In popular parlance, the unofficial economy goes by the

name of black money and the official, of white money.

Black and white are also variously substituted by
number two and number one, unaccounted and
accounted, unreported and reported, unrecorded and
recorded and so on. Prof. J.C. Sandesara

COMBATING MONEY LAUNDERING-HAWALA

I. Ratification and implementation of UN instruments:

Each country should take immediate steps to ratify and to
implement fully the 1999 United Nations International Convention for the
Suppression of the Financing of Terrorism.
Countries should also immediately implement the United Nations
resolutions relating to the prevention and suppression of the financing of
terrorist acts, particularly United Nations Security Council Resolution
1373.

II. Criminalising the financing of terrorism and associated money

laundering:
Each country should criminalise the financing of terrorism, terrorist
acts and terrorist organisations. Countries should ensure that such
offences are designated as money laundering predicate offences.

III. Freezing and confiscating terrorist assets:

Each country should implement measures to freeze without delay
funds or other assets of terrorists, those who finance terrorism and
terrorist organisations in accordance with the United Nations resolutions
relating to the prevention and suppression of the financing of terrorist
acts.
Each country should also adopt and implement measures, including
legislative ones, which would enable the competent authorities to seize
and confiscate property that is the proceeds of, or used in, or intended or
allocated for use in, the financing of terrorism, terrorist acts or terrorist
organisations.
IV. Reporting suspicious transactions related to terrorism:
If financial institutions, or other businesses or entities subject to
anti-money laundering obligations, suspect or have reasonable grounds
to suspect that funds are linked or related to, or are to be used for
terrorism, terrorist acts or by terrorist organisations, they should be
required to report promptly their suspicions to the competent authorities.

V. International Co-operation:
Each country should afford another country, on the basis of a treaty,
arrangement or other mechanism for mutual legal assistance or
information exchange, the greatest possible measure of assistance in
connection with criminal, civil enforcement, and administrative
investigations, inquiries and proceedings relating to the financing of
terrorism, terrorist acts and terrorist organisations.
Countries should also take all possible measures to ensure that they do
not provide safe havens for individuals charged with the financing of
terrorism, terrorist acts or terrorist organisations, and should have
procedures in place to extradite, where possible, such individuals.

VI. Alternative Remittance:

Each country should take measures to ensure that persons or legal
entities, including agents, that provide a service for the transmission of
money or value, including transmission through an informal money or
value transfer system or network, should be licensed or registered and
subject to all the FATF Recommendations that apply to banks and non-
bank financial institutions. Each country should ensure that persons or
legal entities that carry out this service illegally are subject to
administrative, civil or criminal sanctions.

VII Wire Transfers:

Countries should take measures to require financial institutions,
including money remitters, to include accurate and meaningful originator
information (name, address and account number) on funds transfers and
related messages that are sent, and the information should remain with
the transfer or related message through the payment chain.
Countries should take measures to ensure that financial institutions,
including money remitters, conduct enhanced scrutiny of and monitor for
suspicious activity funds transfers which do not contain complete
originator information (name, address and account number).

VIII. Non-Profit Organisations or Non Government

Organisations(NGO's):
Countries should review the adequacy of laws and regulations that
relate to entities that can be abused for the financing of terrorism. Non-
profit organisations are particularly vulnerable, and countries should
ensure that they cannot be misused:
i. By terrorist organisations posing as legitimate entities;
ii. To exploit legitimate entities as conduits for terrorist financing,
including for the purpose of escaping asset freezing measures; and
iii. To conceal or obscure the clandestine diversion of funds intended for
legitimate purposes to terrorist organisations.

IX. Cash Couriers:

Countries should have measures in place to detect the physical
cross-border transportation of currency and bearer negotiable
instruments, including a declaration system or other disclosure
obligation.
Countries should ensure that their competent authorities have the
legal authority to stop or restrain currency or bearer negotiable
instruments that are suspected to be related to terrorist financing or
money laundering, or that are falsely declared or disclosed.
Countries should ensure that effective, proportionate and dissuasive
sanctions are available to deal with persons who make false
declaration(s) or disclosure(s).

Global Financial Integrity (GFI).

India lost $123 billion in black money during 2001-2010, a U.S.-
based research and advocacy organisation said in a report.
However, Indias loss is far less than that of China, which according
to the report suffered a loss of $ 2.74 trillion during the same period
(2001 to 2010), followed by Mexico ($476 billion), Malaysia ($285
billion), Saudi Arabia ($201 billion), Russia ($152 billion), the
Philippines ($138 billion) and Nigeria ($129 billion). India is the eight
largest victim of black money loses, said the report Illicit Financial
Flows from Developing Countries: 20012010, released by Global
Financial Integrity (GFI). India is the only South Asian country to
figure in the top 20 list of such nations. In 2010 alone, the Indian
economy suffered $1.6 billion in illicit financial outflows.

