Black Money – Domestic and International Efforts

India gets 4th set of Swiss Bank account details


From UPSC perspective, the following things are important :

Prelims level : Swiss Banks

Mains level : Black Money Issue


India has received the fourth set of Swiss Bank account details of its nationals and organizations as part of annual information exchange, under which Switzerland has shared particulars of nearly 34 lakh financial accounts with 101 countries.

How India gets such information?

Ans. Automatic Exchange of Information (AEOI) Agreement

  • In an effort to bring in transparency and restrict money laundering, the Swiss Federal Office gives a detailed account of the massive AEOI exchange.
  • This is the fourth tranche of information that India has received from Switzerland since the two countries entered into an Automatic Exchange of Information (AEOI) agreement in January 2018.
  • The first such exchange with India took place in 2019.
  • Some countries which have been added to the Swiss AEOI list for the first time are Turkey, Peru and Nigeria.
  • The Swiss Federal Tax Administration office has also informed that with 74 of these 101 countries, the information exchange was reciprocal.

What is the volume, nature of data?

  • In 2019, prior to India receiving its first batch of banking information via the AEOI, India would be among 73 countries that would be receiving the data.
  • In India’s case “several dispatches” would be required, giving an indication of the large volume of account holders.

Guidelines for exchange of such sensitive banking information

  • The guidelines and parameters for the AEOI are set by the OECD (Organisation for Economic Co-operation and Development), the Paris-based international body.
  • The annual exercise of AEOI exchange, such as the current Swiss bonanza of banking details, is strictly meant for “tax only” purposes and in India.
  • This data is kept in the custody of and for action by the Central Board of Direct Taxes (CBDT).
  • Under the OECD’s guidelines, details of the quantum of funds or the names of account holders cannot be publicised.

What is the scope of India’s AEOI network?

  • Under the OECD umbrella of AEOI, India presently shares bulk financial and banking information with 78 countries.
  • It receives the same from 107 countries, with Switzerland known to be sharing some of the most voluminous data.

Institutional mechanism in India

  • Primarily to the large volume of FI data coming in from now a 100 countries, the CBDT last year set up a network of Foreign Asset Investigation Units (FAIUs) in 14 of its investigation wings.
  • The information of a region which has reached India via the AEOI route is transmitted in a secure manner.
  • It is the FAIUs that do the follow-up probe of the such data, and to begin with, investigate whether the taxpayer has declared the foreign bank account/s in tax returns or not.

Why do people park their money in Swiss Banks?

  • As wealth became easily mobile across international borders, the safety and stability of Swiss banks, located in a peaceful country presented an irresistible attraction for the super-rich.
  • Switzerland itself is a politically neutral country.
  • Swiss bank accounts are attractive to depositors because they combine low levels of risk with very high levels of privacy.
  • The Swiss economy is extremely stable, and the banks are run at very high levels of professionalism.
  • Opening an account is not difficult, and requires not much more than basic KYC, including a proof of identity such as a passport.

Question of Black Money

  • “Black money” allegedly stashed away by Indians in Swiss banks is a political issue in India.
  • Leaders and political functionaries have often made promises to “bring it back” and credit 15 Lakh Rupees in every Indian’s account.
  • Swiss authorities have maintained that they cooperate with the Indian government to fight tax evasion and fraud.

Also read:

What are Swiss Banks?


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