August 01, 2011 10:56 AM |
Veeresh Malik
Veeresh Malik
For the common man, a KYC (know your customer) process is needed for every small transaction. For corporates, these norms are more stringent, in issues concerning security and taxation. But the government ignores all KYC requirements for large and international corporates, and seems to be happy to do business with ghosts hiding behind tax havens and opaque corporate structures
One of the most basic elements of any relationship, transactional or long-term, personal or business, is to know more about the other parties in the relationship. It goes without saying—you and I would like to know who they are, what they are, and most importantly—where they are from and what is their permanent address... and so on.
Frankly, you and I would mostly not buy a simple small item for our domestic use unless we knew more about the seller, and the product or service that is being dispensed. Even a cup of tea from a roadside stall, where there is a danger of urea being mixed in it instead of milk, invites due diligence.
In a personal relationship, it is as simple as asking our common friends, the neighbourhood know-it-alls, relatives, the usual. In case deeper details are needed, people can and often do employ private detectives, it is almost an accepted way of doing things. Likewise, if you or I want to open a bank account, get a new phone connection, obtain or renew a driving licence, use a cyber-cafe in a strange town, enter an airport, travel by train, pay a bill online, file our tax returns, send an international parcel, seek admission for a child into school, buy insurance—or many more day-to-day transactions—we have to establish our bonafide identities. In all cases, unless the transaction is very small, or repetitive, or our risk-taking ability is high—we as well as our government would like to know who is on the other side.
Fair enough.
In business terms, this is known as finding out more about the beneficiary ownership of the entity one is doing business with. By definition, this is expected to be much stronger and detailed, the larger it gets. This will be larger than any ‘Know Your Customer/Client/Counterpart/Contemporary/Chandler/Contractor" (KYC) that is implemented in other relationships. For example, at Transchart, which is the chartering wing of the ministry of shipping, a “charter” is not considered legal tender unless Transchart, acting on behalf of the president/government of India, knows the full details of the beneficiary ownership of the vessel and cargo and the country of origin as well as domicile. Mind you, this is in shipping—which is the world’s most opaque business, where offshore tax haven ownership really began and still has its strengths.
The idea is simple—if we do not know who you are or where you are from, we are the government of India, and we will not do business with you. Regardless of whether you have gone and “registered” yourself in India, or whatever, you come out and tell us who you really are. So that we can catch you if things go wrong is one aspect. But the bigger one is that this is how business is done. Between equals. You know we are the government of India. We need to know who you really are. Simple as that.
That’s also one of the many reasons why Transchart has a perfect record on this aspect of doing business—knowing who they are doing business with. To date, barring any exception, not a single ship or cargo has vanished without trace or logical explanation. The logic is very simple—one part to the charter party (contract) is the president/government of India, whose bonafide and full KYC is well known, an open book actually. It is therefore expected and accepted that the other party to the contract, the ship-owner or the cargo owner, follows the same rules of the game. And that during the currency of the contract or charter party, there will be no change to these details—in other words, ownership change is not permitted midway.
Transchart has been around, taking part in international commerce on international terms, since decades before “liberalisation” really hit the rest of India. Despite business at Transchart going up multiple times, this simple fundamental rule, of knowing who the government was going to be doing business with, was never tampered with. This is how it should have been in other businesses, which grew rapidly in India after liberalisation. After all, signing on behalf of the president of India means something, and that is what is the essence of international business everywhere.
But that’s not what happened with the rest of the Government departments in India. Today, we are in the amazing position of not knowing who the real beneficiary owners in India are for the following corporates operating freely in India, happily hiding behind their tax havens and client/attorney privileges, changing despondent ownerships like other people change underwear. They all know who or what the president of India is, can sue or take action against the government if required, but themselves hide behind their opaque curtains.
One of the most basic elements of any relationship, transactional or long-term, personal or business, is to know more about the other parties in the relationship. It goes without saying—you and I would like to know who they are, what they are, and most importantly—where they are from and what is their permanent address... and so on.
Frankly, you and I would mostly not buy a simple small item for our domestic use unless we knew more about the seller, and the product or service that is being dispensed. Even a cup of tea from a roadside stall, where there is a danger of urea being mixed in it instead of milk, invites due diligence.
