JOIN USThe revelation that banks are extensively involved in money laundering may not have come as a major surprise. What the sting operation conducted by an online magazine has done is to confirm it by providing names and shedding light on the methods employed to make black money white.
The staff of three top private banks across the country were shown as too willing to accommodate the demand to sanitise black money and to proactively facilitate it. It shows that the practice is not limited to the rare rogue manager but has come to be part of normal banking operations. It is not difficult to infer that other banks may be equally involved, though private banks may be in it to a much greater extent than others.
According to conservative estimates, there is about Rs 10 lakh crores of black money circulating in the country. It becomes part of the financial system mainly through banks which, with their numbers and spread, link all areas of the economy, especially the most money-laundering sectors like real estate, films and stock markets. They also provide the bridge to politics where much black money flows through corruption, election funding etc. Bureaucratic corruption also has a major role. What is shocking in the revelations is that the undercover reporter did not have to face questions anywhere about the source of funds and did not have to prove his identity. Just the word that he was fronting for a politician was enough to open all the illegal doors for him. That showed that it is so common and natural. How this could be used for terrorism and drug trafficking can only be guessed.
The claim of the senior managements of the banks that they were unaware of the illegal activities is not convincing. Nor will the claims about high corporate governance standards and best practices appeal to anyone. The failure of financial regulators, including the RBI, to keep a watch over the banks is all too obvious. When private banks do everything illegal that Swiss banks offer to do, the plan is to set up more such banks. The serious charges levelled against HSBC bank in the past have not been acted upon. The latest flutter will also come to pass and it will soon be business as usual for banks.