During the international financial crisis a few years ago, some Wall Street behemoths that were involved in the shenanigans managed to convince pliable regulators in the US that they were “too big to fail”. Consequently, they were bailed out with huge dollops of taxpayers’ funds and managed to claw back to solvency, while their poor victims were left to fend for themselves. The same scenario was repeated to a lesser extent in the UK and some countries in Europe.
We seem to be witnessing a smaller, but not less insidious, version of these shenanigans in the world of international finance in recent months. The snake in the grass is a one-time colonial British bank, HSBC, that has now spread its tentacles to every nook and corner of the globe. Its catchy slogan of being “a local bank” in each of its areas of operation has been a constant feature in its advertising campaigns. The HSBC saga has actually been going on for at least a decade and it, therefore, becomes necessary to study the historical canvas of this monumental scam.
The story starts in 2008, when Hervé Falciani, a French executive in HSBC’s Geneva office, found a list of French citizens who had accounts in his bank, thereby evading French taxes and hiding their assets in Switzerland. Falciani anonymously contacted the French authorities and gave them a list of around 3,000 illicit accounts in December 2008. Falciani’s motives have been questioned by many, especially the Swiss government. There has been, however, no proof whatsoever that he personally gained anything from his whistle-blowing. All one can say is that some people in real life find their actions incorrect and wrong one fine day and spill the beans. Becoming a whistle-blower is akin to crossing the Lakshman Rekha or the Rubicon.
Switzerland went after Falciani with all guns blazing. His fight against the gnomes of Zurich and Berne is remarkable and almost unbelievable. And his story, with its twists and turns, continues, although he has now been granted protection by the French government.
Of course, what interests us in this episode is the substantial Indian angle and how matters panned out in our shores. The French finance ministry, or Bercy as it is popularly called, discovered a large number of desis whose names figured in the Falciani dossier. As a token of goodwill, France passed on the list of Indian clients of HSBC Geneva to the GoI in July 2011. They never quite knew how Raisina Hill worked in those heady days of the UPA raj. There was initial brouhaha in the media and Parliament, but soon the “janitors” started their cover-up acts.
Every official Indian agency involved, specially the finance ministry, CBDT, Enforcement Directorate etc., designed all possible ruses in order to disarm the incoming missile from France. Deliberate steps were taken to ensure that the legal picture got blurred or weakened. North Block and the I-T Department, in a bizarre and completely sub rosa move, told the Indian account holders to abrogate their rights under Swiss law and provide details of their accounts. In this sordid soap-opera, they were asked to mail their “renunciation” letters to HSBC Geneva, with a copy to the Indian tax man. The worst Bollywood screenwriters could not have come up with a plot like this. The Swiss government was equally clever—it told Delhi that it would not act on “illegally acquired” information. This was the end of the road in Delhi, till June 2014, when the new regime took over.
In the interregnum, HSBC was on the ropes in its battles with the French and the Americans. The latter had the bank reeling, with accusations of money-laundering, fronting for drug cartels and
even doing business with the al Qaeda. A few years ago, the US levied a fine of $1.92 billion after the British bank had pleaded guilty to the American charges.
Fast forward to Delhi of June 2014 and now. There is a new dispensation in Raisina Hill and we have an SIT appointed by the Supreme Court to investigate the entire issue of illicit funds of Indians parked abroad. Does it mean any changes on the ground? The jury is out. This writer is not convinced that the GoI is fully committed to going after rogue institutions like HSBC to punish them for their crimes. Getting the money back from the accounts in Falciani’s list is a non-starter, because those birds flew away a long time ago. But India can and should punish HSBC. In early February, French journal Le Monde published a monumental report on the skulduggery of HSBC in the last decade. This meticulous research has hardly been reported here, although it should be a part of the SIT’s agenda. Dubbed as “Swissleaks”, it shows that nearly 181 billion Euros were handled by HSBC Geneva during 2006-07.
The RBI has enough powers under the Banking Regulation Act and FEMA to sanction HSBC India. Surely, the Old Lady of Mint Street needs to wake up and smell the coffee. jay.bhattacharjee@gmail.com