In a personal relationship, it is as simple as asking our common friends, the neighbourhood know-it-alls, relatives, the usual. In case deeper details are needed, people can and often do employ private detectives, it is almost an accepted way of doing things. Likewise, if you or I want to open a bank account, get a new phone connection, obtain or renew a driving licence, use a cyber-cafe in a strange town, enter an airport, travel by train, pay a bill online, file our tax returns, send an international parcel, seek admission for a child into school, buy insurance—or many more day-to-day transactions—we have to establish our bonafide identities. In all cases, unless the transaction is very small, or repetitive, or our risk-taking ability is high—we as well as our government would like to know who is on the other side.
Fair enough.
In business terms, this is known as finding out more about the beneficiary ownership of the entity one is doing business with. By definition, this is expected to be much stronger and detailed, the larger it gets. This will be larger than any ‘Know Your Customer/Client/Counterpart/Contemporary/Chandler/Contractor" (KYC) that is implemented in other relationships. For example, at Transchart, which is the chartering wing of the ministry of shipping, a “charter” is not considered legal tender unless Transchart, acting on behalf of the president/government of India, knows the full details of the beneficiary ownership of the vessel and cargo and the country of origin as well as domicile. Mind you, this is in shipping—which is the world’s most opaque business, where offshore tax haven ownership really began and still has its strengths.
The idea is simple—if we do not know who you are or where you are from, we are the government of India, and we will not do business with you. Regardless of whether you have gone and “registered” yourself in India, or whatever, you come out and tell us who you really are. So that we can catch you if things go wrong is one aspect. But the bigger one is that this is how business is done. Between equals. You know we are the government of India. We need to know who you really are. Simple as that.
That’s also one of the many reasons why Transchart has a perfect record on this aspect of doing business—knowing who they are doing business with. To date, barring any exception, not a single ship or cargo has vanished without trace or logical explanation. The logic is very simple—one part to the charter party (contract) is the president/government of India, whose bonafide and full KYC is well known, an open book actually. It is therefore expected and accepted that the other party to the contract, the ship-owner or the cargo owner, follows the same rules of the game. And that during the currency of the contract or charter party, there will be no change to these details—in other words, ownership change is not permitted midway.
Transchart has been around, taking part in international commerce on international terms, since decades before “liberalisation” really hit the rest of India. Despite business at Transchart going up multiple times, this simple fundamental rule, of knowing who the government was going to be doing business with, was never tampered with. This is how it should have been in other businesses, which grew rapidly in India after liberalisation. After all, signing on behalf of the president of India means something, and that is what is the essence of international business everywhere.
But that’s not what happened with the rest of the Government departments in India. Today, we are in the amazing position of not knowing who the real beneficiary owners in India are for the following corporates operating freely in India, happily hiding behind their tax havens and client/attorney privileges, changing despondent ownerships like other people change underwear. They all know who or what the president of India is, can sue or take action against the government if required, but themselves hide behind their opaque curtains.
These include:
1) Our biggest airlines, which have access to every nook and corner of the country, including defence air bases where security is supposed to be extremely high.
2) Our biggest accounting and consultancy firms, often referred to also as the "Big Four", their ownerships are also hidden in tax havens.
3) The largest PR companies, the ones that provide the juice that makes the news and views, and shape so many aspects of government policies.
4) The largest hotel chains, whether related to the opium or tobacco trade or otherwise, and their inherent loyalties to their parent countries.
5) The largest foreign banks, payment processors, investment banks, stock market investors and others with the financial strings of our country in their hands.
6) The airport operators, who have made hiding the real ownership of this vital industry and its subsidiaries an art form.
7) The insurance company joint ventures and subsidiaries, which often use their business fronts for nothing more than ring-trading of profits into losses.
8) The largest info-tech companies, including a few “ghosts”, who ostensibly appear to be from certain developed countries, but are actually not from there.
9) The largest highway PPP (public-private partnership) companies and their toll-collecting entities, getting away literally with murder in the name of improving highways.
10) The largest media companies, who are the best in being able to find ways to get around the issue of ownership of media in India.
11) The largest religious corporate entities, including their in-house international banks, and their activities in India under the guise of evangelism and charity.
12) The largest global NGOs, who are also known to change their "ownerships" as well as aims and objectives, at the change of a regime abroad.
13) The largest private security providers, huge empires in their own rights, carrying out all sorts of activities all over India with access to everything including our borders, ports and defence posts.
Today, big ticket entries are being talked about, into retail, railways, water, and of course, the mother lode of them all—the Aadhaar project. However, it would appear that regardless, the KYC done on the actual beneficiary owner is less than what is done for a hawker setting up a stall in a market on tehbazari (selling products on the pavement or a road, not on a handcart). And it took me ten months to ferret this out of the UIDAI (Unique Identification Authority of India), which included a lot of other parallel processes, since they were simply unwilling to admit what is the most open secret in Delhi.
