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Linking Aadhaar to bank accounts is a recipe for creating benami[2] bank accounts and scaling benami bank transactions. It threatens to destroy your bank accounts and destroy the country’s banking system. It’s devastating that the integrity of banking processes is being destroyed by dividing, outsourcing and privatising processes integral to core banking so that they become the responsibility of no one.

Linking Aadhaar[1] to bank accounts is a recipe for creating benami[2] bank accounts and scaling benami bank transactions. It threatens to destroy your bank accounts and destroy the country’s banking system. It’s devastating that the integrity of banking processes is being destroyed by dividing, outsourcing and privatising processes integral to core banking so that they become the responsibility of no one.

Destroying the banking system

India’s Department of Revenue (DoR) has done it again.

On June 1, 2017 vide Notification №2/F .No. P.12011/11/2016-ES Cell-DOR it mandates the linking of every bank account with an Aadhaar number before December 31, 2017. While lawyers point out several illegalities, including the scope, of the notification of this subordinate legislation under the Prevention of Money Laundering Act (PMLA), the failure of the DoR to consistently protect national interest is unbelievable.

A few days back a co-panelist on a TV channel defended the DoR arguing that linking Aadhaar to Bank Accounts will weed out money laundering by verifying bank accounts. What my co-panelist did not say is money laundering is facilitated by creating benami accounts. It is also facilitated by benami transactions. Nor did my co-panelist explain how benami accounts happen or how benami transactions are scaled by money-launderers.

This latest notification ensures that the Trojan horse that they instilled into the banking system on January 27, 2011, will destroy the Indian economy along with the Indian banking system. As feared by the Reserve Bank of India before January 2011, Aadhaar is yet the best state sponsored enabling mechanism for money launderers to enable benami bank accounts. Aadhaar can even help the money launderer to take over your bank accounts. Aadhaar is also the enabler to scale benami transactions.

Here are just 5 ways in which linking the Aadhaar to PAN[3] or a bank account will hurt you, destroy India and, for those who care, an explanation of how Aadhaar creates benami bank accounts and scales benamitransactions.

The innocent will lose money, reputation and access to justice, dignity and livelihood

One, the innocent will lose money, reputation and access to justice, dignity and livelihood as their Aadhaar numbers can act as mules for money laundering, their subsidy and other Aadhaar enabled payments can be easily compromised, their access to their own bank accounts be denied, or they can be framed for economic offences. Helpless citizens and businesses may also find themselves at the receiving end of covert human rights violations as even their access to money and existence is disabled by deactivation or blocking of Aadhaar leaving no recourse to survival.

Linking Aadhaar to bank accounts or PAN converts India into the new tax haven for money launderers

Two, linking Aadhaar to bank accounts or PAN converts India into the new tax haven for money launderers as it becomes easy to remotely create benamiaccounts and operate benami transactions while claiming complete legitimacy. This will destroy India’s economy and governance.

Financing crime and terrorism will grow uncontrollably

Three, financing crime and terrorism will grow uncontrollably as it becomes increasingly difficult to discover, report or close down such operations. This will make it impossible to ensure national security as the rule of law is destroyed.

Corruption will increase

Four, corruption will increase as it becomes easier when proceeds will not be traceable to the corrupt. It will be increasingly difficult to restore swarajya and impossible to ensure suraiya.

Banks will not be able to contain non-performing-assets

Five, banks will not be able to contain non-performing-assets, fraud and financial misappropriation as the real users of banking services will be untraceable. The economy will be completely out of control as the black and white economies become indistinguishable.

We are in a policy vacuum as the NITI Aayog and the bureaucracy have failed to recognise the Trojan horse and protect national interest. Unless the RBI de-licenses the payments systems based on Aadhaar (AEPS) immediately and the government stays linking Aadhaar to PAN and bank accounts, our leadership will have failed to protect India from this fast colonisation of India by the private interests driving Aadhaar.

Enabling Benami Bank Accounts

Benami accounts get created when banks fail to identify the real customers who own the accounts. The Panama Papers exposed data of thousands of benami accounts created through a Panamanian law firm, Mossack Fonseca. The Panama Papers exposed one modus operandi of hiding the real owners of the assets in tax havens.

panama papers modus operandi
The use of Aadhaar as KYC for bank accounts is similar to the note from Panama Law Firm Mossack Fonseca saying “they are an honest client”

Prudent bankers recognise the importance of knowing who they bank with. It is no wonder that the RBI had warned, right from before the Trojan horse was instilled in to the RBI in 2011, that the Aadhaar enrolment process does not have due diligence. It pointed out that for Aadhaar enrolment verification is not compulsory, as confirmed by the UIDAI in the Demographic Data Standards and Verification Procedure, and does not require document based verification.

The RBI also highlighted that such use of Aadhaar as third party identification is against Prevention of Money Laundering Act, the Financial Action Task Force (FATF) and the paper issued on Customer Due Diligence (CDD) for banks by the Basel Committee on Banking Supervision and circulated to scheduled commercial banks by the RBI on November 29, 2004.

