respecting such design,
IF OFFENCE BE COMMITTED- IF OFFENCE BE NOT COMMITTED
Shall, if the offence be committed, be punished with imprisonment of the description provided for the offence, for a term which may extend to one- fourth, and, if the offence be not committed, to one- eight, of the longest term of such imprisonment, or with such fine as is provided for the offence, or with both.
As to the sweeping statement of the RBI Deputy Governor that “Allegations do not mean flouting norms,” we can only hold the various provisions of Prevention of Money Laundering Act of 2002 as mirror to what he claims to be “transactional issues and have nothing to do with money laundering”. Section 3 as defined in the Act 2002 emphasizes:
Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering.
Are the RBI or the Finance Minister unaware of the above clause of the PMLA? Is attempting to launder money for a politician who has generated cash through corrupt practices, not a proceed of crime?
Cobrapost's Method to Unearth this Scam:
The method was the same: Taking an alias, Cobrapost Associate Editor Syed Masroor Hasan, posing as a relative of an imagined politician, made cold calls on dozens and dozens of branches of these banks and insurance companies. And the proposition was the same: A politician of stature wants to convert huge sums of black money into white. Could the officials help?
It didn’t take much effort to pull the lid off the murky world of money laundering as the officials of these companies rolled out a red carpet for our Masroor Hasan who visited dozens and dozens of branches across the length and breadth of the country, including many major cities and state capitals, across all five zones.
Nowhere was Hasan disappointed. Nowhere was he turned away. Almost every banker and insurer he met with was willing to help launder huge unaccounted cash the fictitious politician Masroor Hasan was representing.
How They Help Launder Your Black Money?
Here, we give a summary of the modus operandi that all bankers and insurers suggested to help convert black money into white, leaving nothing to imagination:
Accept huge amounts of unaccounted cash to invest it in insurance products, and sometimes in gold as well.
Open an account to route the cash into various investment schemes of the bank or insurance arms.
Do it even without the mandatory PAN card or adhering to KYC norms.
Arrange forged PAN cards to facilitate investment of huge unaccounted cash.
Split the money into tranches, below the reporting threshold, to get it into the banking system without being detected.
Use accounts of other customers to channelize the black money into the system for a fee.
Get demand drafts made for the client either from their own banks or from other banks to facilitate investment without it showing up in the client’s account.
Keep the identity of the investor secret.
Open multiple accounts to invest the unaccounted cash directly in cash-investment schemes.
Buy as many policies as you can to accommodate the huge unaccounted cash.
Open an account in some extension branch a couple of months before the investment matures, credit the returns in that account and close it as soon as you withdraw all your money. The point: Extension branches are seldom audited.
Advise the investor to remain invested for a certain number of years, say, 7 years, to keep the taxman at bay.
Allot as many lockers as the client needs for safekeeping the illegitimate cash.
Personally come to the residence of the client to take the black money deal forward and collect the cash, even bring along a counting machine.
Use provisions like Form 61 to show the unaccounted cash as income from agriculture, making the investment of black money and returns thereof unquestionable.
Promise to help transfer overseas huge sums of black money with the help of such operatives as hawala kingpins.
Promise to convert all your unaccounted cash into white through other conduits, someone like builders who need cash for their own operations, or someone who owns a company.
One interesting fact that emerged in our investigations is that some bankers and insurers suggested us to buy insurance products in whomsoever names we wanted and assign those instruments in our name, that is, our imagined minister, so that at the time of maturity we could harvest the returns. This is akin to holding a benami property where the owner of the property is not the one in whose name the property has been bought.
o Another unique idea proffered by some bankers was open multiple accounts in the names of any individuals, not necessarily drawn from family, and become joint account holders, to monitor the accounts and keep all the details and cheque books with ourselves. This could serve our purpose better, and we could enjoy peace, after all our ill-gotten money is slipped into regular banking system and comes back to us as clean.
o Insurance has emerged, whether with private or public sector insurers, as the most favorite tool to launder money, undetected.
Needless to say what all these suggestions mean: a clear intent on the part of these officials to commit a crime as defined under various Indian laws, such as the Income Tax Act, the Indian Penal Code, FEMA and the Prevention of Money Laundering Act.
