"Money flows across frontiers, but laws do not. The rich live globally, the rest of us have borders." — Oliver Bullough, Moneyland
Over the last few months, there have been quite a few news items that have brought money laundering and, in particular, tax havens back into public consciousness.
First is the updating of the Prevention of Money Laundering Act (PMLA) to bring the supporting cast of the money laundering show — accountants, lawyers etc, — into the limelight.
Second is the Enforcement Directorate (ED) making steady progress in various money laundering cases.
Third, the Dravida Munnetra Kazhagam (DMK) government in Tamil Nadu is setting new standards in kleptocracy and the ministers brazenly displaying wealth.
Fourth is some high-profile world leaders getting embroiled in shady deals.
Fifth is the rich Asians renouncing citizenship to move on to greener pastures. All of the above weaves into a story about ‘big money’.
I went back to the bestselling author Oliver Bullough’s, Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back, to make better sense of the events.
By “Moneyland”, the author refers to tax havens and the supporting ecosystems.
Last week, there was a news report of lawyers being brought into the ambit of PMLA.
This follows the bringing of Chartered Accountants and Company Secretaries under the Act.
Readers may think that maybe the officials finally got around to watching the Rajinikanth starrer Sivaji, where our hero gives the accountants of crooks a good thumping.
But these actions are actually being taken to be compliant with the recommendations of the global money laundering watchdog, FATF (Financial Action Task Force), that is meeting in November to rate countries into various lists — compliant, grey or black.
The general public should welcome punishing enablers of the abuse of the global financial system.
This reminds us of the stark reality of the parallel economy that is surreptitiously chugging along under our noses. The corrupt rich evade taxes and launder money in various methods, including parking it in tax havens.
The underground economy, like a leech slowly drawing blood from the host, steadily weakens the fiscal and moral fabric of the society. International Monetary Fund (IMF) estimates that about half a trillion dollars every year is lost as tax revenue every year.
Recently, ED attached properties worth Rs 11 crore in Coorg belonging to Karti Chidambaram, the sitting Member of Parliament from Sivaganga and son of former United Progressive Alliance minister P Chidambaram.
The amount looks paltry, given the scale of the allegations against him. We have to understand that the Moneyland ecosystem supports in layering and routing money under many jurisdictions such that money that lands in tax havens becomes almost untraceable and thus lost.
In the Maxis scam, the Indian Express as a part of Panama Papers investigations reported a maze of transactions between entities in British Virgin Islands, Singapore, Bahamas, Jersey and London among parties accused.
Anti-corruption activist Savukku Shankar has alleged that recent visits of members of the DMK first family to London and Dubai were possible efforts to launder looted wealth.
Raids by the ED on movie production company, Lyca Productions, also provide ballast to allegations of international money laundering through their offices in European countries.
Lyca has partnered with Red Giant pictures, which is closely associated with Udhayanidhi Stalin, the Youth Welfare and Sports Development Minister of Tamil Nadu.
Bullough quotes an investigation officer, "You can have a corporation created in a very transparent jurisdiction that will then be nested in a more obscure jurisdiction... The more plastic bags you wrap around a dog turd, the harder it is for outsiders to realise what’s inside. And if the last bag says Tiffany & Co. on it, perhaps no one will ever realise it is full of shit."
The usual refrain in Tamil Nadu is that DMK regimes have always been corrupt and it is a natural by-product of “progress”.
The deluded should listen to fellow Tamil, the former deputy prime minister of Singapore, S Rajaratnam.
He said, “A society that is indulgent towards corruption and the successfully corrupt is not, as is often argued, a liberal sophisticated society inspired with a shrewd understanding of human nature. On the contrary, it is what one sociologist has aptly named a ‘kleptocracy' — a society of the corrupt, for the corrupt, by the corrupt”.
It makes me sad to remind readers that India had a chief economic adviser in the name of Kaushik Basu, who argued for making bribery legal. Such was the moral turpitude under UPA-2. One shudders thinking about it.
To be continued in Part II.
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