The revelations by cobrapost.com of the existence of money-laundering facilities and the modus operandi for it at three top private sector banks should not surprise us though it appears startling. There is a huge amount of black money circulating in India, with bribes taken from the highest levels in the government and bureaucracy to the lowest municipal official. Turning this black money white is a big problem — and the sectors used to launder it include real estate, the film industry and stock markets. The three banks are just cogs in this money-laundering machine: as Cobrapost said, there are “many Switzerlands” in India! A government-commissioned study last year estimated black money accounted for over 10 per cent of the country’s GDP, or over `10 lakh crores. One can only imagine the revenue lost by the government, which therefore is forced to boost revenues by imposing a service tax on the `25 a man spends on his cup of tea.
What come through in Cobrapost’s revelation is the incredible candour with which bank officials offered to do money-laundering for a person who just walked in and claimed he wanted to convert a politician’s money into white. Could politicians and banks be hand in glove in this operation? This could easily be extended to terrorists. If, as the Big Three claim, they had the KYC and all check systems in place, both they and the Reserve Bank will have to take a relook at all these norms in order to check money-laundering.