We are sure the RBI top brass will again go about town touting the expose as something of a non-issue since no transaction of cash has taken place, as both D. Subbarao and his deputy K.C. Chakrabarty did when we exposed the three major private banks, namely, HDFC Bank, ICICI Bank and Axis Bank on March 14, 2013, giving a clean chit to these banks. And we know they would claim that the banking system is “safe and secure” debunking our findings with their typical nonchalant bureaucratese. But they have been proved wrong, with the RBI’s own audit report indicting these banks now out, and forcing the banking regulator to follow it with punitive action against the erring banks.
The optimism aired by the central bank’s top honchos that Indian banking system is “safe and secure” is nothing but a naïve interpretation of the reality of the day: Our economy is overwhelmingly grey than it is white.
Let us quote a nugget of wisdom from a gentleman banker who believes, to put in a lighter vein, our economy is strong because of black money and all the talk to check it is just talk: “Dekho ji jo chalta hai Hindustan mein ... chalta toh wohi rahega ... baaki upar jo bhi hai ...wo hota rahega ... sub baatein hoti rahengi (You see what is going on in India would go on ... what happens in the upper echelons will go on ... there will be all sort of talk).” The same banker tells why this phenomenon would go unabated: “Kyonki jo control karne wale hain unhin ke paise lage huye hain ... hai ki nahin (Because those very people who are supposed to control it have invested their own money ... isn’t it).”
A sad commentary on our economy, and who control it, but nonetheless a cold truth.
The Impact of Cobrapost Expose:
In between the first expose of March 14 and this expose, certain developments have taken place. For instance, all the banks have been asked to strictly adhere to KYC norms, and even older account holders’ antecedents are being verified without exception. The banks alleged to have been involved in money laundering have punished their staff members, more than 50 in numbers, with suspension, although they are just a cog in this wheel. In yet another development, miss-selling by insurance companies to the tune of Rs. 1.5 trillion, between 2005 and 2012, making the gullible investors as much poor, has come to light, and there is an effort on the part of certain quarters to use this to deflect attention of the nation from the real issue of money laundering and the dangers inherent to it which are now being openly discussed in the print media, and other public fora such as ASSOCHAM, an industry body, although the electronic media silence over this issue is conspicuous and deafening.
Can the System Be Cleaned Of The Malaise?
Although the RBI has announced action, both at the systemic level and at the individual bank level, one can only hope they are not cosmetic, and the latest expose would spur both the RBI and the IRDA to address the malaise, for all times to come.
However, looking at the RBI’s rather suspicious, Protector-instead-of-Regulator conduct, it looks highly unlikely that any worthwhile cleansing of the system will happen.
It is high time our financial institutions are overhauled, so are the monitoring systems of both the RBI and the IRDA, to clean up the system, and put in place checks and balances. While the RBI should take a rethink on its licensing policy, as many private insurers and NBFC players are making a beeline to seek regular banking licenses from the central bank, the IRDA should forbid all insurers to entertain cash transactions. The IRDA should also revisit the wealth management portfolios of all the insurers, to help identify the faults inherent to such lucrative business opportunity. Only then can one hope of redeeming our pledge to international community India has given when it became a signatory to FATF (Financial Action Task Force on Money Laundering).
More than that what is at stake is national security, and it is anybody’s guess what havoc it would wreck on India’s economy and social fabric if forces inimical to Indian state take advantage of such all-pervasive permissiveness in our financial institutions.
However, given the virtual cover-up post the first expose, we are not very hopeful that a full-scale clean-up of this sort will take place, ever. And there is reason behind this skepticism of ours born out of government’s own actions. For instance, the Ministry of Finance has wrapped up the Directorate of Criminal Investigation (DCI) that was set up to check the flight of black money out of the country and bring the culprits to book, under the mandate of the Parliament. It was this agency which was on hot pursuit of those industrialists and politicians who have parked their black money with the Geneva branch of HSBC Bank and whose name were made public by the French government. One can draw an unmistakable inference from this episode that far from being serious on a serious crime like money laundering, the government is working at cross purpose, thus leaving our financial borders as porous as our geographical borders are.