The RBI also observed that a fixed time document like the Aadhaar cannot be a Proof of Address. It further cautioned using Business Correspondents (BC), to open bank accounts or undertake banking transactions, as the vulnerability of the system has not been tested and co-mingling funds of different banks in the hands of BC’s was a major operational risk to the banks. While resisting the use of Aadhaar, the RBI also highlighted the Government’s concern about the perceived misuse of such accounts for terrorist financing.

Under pressure from the UIDAI and the Department of Revenue, Ministry of Finance, the RBI, through its circular dated January 27, 2011, allowed bank accounts to be opened exclusively on the basis of Aadhaar number. However the RBI required such accounts to be put to restrictions and be subjected to conditions and limitations prescribed for small accounts.

Not happy with the restrictions, the UIDAI pressed the RBI to lift the restrictions placed on accounts opened with Aadhaar numbers under the PMLA. On September 28, 2011, again through the Department of Revenue, the UIDAI succeeded in getting the RBI to backtrack and suspend the restrictions of the PMLA on bank accounts opened solely through Aadhaar. The UIDAI also succeeded in causing the RBI further to accept eKYC or remotely using information associated with an Aadhaar number as KYC. According to the UIDAI eKYC brings scale to the ease of onboarding customers.

To put the problem in perspective, Aadhaar enrolment was completely outsourced to private parties by the UIDAI with the sole aim of building the worlds largest biometric database. Mr. Nilekani’s UIDAI repeatedly emphasised that they merely provided a framework to issue a number and store the (unverified and unaudited) data.

RTI says Aadhaar has never been verified or audited
UIDAI admits that the Aadhaar (UID) database has never been verified or audited

No one from the UIDAI or even the government even sign the Aadhaar card that is mailed back to the enrolee. The very same organisations that were declared by the UIDAI as holding databases full of ghosts and duplicates were asked to serve as “Registrars” to the enrolment process. They were even given flexibility in the collection, retention and use of the data (including biometric) that they collected.

Without a verification and audit Aadhaar enables duplicates and ghosts
Without a verification and audit Aadhaar enables duplicates and ghosts

No one in the Aadhaar enrolment process was required to identify anyone. At best they had to merely verify documents that were submitted for enrolment. Needless to say anyone in possession of your documents could enrol with minor changes in any demographic information or with different biometrics. Field stories of enrolments are replete with descriptions of biometric jugaad including using combination of persons, use of biometric masks, biometric modifications, and other ingenious methods to maximise registrations.

According to the IT Minister Ravi Shankar Prasad, 34,000 operators who tried to make fake Aadhaar Cards have been blacklisted. Even if each operator worked for a year before being blacklisted, at about 100 cards a day amounts to over a billion cards. That is more than 95 percent of the database. The Aadhaar enrolment has been unlike that of any other identity document, easily scaling the creation of duplicate and ghost identities.

Excrept of IT Minister Ravi Shanker Prasad’s reply in Rajya Sabha on April 10, 2017
Excrept of IT Minister Ravi Shanker Prasad’s reply in Rajya Sabha on April 10, 2017

While there is widespread belief that biometric authentication at time of opening a bank account prevents benami, it ignores the field realities of mobile phone SIM cards being issued on Aadhaar photocopies and used to open bank accounts, of having remotely “downloadable” accounts, and also plain simple use of photocopies of Aadhaar or parallel Aadhaar databases to open bank accounts. With Aadhaar, banks do not have any trace of the real customer. The real customer is simply masked by a benami owner using an Aadhaar number.
Even your Aadhaar can be used, without your knowledge, by a perpetrator to open multiple accounts in order to use it to collect bribes, park black money, or siphon your subsidies. In the eyes of law enforcement, if these accounts are discovered, you will be the criminal.

benami money laundering aadhaar bank account
Is Aadhaar the new Panama?

To compound the problem, UIDAI has no liability for benami bank accounts opened with Aadhaar. After the introduction of the Aadhaar to open bank accounts, the accounts and deposits have doubled in 5 years. No one knows who really controls these accounts.

Growth of bank accounts and deposits in India
Growth of bank accounts and deposits in India

Enabling Benami transactions

Even when it had no mandate to develop banking platforms, in 2009, the UIDAI signed an MoU with the National Payments Corporation of India (NPCI), a non government company, to develop an Aadhaar Enabled Payment System (AEPS). In this MoU the UIDAI has no responsibility for your banking transactions and the NPCI has no obligation to the RBI. The payment system uses the Aadhaar linked to a bank account as a financial address to do electronic money transfers from one Aadhaar number to another.

Company data for NPCI
Company data for NPCI

Unless an Aadhaar is linked to the account, the AEPS cannot access the bank account. Linking a PAN to the Aadhaar will have the same effect as linking the Aadhaar to a bank account as the PAN is already linked to the bank account. Such accounts become Aadhaar enabled. Aadhaar enabled bank accounts are ready to be used by the AEPS for Aadhaar to Aadhaar money transfers.

