$23 billion was lost through Indian bank scams in one year
The globalization of trade has enabled innumerable entry points into the shadow banking economy. One recent example is India exporting dirty money to the Bahamas:
An amazing surge in India's exports to the Bahamas has stoked the lingering suspicion that a slice of the country's trades is sham transactions done to bring back money stashed in secret accounts with offshore banks.
In just two years, exports to the Bahamas — best known as a tax haven — have shot up from $2.2 million in 2008-09 to $2.2 billion in 2010-11, according to commerce department data. The number in no way matches the data on the Bahamas' global imports, which according to UNCTAD — the global trade and investments monitoring agency — was $2.8 billion in 2010.
According to the CIA data base, India has only a 7.5% share in the Bahamas' imports, which works out to about $200 million in 2010. The wide gap, some think, is more than sloppy statistics. "This is just a way of bringing black money back into the economy when it needs to be converted into white money and used for other purposes such as investments," said an economist on the committee appointed by the government to suggest ways to curb black money.
The scheme involves inflating the value of goods to cover laundered funds:
This happens through export 'over-invoicing', which boils down to billing the overseas buyer $10 million for cargo that may be worth just $10,000. In such transactions, the buyer may be fictitious, or a shell or front company of the Indian exporter. It's a ploy to bring back undisclosed money under the garb of cross-border trade. Biswajit Dhar, a trade expert and director-general of RIS, a think tank, felt the government should be looking at these indicators of black money. "They should also look at a detailed list of exporters... I'm sure some of them are fictitious," he said.
With one-third of the world's wealth and 80% of all international financial transactions located in offshore tax havens, scrutiny has increased across the globe. Several island nations were fingered by Indian authorities in a wide-reaching tax probe:
India’s Finance Ministry has embarked on a major investigation into more than a hundred offshore “financial structuring deals” undertaken by Indian business entities in various off-shore jurisdictions including Bermuda.
New Delhi investigators are probing investments and deals to the tune of billions of rupees executed in what they are calling “tax havens” like Bermuda, Mauritius, the Isle of Man, Cyprus and the British Virgin Islands. […]
The investigation, called “Lifting Corporate Veils”, will examine overseas deals, including some big ticket ventures, to investigate whether “a chain of overseas takeovers may be part of an exercise for an elaborate treaty shopping or tax evasion exercise.
Indian banks hold about $1 trillion in assets, which is expected to increase 10-fold over the next 10 years. Security however has been poor, with customers being hit by phishing scams as well as a major siphoning case.
The Bank of India has a rocky history which includes ties to BCCI, a financial entity so scandalous that 20 years later the tale of its demise, or Sandstorm report is only now being fully released.