At the end of this release you will find some selected excerpts of confessions of officials of these institutions exposed.
ANIRUDDHA BAHAL
Editor, Cobrapost.com
May 6, 2013
For more details log on to:
www.cobrapost.com
HERE ARE SOME EXCERPTS OF CONFESSIONS BY SOME BANKERS AND INSURERS OF THEIR PAST INVOLVEMENT IN MONEY LAUNDERING
M. Sharma, Branch Head, Birla Sunlife, Jaipur, Rajasthan
Accepting the proposed huge cash investment:
“Aap mujhe cash mein de dijiyega … main uska DD banwa loonga (You give me cash … I will get a DD for it).”
On how should we withdraw the returns after the investment matures:
“Jab bhi bhavishya mein aap is paise ki maturity lene waale hon toh ek fresh account khulwaiyega … jab withdraw karna ho ek fresh account khulwayiega … bank account … us bank account ko do ya teen mahine se operate karne lagiyega … bank account mein paisa credit hoga … paisa aane ka jariya ek hi hai … wo to number ek ka ban ke hi aayega (Whenever in future you withdraw the money at maturity, open a fresh account … operate it for two or three months ... the money would be credited in to that account … this is the only way the money can be received … that will cone only after it is converted into Number 1 [white]).”
S. Sharma, Branch Manager, Birla Sunlife, Associate Partner, Moradabad, Uttar Pradesh
Assuring us our unaccounted cash would become white:
“White ho jayega … bus white ho jayega wo fir (Will become white … then that will become white).”
On what he would with our cash:
“Aap chahe cheque se dijiye chahe DD banwa lijjiye cash … hum DD banwa denge uska (Either you give us cheque or you get a DD for that [cash] … we will get the DD made for you).”
He would keep his regional manager in the loop to help use invest maximum unaccounted cash: Sharma:
“RM ko le aoonga … usse kya hai na ki saara kaam aur bhi 25–30 lakh jitna bhi maximum hota hai … bahut log karte hain yahan par (I will bring the RM [to the meeting] … that will help us to invest another Rs. 25–30 lakh to the extent maximum [amount of cash] … a lot of people do such investments here [with us]).”
A. K. Gupta, Chief Manager, Bank of Baroda, Parliament Street, New Delhi
Telling us not to worry as what we have proposed it like peanuts:
“Main keh raha hoon tension hi nahin … ye sub kaam toh chote hain … saare mantriyon ke khaate hain (I am telling you there is no tension … all these tasks are like tidbits for me… we have accounts of all the minister).”
D.K. Prasad, Manager, Trade Finance, South Delhi
It is apparent what Prasad is saying:
“Toh black ko white kyon nahin kar lete (Why don’t you make black white).”
On how he would get us some company owner who would take in all our black money and would issue us a cheque, of course for a fee:
“Wo company ke through jo hoga wo aapko cheque dega … jo itna genuine kaam hoga wo aapko pata hai … wo bhi is tareeke se apna … bade bade CA jo returns wagaireh hain wo usmein adjust karenge (That will be done through a company … that fellow will give you a cheque … that will be a genuine job … you know it … they use this method … big CAs who prepare returns etc. will adjust in their books).”
M. Goel, Senoir Manager, Canara Bank, South Delhi
On how we should go about slipping our unaccounted money into the banking system:
“Pehle account khol lenge … main aapko form de doonga … slowly slowly jaise hota hai, I mean ek baar lump sum mein nahin kara payenge, zyada hi hoga toh Sir se boliye locker denge … for a time being you will keep …ghar mein rakhna risky hota hai … you will keep in the locker (First open an account … I will give you the form … it will be done like slowly, slowly … I mean we will not be able to do it in a lump sum … if it is required tell Sir we will give you a locker … for a time being you will keep … it is risky to keep the money at home … you will keep in the locker).”
Counting his clients who put in their ill-gotten money through him:
“Policewale hain kyon ki wo bhi … doh teen policewale hain … ya doh teen builder ke hain (There are some policemen because they too … there are two-three policemen … there are two-three builders).”
