Not all black and white now
Investigative website Cobrapost has alleged that several leading private and public sector banks and insurance companies help customers launder black money. The sting operation has underlined the need for an overhaul of the financial services system.india Updated: May 07, 2013 22:56 IST
Investigative website Cobrapost has alleged that several leading private and public sector banks and insurance companies help customers launder black money - in other words, help convert black money into white - by deliberately and brazenly violating various banking and other laws. The Reserve Bank of India, the Insurance Regulatory and Development Authority, the finance ministry and many of the individual banks and insurers have instituted investigations into the allegations and have promised strict action against officials if they are found guilty. That is a good beginning, but for it to mean anything, the authorities must lay down a time frame within which the investigations will have to be completed.
Before proceeding further with this edit, a caveat will be in order: prima facie, it appears that no crime has been committed as no transaction has taken place. What Cobrapost has reportedly exposed - in two sets of sting operations - is only the alleged intent of some bank and insurance executives to help undercover reporters, posing as potential customers, launder their money. But this shouldn't in any way deter the investigators from delving deeper into the issue of whether money laundering is, indeed, rampant across India's financial services industry, as Cobrapost has alleged. Why? The issue is much more serious than a few overzealous (and misguided) executives offering to throw caution and the law book to the winds to gain that elusive competitive advantage.
At this point, it is too premature to say whether the allegations of money laundering are based on facts or otherwise. But what they have done is focus attention on India's financial services architecture, which is crying out for reform. The truth is that the system is creaking at the seams, it is very easily manipulated and far too many people at various levels have way too many discretionary powers that can be abused. Such a system, obviously, cannot deliver the goal of financial inclusion that is the holy grail of every government. So, even as the authorities investigate the allegations, pin individual and institutional responsibility in case of violations and punish the guilty, the government should not ignore the wake-up call this sting operation has sounded - for it has opened our eyes to the need for an immediate and thorough overhaul of the nation's financial services system. If we heed the warning signs and act now, the website's sting operation may yet become a catalyst for fundamental and far reaching changes that will continue to pay dividends for many decades to come.
First Published: May 07, 2013 22:12 IST