That our government increasingly does not know who or what they are doing business with. That they have not the faintest clue or wish to try to impose even a pretence of a KYC norm on these large corporates and entities.
So here's the relevant functional operative part of an Order from the UIDAI vide their letter No. F.12013/13/2011/RTI-UIDAI, Order No. Appeal 3/2011, in response to my First Appeal in an RTI (Right to Information) response from the UIDAI, which has taken 10 months to ferret out, which states blandly:
"There are no means to verify whether the said companies/organisations are of US/(other origin) or not." See full text below:
1) Our biggest airlines, which have access to every nook and corner of the country, including defence air bases where security is supposed to be extremely high.
2) Our biggest accounting and consultancy firms, often referred to also as the "Big Four", their ownerships are also hidden in tax havens.
3) The largest PR companies, the ones that provide the juice that makes the news and views, and shape so many aspects of government policies.
4) The largest hotel chains, whether related to the opium or tobacco trade or otherwise, and their inherent loyalties to their parent countries.
5) The largest foreign banks, payment processors, investment banks, stock market investors and others with the financial strings of our country in their hands.
6) The airport operators, who have made hiding the real ownership of this vital industry and its subsidiaries an art form.
7) The insurance company joint ventures and subsidiaries, which often use their business fronts for nothing more than ring-trading of profits into losses.
8) The largest info-tech companies, including a few “ghosts”, who ostensibly appear to be from certain developed countries, but are actually not from there.
9) The largest highway PPP (public-private partnership) companies and their toll-collecting entities, getting away literally with murder in the name of improving highways.
10) The largest media companies, who are the best in being able to find ways to get around the issue of ownership of media in India.
11) The largest religious corporate entities, including their in-house international banks, and their activities in India under the guise of evangelism and charity.
12) The largest global NGOs, who are also known to change their "ownerships" as well as aims and objectives, at the change of a regime abroad.
13) The largest private security providers, huge empires in their own rights, carrying out all sorts of activities all over India with access to everything including our borders, ports and defence posts.
Today, big ticket entries are being talked about, into retail, railways, water, and of course, the mother lode of them all—the Aadhaar project. However, it would appear that regardless, the KYC done on the actual beneficiary owner is less than what is done for a hawker setting up a stall in a market on tehbazari (selling products on the pavement or a road, not on a handcart). And it took me ten months to ferret this out of the UIDAI (Unique Identification Authority of India), which included a lot of other parallel processes, since they were simply unwilling to admit what is the most open secret in Delhi.
That our government increasingly does not know who or what they are doing business with. That they have not the faintest clue or wish to try to impose even a pretence of a KYC norm on these large corporates and entities.
So here's the relevant functional operative part of an Order from the UIDAI vide their letter No. F.12013/13/2011/RTI-UIDAI, Order No. Appeal 3/2011, in response to my First Appeal in an RTI (Right to Information) response from the UIDAI, which has taken 10 months to ferret out, which states blandly:
"There are no means to verify whether the said companies/organisations are of US/(other origin) or not." See full text below:
This was in response to a question wanting to obtain more information on the countries of origin of the vendors to the UIDAI, the response received after two repeat RTIs, ample follow-up and probably about 80-100 man-hours of work.
Great. So UIDAI does not even know the country of origin, leave alone the address or the people behind this majorly important project, involving pretty much everything about India and Indians.
What is really happening is this—under the Registrar of Companies, and the Companies Act, pretty much anybody or anything can register a company in India. There is hardly any scrutiny on what or who is registering a company in India, as long as they appear to have an address somewhere, any sort of address where a letter can be posted to, and as an example, Ugland House in the Cayman Islands is one such popular address. A cursory search of the Ministry of Corporate Affairs website shows that thousands of companies have addresses linked to the above address. And all are there—banks, insurance companies, airlines, info-tech companies and more—than suddenly legitimate registered companies in India. They often share names and brands with their parent companies, but nothing more, no liabilities in case anything goes wrong.
There needs to be something done about this, and soon. It is absolutely incredible and criminal to have a situation where large corporates working in India are not subject to at the very least the same KYC fundamentals that the citizens of India are subject to. And it is also important to try and find out how things came to this pass.
If our government is selling our country, then we should know, at least, who are they selling it to?