S. S. Kumar, Divisional Manager, Canara Bank, Agra, Uttar Pradesh
Bring all your crores and put in a savings account, your money is conevered into white:
“Definitely take care … savings [account] mein rakha toh kuch nahin hoga … kuch nahin hoga (If you keep the money in savings account, then nothing will happen) … It will not be reflected anywhere … even income tax mein nahin jayega… but aapko interest kum milega (It will not be reported to the Income Tax department but you will get lower interest).”
C. M. Duggal, Regional Head, Federal Bank; R. N. Munjal, Relationship Manager, IDBI–Federal, Moradabad, Uttar Pradesh
R. N. Munjal
On converting our unaccounted cash into DD and then invest it:
“Direct cash de DD banwa dete ... koi dikkat nahin ... wo sub humara headache hai ... aapka kuch bhi nahin (Give direct cash, will convert it into DD ... there is no problem ... all of that is our headache, not yours).”
On how peope bring in all their black money and ask him to invest:
“Meerut ... Dehradun mein bhi kaafi hain ... paise log laate hain kehte hain ... number do ka paisa hai ... ye karwao (In Meerut ... many in Dehradun as well ... people bring Number two [black] money ... ask us to get it done [convert the money into white]).”
“Unki baat hai kareeb ek saal pehle ki ... unka daala near about ek crore rupaye ... aath–nau lakh rupaye barh gaya hoga ... aise case to bahut hain Sir (His case is about a year old ... I put in near about Rs. 1 crore for him ... now it has grown by about Rs. 8–9 lakh ... there are many such cases).”
“Teen kare the unhone ... do mein 20-20 lakh, ek mein unhone kara tha ... 35 lakh ke aas paas (He had bought three policies ... two for Rs. 20 lakh each ... one around Rs. 35 lakh).”
G. Agarwal, Manager, IDBI Bank, South Delhi, New Delhi
G. Agarwal
On how our black money would be put into the banking system without the mandatory PAN:
“Account khol lenge ... without PAN card ... usmein 49,000, 49,000, 49,000 karke aap daily cash daalte jao ... daily (We will open an account without PAN card ... daily put Rs. 49,000 cash in it ... daily).”
On foreign remittance:
“Gift hi dikhayenge ... ya toh koi parh raha hai ... educational purpose se ja raha hai ... England mein property khareed rahe hain (Will show it as a gift ... or somebody is studying ... [the money] is being sent for educational purposes ... you are buying property in England).” “Thoda thoda hi karna hai (Will have to do it in small chunks).”
V. Joshi, Assistant Manager, IDBI Bank, Central Delhi
On how our unaccounted cash would be routed through multiple accounts:
“Uske liye ye karo ki aap ke naam pe ya kisi ke bhi naam pe ... jitne bhi log kar rahe hain, unke account khol ke us paise ko route karao pehle (For that, first you open accounts in your name or in the name of anyone ... all other persons who are doing it ... route the money [through them]).”
Understanding well our purpose of money laundering:
“Main samajh gaya ... aap ko black ko white mein convert karna hai (I have understood ... you want to convert your black money into white).”
On how he would route our black money through an account:
“Jab bhi aapka payment ka time ayega, pehle aap ke black money ko mein route karoonga account mein, account se white karne ka route karoonga ... isiliye co-ordination chahiye (When the time comes for you to make payment, first I will route your black money to the account, then I will route that money [into investments] through account for making it white ... that is why I need [somebody for] co-ordination).”
On how he has helped bigwigs to launder their money in the past:
“Main jab Lucknow mein tha toh main Gomti Nagar ki branch mein hi tha ... wahan pe jitney bhi syndicates the ... investments karwate the ... unke saath kaafi dealing hoti rahti thi ... aur wahan pe aapne dekha hi hoga ... ya toh wahan IAS officers ke ghar hain ... sub constructors ke ghar hain ... bureaucrats hai ... wahan black money ka flow kaafi zyada rehta tha (When I was in Lucknow, I was in the Gomti Nagar branch ... all the syndicates there ... would make investment ... I used to see through a lot of dealings there ... and as you must have seen ... IAS officers have their residences there ... [almost] all constructors have their homes there .... bureaucrats live there .... there is a lot of flow of black money there).”
