Indian investigative agencies are finding it difficult to track the money trail of the alleged Rs 3,600 crore-plus illegal remittances through Bank of Baroda branch in New Delhi to Hong Kong (HK) due to stringent privacy laws in the HK region, which is also a major international financial centre (IFC).
India’s Financial Intelligence Unit (FIU) had written to the Indian Consul General in Hong Kong to seek information on the alleged illegal remittances from Indian banks located in the region. However, as non-Indian banks are involved and Hong Kong has strict privacy laws which prohibit banks from sharing information, probe by Indian agencies is unlikely to yield the desired results, banking sources said.
The Consul General, in turn, had written to all public sector banks located in Hong Kong to reveal if any of the alleged fraudsters have any accounts with them. FIU which functions under the finance ministry is the central national agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions.
“Yes, we have received such letters from Indian consul general and have checked that none of these alleged people have any accounts with us,’’ said an official of an Indian PSU bank. However, it is not known whether similar queries were sent to the non-Indian banks located here. The funds from the Delhi BOB branch were sent to non-Indian banks located in Hong Kong.
Sources point out that it wouldn’t be possible to get details on these alleged fraudsters from non-Indian banks as the Hong Kong Monetary Authority has strict privacy laws and banks are not allowed to reveal any information on clients to any second party including investigative agencies of other countries unless there is local court order.
“It is not at all easy to get information from the local banks unless local courts issue orders and it is also not easy to get court order on these matter as India’s laws are not applicable here and courts allow such revelations only in cases relating terrorism and drugs,’’ sources in Hong Kong banking sector said.
Such stringent privacy laws will also hinder the Indian government’s drive to seek details on black money from Hong Kong, a major IFC, which is next to Switzerland in framing regulations to protect customers of banks. While Indian investigative agencies like the CBI and FIU have been trying to gather information from Indian PSBs in Hong Kong, Reserve Bank Deputy Governor SS Mundra had recently said the Central bank is looking at ways and means to make the banking system robust and seek the help of overseas regulators as part of the investigation into illegal remittances.
Mundra said the RBI has signed agreements with various regulatory bodies and it will invoke the inter-regulatory provisions if the need arises.
The investigation currently underway pertains to 59 current accounts, which were opened in Bank of Baroda’s Ashok Vihar branch in New Delhi between May 13, 2014 to June 20, 2015. These accounts were used for outward foreign remittance transactions aggregating to $576 million (Rs 3,672.30 crore) for the purpose as ‘Advance remittance for imports’ to overseas parties numbering about 418, mainly based in Hong Kong. Around 10 per cent (Rs 343 crore) of the amount involved had been deposited in these accounts by way of cash and balance 90 per cent amount through RTGS and NEFT from 51 different banks.
Tracking the money trail
* India’s Financial Intelligence Unit (FIU) had written to the Indian Consul General in Hong Kong to seek information on the alleged illegal remittances from Indian banks located in the region
* Sources say that it wouldn’t be possible to get details on these alleged fraudsters from non-Indian banks as the Hong Kong Monetary Authority has strict privacy laws and banks are not allowed to reveal any information on clients to any second party including investigative agencies of other countries unless there is local court order