Black money probe: Swiss banks rush to ring-fence themselves

As the probe into black money stashed abroad by Indians gathers steam, banks in Switzerland are running from pillar to post to safeguard their interests while some are also considering financial provisions in their books for possible penal actions and legal costs.

At the same time, banks are also lobbying with the Swiss government to insist on safeguards in their information-exchange and administrative assistance frameworks with India to protect their interests during the subsequent prosecution and other legal or regulatory proceedings in black money cases.

Sources, however, said that the role of some banks, and of certain bankers, has already come under the scanner for acting in concert with the suspected black money hoarders and also for making ‘safe haven’ promises for their funds.

The suspected lapses on the part of at least three large European banks, including two from Switzerland itself, are also being probed for allegedly facilitating re-routing of funds of certain Indian corporate houses back into their listed companies as foreign investments.

Capital market watchdog SEBI is probing at least three large global banks and many Indian companies for alleged round-tripping of funds by way of multi-layered transactions, while the regulatory noose has further tightened in these cases with involvement of other regulatory and enforcement agencies.

Such transactions are suspected to have taken place in the case of 15-20 Indian companies, a senior official said, but refused to disclose their names or those of the banks saying a disclosure may impede the investigations. Portfolio managers at some banks with a significant presence in Indian financial markets could have helped clients route money back into the country as foreign funds, using investment vehicles across jurisdictions.

So far, the focus of this Supreme Court monitored probe has mainly remained on persons and entities from India suspected to have stashed illicit wealth in overseas locations, including Swiss banks.

However, as the probe moves further — it is being driven by a Special Investigation Team (SIT) with two former Supreme Court judges as Chairman and Vice-Chairman along with members from various investigative and regulatory agencies — the banks are turning wary about possible action against them.

Senior executives at various banks, including three large ones headquartered in Switzerland and the Swiss units of some major European banks, said they are considering making financial provisions as anticipatory measures, to deal with any action involving them in India’s black money probe.

The banks are also said to be lobbying with the Swiss government, pushing it to ask the Indian authorities to put in place a ‘settlement’ mechanism to deal with the suspected entities,