I do not belong to the academia but I have the experience of combating the menace of Balck Money. Black Money considered purely as an economic concept is OK, let the views of Prabhat Patnaiks prevail, but Black Money also carries a huge burden of memories, Black Money not only distorts the economy,it is like an ominous presence, a curtain of immorality that obstructs from us the real face of our ruling elite and rich. It distorts our lives as social beings, it denies participative parity to the large public in the economic life.
Why should money which originates in criminal activities and tax evasion, why should money earned through kidnapping, bootlegging , prostitution, corrupt practices of the public servant , command that same respect and same purchasing power as the money earned through honest enterprise ? So apart from the economic costs of fighting it , at which some mathematically proficient economists are chuckling, there is an egalitarian obligation on governments to liquidate it.
The popular parlance recognizes the difference between honest enterprise and dishonest theft. Black money, dirty money, hot money etc are certainly not very edifying epithets. But the Banks which are the prime centers of all financial activity and act as a clearinghouse for all money generally do not.(Things have improved considerably all over the world in view of the pervasive terrorist threat.).
The enforcement agencies and the hoarder of ill gotten money have entirely opposite expectations of money ; while the former would like his money to be untraceable to its owner, to become pure exchange value , infinitely mobile, nimble enough to be able to disappear from one jurisdiction and materialize in another, without let or hindrance. The enforcement agencies, if they had their way would like every single bit of money, every paisa, to be legible, to bear its ownership as well as its origin.
What are the options before the hoarders of black money? Not many; either they go to the Bank or forget about their hoarded cash. If they forget about it, it is good riddance to bad rubbish. The money that does not enter the over ground economy decrease the liability of the Reserve Bank to redeem money to that extent. Griping critics have said that it is a clever move by the government to improve the financial health of the banking sector. And why not? If the evader and white collar criminal is not made to pay for it who will? You pity the poor plumage and forget the dying bird! What many knowledgeable people are saying today that the hoarder of black money will now convert it into denominations of 2000, and live lot happier with less inconvenience and less unwieldy hoard? Indeed it is possible, but for the old money to retain its status as money has to end up in the bank and change into new currency. Therein lays the rub.
The enforcement agencies pursuing the audit trail often run into the formidable wall of Bank secrecy and customer confidentiality norms. Banking regulation in every jurisdiction makes it difficult to obtain information. Section 4 of the Indian Bankers Book Evidence Act 1891 provides for the production of the certified copies of the entries in a bankers book in a legal proceeding. Section 5 of the same Act stipulates that a no officer of a bank shall in any legal proceeding to which the bank is not a party be compelled to produce any bankers books. The standard demand made by the banking agencies for proofs of the criminality of the funds begs the question. The criminality cannot be established without the willing co-operation of the bank authorities if one is looking for suspicious or criminal transactions.
To describe the situation the word ‘Compellence”, a word that I came across in the context of strategic debate, would be eminently suited. “Compellence has been described as a set of actions or positions that force an opponent to take some action desired by the initial actor. It is the opposite of deterrence, in which the actions are intended to prevent an opponent from taking some action.”Here it is a two way Compellence for both the unwilling parties.(678)
THE WAY AHEAD
Of course there will be intermediaries, middlemen, third party transactions. But they will be people, identifiable by their Pan Cards. The more the merrier; such a precious hoard of data will keep the enforcement agencies busy for long. These would be like so many clues in a gigantic jigsaw puzzle for further explorations. After all those who hold unaccounted cash must be having other investments. Armed with statutory powers it would be much easier to make the connection to real estate and other modes of concealment can be established at leisure by any enforcement agency that knows its marbles.
Way back in late 90s I had put across the proposal in my talk to the IAS officers in the National Academy of Administration Mussoorie. What I had suggested was to make accountable in law, those who were involved with the introduction of money in legal channels. Bankers, tax planners, charted accountants need not be allowed to hide behind customer confidentiality. When statutory authorities place trust on their records etc this privilege must impose a countervailing responsibility. In investigation relating to such financial crimes it should be mandatory for chartered accountants, tax consultants, and real-estate agents to make full disclosures. Those who pollute economic environment must pay for the clean up by unstinted co operation. I was invited to the Malimath Committee where also I submitted this proposal.
The US, I believe has put in place something similar known as the Sarbanes Oxley Act which is called Public Company Accounting Reform and Investor Protection Act" (in the Senate) and "Corporate and Auditing Accountability and Responsibility Act" . With such a popular upsurge of public opinion against black money it will be worth considering having an Act which should inhibit the colour changers of money.(290)
*Manoje Nath, IPS retired as DG Homeguards, Bihar has vast experience of investigating financial crimes. The Patna High Court asked him to investigate several important cases during his tenure .Among many other important cases, it asked him to investigate counterfeit currency cases and directed the government to create a special cell to be placed under him for curbing this menace.