K. Prasad, Senior Manager, Indian Overseas Bank, Moradabad; A. Agarwal, Manager, Life Insurance Corporation, Moradabad, Uttar Pradesh
A. Agarwal
On how investing in LIC helps make you money white:
“Actually, LIC mein jaake number ek ka to ban hi jayega … doosri baat aapko return bhi mil raha hai FD se jyada (Actually, the money will become Number one [white] once it [money] gets into LIC … second, you will also get more returns than fixed deposits).”
There are many big clients who Agarwal helps invest there millions with LIC;
“Ek ek party chota mota amount nahin deti … pachees pachees, tees tees, paintees paintees lakh rupaye deti hai … araam se ho jaata hai (Each party give us anything between Rs. 20 lakh and Rs. 35 lakh … we do it easily).”
D. Luther, Chairman Club Member; T. Chopra, Development Officer; R. Nagpal, Assistant Branch Manager, LIC of India, North-West Delhi
T. Chopra
“Nahin nahin … abhi peeche pachees lakh kisi aur ke karaye hain (No, no … only recently I have got Rs. 25 lakh invested for another fellow).”
D. Luther
“Aisa kuch nahin aata … yahan se koi aisa nahin jaata … yahan toh croron croron aata hai (Nothing of that sort [income tax notice] comes … nothing is sent from here … crores of rupees are slipped into it [LIC]).”
R. Nagpal
“Haan, bees lakh rupaye abhi cash jama karaye hain … raseed bhi hai inke paas aap dekh lo (Yes, [he has] got Rs. 20 lakh deposited a short while ago … if you want he can show you the receipt).”
“Aap 25 crore bhi lagaoge toh bhi theek rahega yahan pe … government company hai (If you invest Rs. 25 core, even then it will be alright here … this is a government company after all).”
Kapoor
“Har ek aadmi ke paas ek aisa account bhi hota hai jisko wo declare nahin karata… zarrori nahin hai ki aapke paas agar chaar account hain toh chaaron ke chaaron aapne income tax mein declare kar rakhe hain … ek aisa bhi account hota hai jahan se aapko thodi bahut upar ki amdani hai usko bhi save kart hain (Every person has an account which he has not declared in his income tax [returns] … it is not necessary that if you have four accounts you declare them all … there is always an account in which you save your extra income).”
M. Khanna, Assistant Branch Manager, LIC of India; K. Joshi, LIC Agent, Gurgaon, Haryana
K. Joshi
“Same day loan ho jayega Sir. Black ko white karne ka isse acha tareeka nahin (It will be sanctioned the same day Sir. No method is better than this to make your black money white).”
“PAN card banwa doonga alag se … PAN card banwa doonga alag se (I will get you made a separate PAN card … I will get you a separate PAN card).”
“Usse pahle Pankaj Sharma ne lagaya tha baees laakh lagaya tha (Before that Pankaj Sharma had invested Rs. 22 lakh).”
M. Khanna
“It’s ok … loan lena toh bahut badhiya hai … loan se white ho jayega (It is ok … availing of a loan is all the better … loan will make it white).”
“Main officially inko bol nahin sakti … main samajh rahi hoon … PAN card toh karwao inse … kyomki mera bhi system nahin leta …. aap kya de rahe ahin kya nahin (I can’t tell him officially … I understand it … get the PAN card done from him … because my system won’t take it … whatever you are giving).”
“Main aapko naam disclose nahin karoongi … dekhiye wo toh humara confidential hota hai … agar koi aapka poochega hum usse bhi nahin batayenge … koi problem nahin hai (I will not disclose you the names … look that is confidential for us … if someone asks us we will never tell him … there is no problem).”
R.K. Singhal, Assistant General Manager, Noida, Uttar Pradesh
“Humare yahan se koi nahin jayegi … aapki kitab kisi ke haath lag gayi to alag baat hai … humare yahan se koi report nahin jaati … bahut saare kahte hain is terah ke (No report will go from us … if somebody else lays his hands on your book, then it is a different case … we don’t send any report … we have many accounts like this). ”
S.K. Setia, Chief Manager, PNB, South Delhi
“Toh main us angle se hi karata hoon jo bhi product hai (Then, I will do it with that angle whatever the product is).”