Table
4.0
Country wise Black money in the
decade 2001-2010
Countries Black money
China $2,740 Billion
Mexico $476 Billion
Malaysia $285 Billion
$2
Saudi Arabia 10 Billion
$1
Russia 52 Billion
Phillipines $138 Billion
Nigeria $129 Billion
India $123 Billion
$1
Indonesia 09 Billion
UAE $107 Billion

India is among the top 10 developing countries in the world with

a black money outflow of $1.6 billion ( Rs. 8,720 crore) in 2010, a
report by Global Financial Integrity (GFI) said. The report, said the
total outflow of black money from India since independence until
2010 was $232 billion, generally in the form of corruption, bribery
and kickbacks. The cumulative value of illicit assets held by Indians
during the same period is estimated to be $487 billion. In the post-
reform period of 1991-2008, deregulation and liberalisation
accelerated the outflow of illicit money from the Indian economy, the
report by Washington-based GFI, Illicit Financial Flows from
Developing Countries, said. Almost three-quarters of the illicit
assets comprising Indias underground economy which has been
estimated to account for 50% of Indias GDP (around $640 billion in
2008) ends up outside of the country, the reports author and
former economist with IMF Dev Kar, said. The earlier edition of the
report has been quoted by the government in its white paper on
black money. The report found illicit financial flow in 2010 from
these countries was $ 858.8 billion, just below the all-time high of
$871.3 billion in 2008. Maximum outflow of illicit money was from
China with India ranked eighth. The report said that astronomical
sums of dirty money continue to flow out of the developing world
and into offshore tax havens and developed country banks,
meaning that the poor in source countries are being deprived of
their right to development. There is also a statistical correlation
between larger volumes of illicit flows and deteriorating income
distribution in the developing countries.

Delhi High Court

Vatika Farms Private Limited ... vs Union Of India (Uoi) Through Its
... on 28 March, 2008
Equivalent citations: (2008) 216 CTR Del 37
Author: M B Lokur
Bench: M B Lokur, V Gupta

JUDGMENT Madan B. Lokur, J.

1. By this order, we propose to deal with the existing grievances of the

Petitioners, at a prima facie and interim stage, in a batch of over a
hundred writ petitions. Learned Counsel for all the parties were heard on
these grievances from 17th to 20th March, 2008 when orders were
reserved.

(The intervening paragraphs are of no relevance to the subject-hence

deleted)

16. As a backgrounder, we may recall that the Settlement Commission

was constituted as a result of a Report given by a Committee headed
by Hon'ble Mr. Justice K.N. Wanchoo, a former Chief Justice of India.
The Wanchoo Committee recommended a settlement machinery since,
in the administration of fiscal laws, the primary objective is to raise
revenue and so there has to be room for compromise and settlement. 'A
rigid attitude would not only inhibit a one-time tax-evader or an
unintending defaulter from making a clean breast of his affairs, but would
also unnecessarily strain the investigational resources of the Department
in cases of doubtful benefit to revenue, while needlessly proliferating
litigation and holding up collections. We would, therefore, suggest that
there should be a provision in the law for a settlement with the taxpayer
at any stage of the proceedings.' The Committee opined that such a
settlement should be fair, prompt and independent.

17. The Wanchoo Committee recommended the setting up of a Direct

Taxes Settlement Tribunal which would ensure impartial and quick
decisions. That Tribunal would proceed with a settlement petition only if
the Income Tax Department raised no objection to its being entertained
otherwise that Tribunal might become an escape route for the tax
evaders. In other words, the Wanchoo Committee gave adequate
protection both to the tax payer in terms of ensuring an impartial and
quick decision or settlement in his case and also to the Income Tax
Department by enabling it to oppose a settlement application in case the
tax evader sought to use the process of the Settlement Tribunal as an
escape route for evading tax. Acting on these recommendations, the Act
was amended with effect from 1st April, 1975 by introducing Chapter
XIX-A for settlement of cases through a Settlement Commission.

Confidential information disclosed by the Petitioners to the Settlement

Commission (which was otherwise not available to the Assessing
Officer) would now be made available to him and could be used by him
against the Petitioners [Section 245HA(3)]. The procedure now laid
down by the Finance Act, 2007 is neither just, nor fair nor reasonable.

22. It must be appreciated that the assumptions made by

the Wanchoo Committee and the rationale given by it for setting up a
settlement body are still valid, and the Respondents have not submitted
anything to the contrary.

24. That the assumptions made by the Wanchoo Committee and the
Supreme Court are valid even today and that they subsist is clear from
the fact that the Wanchoo Committee Report has not been trashed by
the Respondents and the fact that the Settlement Commission still exists
and has not been wound up. After all, if all the assumptions and reasons
were not correct, the Respondents would have wound up the Settlement
Commission 'why keep an ineffectual or worthless body in place for no
apparent reason' The fact that the Settlement Commission has been
allowed to exist, and continues to exist and entertain fresh settlement
applications, clearly suggests that it is needed, even if it is for a few
cases. And, if it is needed for a few cases, why is it not needed for a
greater number of cases?