Can Indians Named in the Panama Leaks be Hung to Dry?

500 Indians have been named in the latest Panama leaks. Now will heads roll in India?

The Panama Leaks is only the fourth such recent revelation of Indians with offshore money bags.

• In 2007, there was the Liechtenstein leaks
  
• In 2011 HSBC Bank revealed a list of Indians with offshore accounts.
  
• In 2013 came another list from HSBC
  
• In 2016 came the mother of them all, Panama
  

Now while our governments have been quick to welcome investigations and order probes by multiple agencies into the multiple mountains of data, nothing ever seems to come out of it.

So what happens to rich Indians who are named or exposed in these infamous leaks?

Also Read: Panama Papers: What India Should Do To Get Mossack Fonseca Files

Zero Conviction Rate

The Ministry of Finance claims that prosecution has been initiated in the Liechtenstein leaks.

2011 HSBC Leaks

• 569 entities traced
  
• 390 found guilty
  
• Prosecution filed aganst 154 people

ICIJ Leaks of 2013

• 434 Indians traced
  
• Prosecution initiated against 54 people

Panama Leaks

• Multi-agency probe launched
  

But legal experts argue that nothing comes out of these cases and here’s why:

Given the volume, the pace and procedures of investigation, it could take years. It is important to understand that at the heart of the controversy lie a set of documents. All these individuals need to do is claim that the documents are false or forged. Just proving the authenticity of these documents can take years. Finding the trail of money based on the information in the documents can also take ages. After one gets past the proving stages, there will be years of appeals. 

Dushyant Arora, Lawyer & Columnist 

So the process of proving guilt is complicated. The law at the time of transation will apply, veracity of documents will have to be proved and then the wheels of justice will take their own course. Procedural considerations coupled with a weak political will have only doused any hopes of justice, says senior advocate Prashant Bhushan.

Even in HSBC leaks, when account details of Indians were given, the government didn’t put the information in the public domain. While the Supreme Court appointed an SIT and an investigation is underway, nobody has gone to jail. Wherever powerful people are involved, successive governments have only soft peddled the issue.

Prashant Bhushan, Supreme Court Lawyer

Also Read: For Sale: Shady Panama Hats, Tailors, Laundromats

What’s Illegal About it?

Bhushan clarifies that being named in leaked files of offshore accounts does not immediately indicate guilt. Only undeclared wealth invites scrutiny.

Keeping money in off-shore accounts is not illegal. But if the companies or the share-holding has not been declared, that is illegal. The law has changed now but prior to 2004, permission of Reserve Bank of India was required to transfer wealth abroad. Individuals and entities who have not informed RBI would be guilty of offences under FEMA & FERA. Depending upon nature and source of money they would also be guilty of tax evasion under Income Tax Act, siphoning out money would also make them guilty under The Companies Act for cheating of shareholders as well as defrauding of banks.

Prashant Bhushan, Supreme Court Lawyer

Liberal Laws of Today Cannot Be Applied Retrospectively

The money stashed abroad is subject to controls and conditions, but the RBI’s Liberalised Remittance Scheme 2004 sought to lessen them, allowing Indians to freely remit $2,50,000 every year. However, the Panama leaks reveal details of offshore accounts from as early as 1977 to the present day. Today’s liberal rules don’t apply to yesterday’s transactions. It is not a ‘one size fits all’ solution.

Panama Leaks shows transaction from 1970 onwards. Data in the leaks has to be analysed according to the laws prevalent at the time of the transaction. Before 1990, in the pre-liberalization era, there was no question of controlling or having stake in companies abroad. The RBI Governor is correct, having accounts overseas is not a crime, but compliance with law at the time of transaction would need to be checked. When was the company acquired? When was the bank account opened? When was transaction made? And was it permissible at that point of time? LRS 2004 does not cover transactions in the past. 

Sanjay Hegde, Supreme Court Lawyer 

So while holding money in offshore accounts does not amount to guilt, hiding it from the authorities does. The creation of multiple companies under multiple identities is generally an indication of tax evasion. Bhushan’s argument is simple – if it is legal, why hide it?

A lot of people whose names are appearing are saying their money is legal. My question is then why do you need to hide it? Why do you need to hide the identity of shareholders and directors? Why hide beneficiaries if it is all legal?

Prashant Bhushan, Supreme Court Lawyer

Also Read: How Offshore Accounts are Used to Hide Wealth and Avoid Taxes