S. Mishra, Chief Manager, PNB, South Delhi
On how all transactions are kept confidential:
“Ye sub toh bahut confidential cheezein hoti hain na … ab matlab agar aapko nahin jaanta hai koi toh wo aapko … matlab entertain koi nahin karega yahan …. kisi bhi soorat mein (All these things are very confidential … I mean if nobody knows you here then they would … I mean nobody will entertain you here in any case).”
“Jo bhi dealing hai … agar humein kisi ko batana hoga ki aap isse se ye jaankari le lijiye tab hum aapko wahi number denge utne hi kaam ke liye ki aap ye cheez unse pooch sakte ho agar by chance main bahar hoon toh (Whatever the dealing … if I have to tell you that you can seek that particular information from somebody … only then will I give you his number for that specific purpose telling you can ask him about this thing … if by chance I am out of town).”
K. Madhumathi, Territory Manager; Chandrashekhar, Sales Manager, Reliance Life, Hyderabad, Andhra Pradesh
Madhumati
Doing big cash transactions are routine:
“Yesterday evening only I picked up one 50 lakh cash … aapke jaisa hi … he was not a politician but a businessman … very big businessman … toh unko kya hai ki his name should not come out (Yesterday evening only I picked up Rs 50 lakh … same as yours … he was not a politician but a businessman … a very big businessman … all he wanted is that his name should not come out).”
On how customer’s names are kept a secret:
“Because we block the names … because customer ka naam bahar nahi aana chahiye (Because the names of the customer should not be revealed)… because many of the customers are having black money where they want to make it as a white … name aane se ek baar Income Tax ko pata chal jayega na toh un logon ki life kharab kar denge (if their names come to the knowledge of the Income Tax officials they will make their lives miserable)
An investment proposal of Rs. 1 crore is like peanuts compared to what they do:
“Croron ka karte hain bhai sahib … ek crore to bahut chota amount hai … hum log yahan 50 crore 80 crore ka karte hain … and Reliance mein Ambani ke group mein to itne saare karte hain poori yeh Rajasthani log hai na … Rajasthani log zyada karte hain … Marwari (We do it for crores [of rupees] … Rs. 1 crore is a very small amount … we here do it for around Rs. 50–80 crores … and there are many customers who invest with Reliance of Ambani group … these Rajasthani Marwari people do the most).”
M. Raghu, Territory Manager, Reliance Life Insurance, Hyderabad, Andhra Pradesh
On how we can get forge PAN card to invest with his company:
“Without PAN card karna hai?... Doosra PAN card nikaliye (You want to do it without PAN card? Get another PAN card).”
“Ek baar pakka karne ke baad kya karte hain naya PAN card nikaal dete hai … with a spelling mistake kariye ... kuch na kuch karke PAN card nikaal dete hai … because of these people lots of default log ho gaya hai … bahut log do–teen PAN card lekar rakha hai … wo PAN card rakhte hai … PAN card rakhe toh … wo PAN card ke naam pe IT ko jaata hoga … pata nahi (Once we decide [on the investment], what we do is we make a new PAN card … with a spelling mistake on it … anyhow we would manage a new PAN card … because of this there are many defaulters … many people have two–three PAN cards … they keep the [original] PAN … which means … they file returns to the IT [Department] … don’t know).”
On how safe it is to invest with Reliance:
“Safety safety … bahut saara paisa aisa hai (It is safe … a lot of money is [invested this way] there).”
R. Shankar S, Senior Territory Manager, Reliance Life Insurance, Bangalore
On how big chunks of unaccounted cash are routine with Reliance:
“Aaj savare ji saath lakh cash collect kar ke laaya tha … yehi same thing (Today morning itself, I collected 60 lakh cash … for the same thing).”
Our unaccounted cash would be converted into DDs for investment in Reliance Indurance:
“Nahin humein DD banana hai … that we will make (No, we have to make the DD … that we will make).”
