Are the political parties in India fooling us on the issue of illicit wealth parked abroad by winking at the obvious, wonders M R Venkatesh.
The Stolen Asset Recovery (STAR) initiative was launched jointly by the UN Office on Drugs and Crime (UNODC) and the World Bank (Bank) in 2007 to trace and recover stolen wealth of various countries parked in various tax havens.
The Bank estimates that the cross-border flow of the global proceeds from criminal activities, corruption, and tax evasion to be between $1 trillion and $1.6 trillion per year. Much of this happens to be from the developing countries to the developed world.
How much of this is from India? Your guess is as good as mine, but if the Government of India is to be believed not much of it is from India and whatever little went out had come back during the UPA regime, inspired obviously by the dynamic leadership of Dr. Singh!
While the Bank concedes that these estimates are "imprecise," nevertheless these estimates give us the magnitude of the problem. That explains why this multilateral initiative from the World Bank.
What is laudable about this objective is that there is paradigm shift in the approach to the global menace of corruption, capital flight and money laundering under this initiative. Till date the traditional view was to blame developing countries, its weak institutions and poor governance for the menace little realizing that the money so stolen from there is invariably parked in some developed countries.
More importantly, such capital flight takes place with the active connivance of global accounting firms, law firms, international banks and corporate formation agents in some of these exotic tax havens that use various techniques to launder such crime money, remove the taint from the money and re-circulate them in the world of global finance as clean lily white money.
Obviously it takes two to tango. The STAR initiative seeks to address these issues head on, especially on behalf of the developing nations who continue to lose their billions. By putting corrupt leaders on notice that stolen assets will be traced, seized, confiscated, and returned to the victim country, the STAR initiative surely constitutes a formidable deterrent to corruption.
Secret billions of dictators and despots
Yet after 5 years the STAR initiative has not been much of a success. Even though countries as diverse as Nigeria, Peru, and the Philippines have enjoyed some modest success in asset recovery, the process has been time-consuming, laborious and costly.
But are the corrupt only from these countries? Is it a case that leaders only from these three countries have parked their illicit wealth abroad? Or is it a case that the recovery effectuated in the cases referred to above by the Bank the end of the matter?
The answer to all these questions would be a resounding no. Why? This is simply because even by the Bank's own admission substantial amounts of illicit wealth stolen from developing countries remains to be traced and recovered. Surely, a daunting task even for the Bank.
Naturally questions arise. Is the Bank competent? Does it have the necessary wherewithal? Or is it handicapped by the lack of information on the looters?
But what is worse is there have been several media expose on the matter - yet not much traction has come about on the subject, both from the respective governments as well as by the Bank. In fact, the Asset Recovery Hand Book published by the Bank (Para 1.2.4) suggests using media reports for initiating investigations on such matters.
In this connection the most shocking media expose on this subject came from Schweizer Illustrierte, a Swiss magazine of repute which carried an expose of 14 politicians of developing nations who, it said, had stashed their illicit wealth in Swiss banks (issue dated November 11, 1991).
In an article in German (and roughly translated into English) titled as "Curse of money - The Swiss bank accounts of the Dictators," featured 14 dictators and despots from various developing countries, details of their money parked in Swiss Banks and related particulars.
Interestingly, one of the 14 happened to be Rajiv Gandhi, the late PM of India who had been assassinated six months prior to this expose. The report under his photo, read: "2.5 billion francs on the Indian secret accounts in Switzerland" of "Rajiv Gandhi, Indian." That would, according to rough estimates, be equivalent to USD 10 -15 billions (Rs 55,000-90,000 crores) today.
The other leaders captured by the magazine were: Suharto of Indonesia (USD 25.5 billion), Haile Selassie of Ethiopia (USD 22.5 billion), Mobutu of Zaire (USD 6 billion), Shah Pehlvi of Iran (USD 5.7 billion), Saddam Hussein of Iraq (USD 800 million), and Nicolas Ceausescu of Romania (USD 500 million).
While all those who are named in the story are now no more in power or even alive, the fact of the matter is that there is no genuine attempt either by the respective governments or by the Bank to recover the stolen wealth of those named by the Schweizer Illustrierte in its story. Why? The answer to this question is the crux of the issue.
Make STAR program more realistic
The stunning expose by Schweizer Illustrierte as early as in 1991 was and continues to this day an extraordinary story by the media on the secret accounts of leaders from developing countries, unrivalled perhaps to this day in its sweep and audaciousness.
Despite the staggering amounts mentioned (remember that these amounts are staggering even after two decades) in this article, the fact remains that not one government from these countries have recovered the illicit wealth of their leaders, even after their fall. Sadly some successors pursued recovery process only to loot the recovered wealth!
While most of the leaders mentioned in the story were dictators / despots there was one honorable exception - Rajiv Gandhi. He was perhaps the only one to figure in the story from a democratic country. Unfortunately he was dead by the time the story was published in November 1991 to accept or deny the story.
Yet the Congress party has not denied or accepted this story to this day. Stranger still, the story gained traction a decade later in India in 2002 when the irrepressible Dr. Subramanian Swamy pointed out the same in the local media. By then the NDA was firmly in saddle. Yet it too did precious little to get to the bottom of the matter.
All these leave us with an extraordinary sense of unease - are the political parties in India fooling us on the issue of illicit wealth parked abroad by winking at the obvious? Remember the Schweizer Illustrierte story is never mentioned in passing by any of the opposition leaders including the Left.
And the Bank believes in system, institution and law manned by these very people who are either party to the loot or beneficiaries of the loot to recover such stolen wealth! Is this not akin to entrusting policing global terror to Al Qaeda? Well not exactly, but STAR initiative is somewhere close to it.
Simultaneously there have been several developments within these countries. The most notable one in the Indian context was the Task Force set up by the Supreme Court by its order of July 2011. Unfortunately, this Order of the Hon'ble Supreme Court has been referred for a review by the Government on the specious argument that it was Court was not constitutionally mandated to set up a Task Force in the first place on such matters.
If you thought such stonewalling was only an Indian phenomenon - please wait. The case of how successive governments in Philippines failed to recover the massive loot by Marcos has been brilliantly captured by James S Henry and Bill Bradley in their master piece The Blood Bankers: Tales from the Global Underground Economy.
Simply put, the global system evolved across continents is by the looters, for the looters and by the looters. And only those who connive or tolerate the looters are allowed to occupy high offices. Dr Manmohan Singh, the Hon'ble Prime Minister of India, is a classical case in point. No wonder, given this paradigm, the Bank is having very little to show even after years of painstaking efforts.
So what is to be done? One way out is for the Bank to reward all whistle blowers on stolen assets parked in tax havens, especially if they come with unimpeachable proof of such illicit wealth. Simultaneously, for starters, how about beginning to investigate the 14 names mentioned in Schweizer Illustrierte?
Unconventional times call for unconventional responses. Unless such whistle blowers are adequately compensated, the traditional routes suggested by the Bank to recover the Stolen Wealth is sure to be tripped from within the system. It is time for some out of the box thinking by the Bank.
As regards India, can the Congress and BJP who have been partners in eloquent silence till now defend the honour of late Rajiv Gandhi by filing defamation case against Schweizer Illustrierte in Switzerland? Such an action will be the first step in recovering the stolen wealth from India. Should Schweizer Illustrierte fail to come up with evidence, at-least the honour of Rajiv will be restored.
Disclaimer: The views expressed here are the author's own.
The author is a Chennai based Chartered Accountant. Comments can be sent to firstname.lastname@example.org