War on corruption will have to extend far and wide given the innovations that fraudsters make to evade and dodge taxation sleuths. The recent raids that resulted in over Rs 85 crore being ferreted out by the income tax department from private vaults is a grim reminder of the misdeeds of greedy businessmen who break the law with a vengeance for personal gain. While traditional businessmen have kept their valuables in their safes at home or in shops, tech savvy GenNow traders seem to have parked their ill-gotten money in private vaults and lockers within and outside the country. Income tax raids in the national capital’s posh South Extension area, which revealed hidden loads of cash in new currency notes, diamonds, gold, jewellery and ornaments points to a deep-rooted malaise centred around the metro cities and major townships. What is interesting is that in several cases, the real culprits are bound to escape punishment given that most lockers in private vaults were registered or used by employees, drivers, peons, gardeners and even cooks.
It is obvious that these unsuspecting low profile faithful servants were put up as shields for their powerful masters — most of them well known. The lockers in private vaults work as transit points in cash deals transcending borders against fake diamonds purchase and sale bills that are scarcely monitored by officials. Businessmen and traders pay Rs 1.5 to Rs 3 lakh per locker as annual maintenance fees as against Rs 1,000-Rs 2,000 at banks for vault services. Reports suggest that private locker services keep the names of those using their services anonymous. This is a worrisome development. By comparison, all vault services provided by banks on the other hand are monitored and subject to Reserve Bank of India regulations. It is necessary for the government to crack down on these private locker services if it needs to pursue black money.
This will have to be done systematically. To prevent generation, aggregation, distribution and laundering of black money within and across borders, private vault services will have to be brought under RBI regulation of RBI. Even the security ring around these vaults will have to be manned by agencies approved by home ministry.
Holding a locker in a private vault alone cannot be construed as a crime. Only wrong doers or suspicious locker accounts will have to be investigated. While real owners of the lockers will have to be identified before RBI, violation of basic norms for private vaults must be made a punishable crime. These high-end services should be transparent and secured by a multi-disciplinary force like any other banking or financial service offered by scheduled banks and financial institutions. Vault services may have to be not only regulated but developed and expanded. If required, 100 per cent foreign direct investment (FDI) should be allowed for these services which are, almost by definition, meant for use by high net worth individuals, corporate honchos and such. In fact, professionally-run private vault services can catapult into making Mumbai, Surat, Bengaluru or Delhi as major destinations for global wealth safekeeping and value add offers. Some European destinations like Switzerland have vaults built into the Alps, for instance, and operate under a veil of secrecy much like their banking system. In contrast, many vault companies in London offer open services. US vault players are diverse and widely knit community with their own rules and regulations. India will have to evolve its own eco-system of private vault services that’s transparent and above board. Finance minister Arun Jaitley will have to come up with a policy echo-system to make the private vaults a bankable proposition.