These individuals and companies include politicians, the mega rich and tax offenders, among others, who have invested in tax havens such as the British Virgin Islands, the Cook Islands, Samoa and other offshore hideaways.
The 612 Indians in this list include two members of Parliament Lok Sabha Congress MP Vivekanand Gaddam and RS member Vijay Mallya and several industrialists such as Ravikant Ruia, Samir Modi, Chetan Burman, Abhey Kumar Oswal, Rahul Mammen Mappillai, Teja Raju, Saurabh Mittal and Vinod Doshi.
The list also includes businessmen who have had a brush with authorities such as the Income-Tax department and the CBI. Several of the offshore investments were made in possible violation of RBI and FEMA rules.
Details of these transactions were contained in 2.5 million secret files and accounted for more than 260 gigabytes of data. They were obtained by the International Consortium of Investigative Journalists (ICIJ) and their total size is more than 160 times larger than the leak of the US State Department documents by Wikileaks in 2010.
Based in Washington DC, ICIJ (www.icij.org) is an independent network of reporters who work together on cross-border investigations.
ICIJ collaborated with 38 media organisations around the world, including the The Indian Express, for this ambitious global project and to analyse the documents. The other media partners include The Washington Post in the US, The Guardian and BBC in Britain, Le Monde in France and the Canadian Broadcasting Corporation.
The secret files provide facts and figures cash transfers, incorporation dates, links between companies and individuals that illustrate how financial secrecy has spread aggressively around the globe. They represent the biggest stockpile of inside information about the offshore system ever obtained by a media organisation.
Besides several well-known Indians, the lists include American doctors and dentists, middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, East European and Indonesian billionaires, Russian corporate executives and international arms dealers.
These people used international financial services providers such as the Portcullis Trustnet (PTN) of Singapore and the Commonwealth Trust Limited (CTL) in the British Virgin Islands to register offshore companies in tax havens. PTN and CTL, it has been found, have helped tens of thousands of people set up off-shore companies, personal financial trusts and hard-to-trace bank accounts.
Anti-corruption campaigners argue that offshore secrecy undermines law and order and forces average citizens to pay higher taxes to make up for revenues that vanish offshore. The stolen asset recovery initiative, a programme of the Wold Bank and the United Nations, has estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $ 1.6 trillion a year.
On the other hand, offshore defenders counter that most offshore patrons are engaged in legitimate business transactions. Offshore centres, they say, allow companies and individuals to diversify their investments, force commercial alliances across national borders and do business in entrepreneur-friendly zones that eschew the heavy rules and redtape of the onshore world.
The 15-month long investigation has found that alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world allows fraud, tax dodging and political corruption to thrive. The expose has also thrown light on the functioning of "nominee directors'' in offshore companies, several of whom have also been engaged by Indian patrons of offshore companies.
For instance, a cluster of 28 "sham directors'' have been identified as having served as the on-paper representatives of more than 21,000 companies between them, with some individual directors representing as many as 4,000 companies each.
The expose comes shortly after a list of 18 Indians who had bank accounts in the LGT Liechtenstein Bank and around 700 Indians who had accounts in HSBC in Geneva became public. In both cases, account holders were prosecuted and paid penalties to Income-Tax authorities for deposits they had made abroad without paying taxes in India.
Incidentally, India had signed a double taxation treaty called the Tax Information Exchange Agreement with the BVI in 2011 to check tax evasion and money laundering from the tax haven. Finance ministry officials said that similar agreements are in the process of being drafted with the Cook Islands and Samoa.
While the Liberalized Remittance Scheme 2012 permits Indians to deposit up to $200,000 abroad annually, the RBI has made it clear that this does not include deposits in tax havens. "As yet, the $200,000 facility for remittances abroad is not applicable for individuals to open accounts or companies in tax havens," a RBI spokesperson told The Indian Express.
Auditors said the legality of holding offshore accounts and registering offshore companies is complex. The RBI restriction on individuals incorporating companies abroad, they said, can be easily circumvented if an offshore company is first incorporated and the shareholding then transfered to the beneficial owner.
In the cases under scrunity, documents show that both patterns have been followed. The date of incorporation and the date of the patrons being appointed shareholders/directors is either identical which is a violation of RBI guidelines or is a month or so later. If it is the latter, these individuals can say they just acquired shares of an offshore company.
However, with individuals debarred from using LRS for setting up companies, even the remittance dispatched by them for setting up an offshore entity can be a violation. Under rules of the Foreign Exchange Management Act (FEMA), the use of the offshore route to bring in FDI is also prohibitted and is a violation of Section 8 of the act.
There is also a restraint on individuals setting up offshore companies without the prior approval of the RBI.
* 15-month investigation based on 260 GB data in 2.5 million secret files including 2 million emails covering nearly 30 years
* Data had details of over 1.2 lakh offshore firms/trusts and 12,000 agents
* Owners, benefactors of offshore accounts spread across more than 170 countries, territories
* 86 ICIJ journalists from 38 media organisations in 46 countries collaborated in investigation
* Data found 28 'sham directors' who together represented 21,000 firms