V. Yadav, Senior Territory Manager, Reliance Life Insurance, Gurgaon, Haryana
On investing in gold:
“One-time payment hai … aage aapki immediate pension start ho jayegi… paise ko aap… white ka paisa ayega … paisa aapka monthly mode milega … usko kahin gold kharido… main aapko best bataoon … yahan se jo paisa mila aapko… usse har mahine gold kharido (This is a one-time payment … pension will start immediate[ly] … the money will be white ... you will get it in monthly mode … you buy gold with it … I tell you the best thing … purchase gold every month with the money you get back from us).”
On facilitating our black money investment:
“Main aapko cheque doonga apna ... aapko trust hai toh main daalonga kis tarah se … main DD banwaonga … tukdo mein … dus-dus lakh ka DD banwaonga (I will give you a personal cheque … if you trust me then I will make DD … put it in … in parts … I will get DDs made of Rs. 10 lakh each).”
“DD main aapka different different account se banwa doonga … uski payment aapko karni padegi DD ki … paise toh lagte hain na DD ke (I will get the DDs made from different accounts … but you will have to pay for that ... after all you have to pay for the DDs).”
Even a fake address would be added to our account:
“Address jahan aap rehte ho doosra address lagwa denge … wo address bhi nahin rahega … banda dhoondega bhi to kisko … mobile number aapka rahega bus … aapse koi pooche toh haan main hoon … aapki koi verification nahin hogi … kuch nahin hoga (We will give an address other than where your stay … that address will not be there … who they will look for? Only your mobile number will be there … if somebody asks you say yes I am … there will be no verification … nothing that sort).”
A. K. Agarwal, Chief Manager, State Bank of India, Noida, Uttar Pradesh
On how nothing would change in India:
“Dekho ji jo chalta hai Hindustan mein ... chalta toh wohi rahega ... baaki upar jo bhi hai ...wo hota rahega ... sub baatein hoti rahengi ... sub baatein hoti rahengi na (You see what is going on in India would go on ... what happens in the upper echelons will go on ... there will be all sort of talk ... there will be all sort of talk).”
It is black money which makes our economy stronger:
“Haan ... usme dekho kitne America ke bank jo ki itne bade ... analyst ye sab mante the ... unki haalat bhi kharab ho gayi na ... toh yahan nahi hui ... aisa thode hai ki yahan par unke paas koi special cheese chal rahi thi … khali ye tha ki yahan pe number do ki economy badi strong chalti hai (Yes ... see what happened in America ... all the big banks, which analysts too held as infallible ... crumbled ... but it didn’t happen here ... it is not that here they [the banks] are working on something special ... the only thing here is that we have a Number 2 [grey] economy which is running very strong).”
Money can be laundered with help from other sources:
“Aise toh log mil jaate hain ... aise toh ho jaata hai ... kyonki unko khud ko No. 2 chahiye ... jo log builder ... ke kaam mein lage rehte hain ... wo convert kar lete hain (You can get such people ... this can be done .... because they too want no. 2 [money] ... people like builders ... like engaged in those kinds of profession ... they convert it).”
A. K. Jain, Relationship Manager (Personal Banking), State Bank of India, Aligarh, Uttar Pradesh
“Sabse best hai… bank mein kar denge kuch ismein kar denge … tukdo mein kar denge … dheeme dheeme kar denge … ek saath nahin karenge (This is the best … some we will do in bank [savings instruments] … some we will do in it … we will do it in parts … we will do it slowly, we will not do it in one go).”
“Locker se nikaal ke usmein daalte rahenge … laocker se nikaal ke yahan rakhenge wahan daal … usmein (We will keep on putting in there after taking it out from the locker … taking it out from the locker we will keep it here [in the account] ... put in there … in that).”
J. Kaur, Chief Manager, State Bank of India, Panchkula, Haryana
“Fir main bata doon mutual fund best rahega … na toh wahan pe koi hai batanewala ki sources of fund kahan se aya … na hi ismein wo cheez hai … wo kar sakte hain … (Then, I shall tell you mutual fund will be the best … there is no requirement for you to reveal the source of fund … from where it has come … there is nothing like that … you can do it).”
“Matlab dus lakh se neeche transaction rakh lo … aath aath nau nau karte ho aap cash jama karate ho to
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