Banks usually pin the blame for wrong transactions on rogue employees. But some of the employees charged with illegal activity have argued in their defence that their employers encourage a culture of undertaking dodgy transactions, which returns the spotlight to the organisations. Is illegal activity being facilitated by foreign banks operating in India — or by ‘briefcase bankers’, based in tax havens across Asia, that come to India looking for people desirous of conducting illegal transactions overseas? And, if so, what pressure is the Government and the Reserve Bank of India putting on these banks and bankers? India is an increasingly attractive banking market, and virtually all the leading international banks are eager to expand their presence here. Surely it should be possible to demand their strict compliance with Indian laws not just here, but globally, and to officially disfavour those organisations that don’t play ball when global compliance is sought. The United States has successfully arm-twisted the same UBS into handing over the names of 4,450 clients for whom it had offered to conceal funds from the eyes of US tax inspectors; why should it be difficult for India to attempt something similar?
Questions have to be posed to Indian regulators as well. The Anil Ambani-related matter was investigated by the Securities and Exchange Board of India (Sebi), and settled last January through a consent order that involved payment of Rs. 50 crore. This is said to be the largest consent fee in Indian history; even if true, it is little more than a flea-bite for a large corporate house. It, therefore, raises questions about the correctness of such consent orders, almost always agreed to without admission of guilt. Such arrangements are usually made in an opaque manner, independent of the public scrutiny that would arise in a case tried in open court. Such questions are current in New York too, where a district court recently rejected a settlement with Citibank by the US Securities and Exchange Commission. The Court order has been contested subsequently, but perhaps someone in India should test Sebi on such matters.