Linking an Aadhaar to a bank account is done through a process called as “seeding” an Aadhaar number to a bank account. After receiving the Aadhaar number from the customer, the bank uploads such numbers’ into a “NPCI mapper” or a repository of Aadhaar numbers and Institution Identification Number (IIN) numbers used for the purpose of routing transactions to the destination banks. The IIN is a unique 6-digit number issued by NPCI to the participating bank. If you or anyone else seed your Aadhaar with another bank account, the NPCI mapper is overwritten with the new banks’ IIN. Money transferred to an Aadhaar number, using the Aadhaar Enabled Payment System, gets transferred to the bank account linked to the Aadhaar number at the branch recognised by the IIN.

A money launderer can transfer money to an account linked to an alternate IIN and then re-seed the NPCI’s mapper with the original IIN for the Aadhaar number, completely wiping out any trace of money to the alternate IIN. Like transactions of bearer shares in Panama, such money transfers becomes no different from a hawala[4] transaction between real parties who remain anonymous or benami[5].

Your Aadhaar number can be used to facilitate such benami money transfers. If these money transfers linked to your Aadhaar number are detected by investigation officers or tax authorities, you, not the real operator will be held on suspicion of economic offences.

The NPCI’s idea of Aadhaar to Aadhaar banking itself is flawed. It is surprising if the RBI has licensed this payment system under the Payment and Settlements Act.

All money is ultimately stored in bank accounts and not in the name of a person. Nowhere in the world does one transfer money to a person, you transfer it to a persons account. Money transfers to and from a bank account makes every money transfer traceable from source to destination making money laundering difficult, if not impossible.

Hawala schemes make money transfers untraceable by eliminating the bank accounts. Money transfers that, like the hawala, are based on the premise that you do not share an account number, with someone transferring money to you, are inherently flawed in auditability as they wipe out the money trail.

The idea of a mapper, as used by NPCI’s AEPS, does not allow for instructions from sender but relies on periodic update of IIN in the NPCI’s table mapping Aadhaar numbers from banks. As multiple banks have to upload the Aadhaar numbers seeded with accounts held by them, this cannot guarantee desired results.

Perhaps the worst aspect of the mapper is that it slices the business process and outsources parts. This destroys the responsibility of the payment system from any single party as was in the case of NEFT or RTGS. Neither the NPCI, the UIDAI or the banks are responsible in such money transfers. They merely provide “look-up” services. In this system, a single compromised or rogue bank branch, or the perpetuator’s ability to exploit a good one, is enough to siphon off subsidy, park black money or take bribes.

Such money transfers would be difficult, if not impossible, to trace without a whistleblower. A few cases have been reported that suggest the large scale play of this scenario already. For example more than 40,000 erroneous transfers were reported through AEPS in DBT transfers meant as part of drought relief for farmers in Karnataka. The government allegedly blamed the banks for failure to seed the correct Aadhaar numbers with the beneficiaries.

Governments across India had been using the RBI’s own payment system, the NEFT or RTGS, to undertake electronic money transfers. This is also evidenced by the fact that Aadhaar Leaks has exposed that bank details are already present in every record of the leaked data. There is absolutely no reason to switch public payments from NEFT to AEPS, run by a non-government company.

The replacement of a time tested standard of electronic money transfers under government regulation by a non-standard payment system run by a non-government company raises several serious questions of national and public interest, propriety and possible conflicts of interest.

Preventing disaster

If the government and the Supreme Court implement the wisdom of 7 orders of the Supreme Court of India on the use of Aadhaar, they can yet save the country from disaster resulting from the colonisation of India by the new East India Companies or the private interests driving Aadhaar.

In its first order of September 23, 2011 the Supreme Court had indicated that “no person should suffer for not getting the Aadhaar card inspite of the fact that some authority had issued a circular making it mandatory and when any person applies to get the Aadhaar Card voluntarily”.

On August 11, 2015, the 3 member bench restricted the use of Aadhaar and indicated that it may not be used for any other purpose.

On October 15, 2015, a 5 member bench led by the Chief Justice had emphasised that “the Aadhaar card Scheme is purely voluntary and it cannot be made mandatory till the matter is finally decided by this Court”. It had restricted the voluntary use of Aadhaar to public distribution system (PDS) Scheme, the liquefied petroleum gas (LPG) distribution scheme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), National Social Assistance Programme (Old Age Pensions, Widow Pensions, Disability Pensions), Prime Minister’s Jan Dhan Yojana (PMJDY) and Employees’ Provident Fund Organisation (EPFO).

In the meantime, following Mahatma Gandhi’s footsteps and refusing to link Aadhaar to anything may be the only option left for you.

On 10 January 1908 Mahatma Gandhi was arrested for the first time in South Africa for refusing to carry an obligatory identity document card commonly known as the ‘pass’.

[1] Aadhaar is a 12 digit random number assigned by India’s Unique Identification Authority of India to unaudited and unverified demographic and biometric information submitted by private enrollers.
[2] Accounts and transactions undertaken using a ghost or a duplicate identity are called benami.
[3] Permanent Account Number or PAN is a number used to track financial transactions and file income tax returns in India.
[4] Hawala is an alternative or parallel remittance system that works outside formal banking systems.
[5] This was first highlighted in September 2014 in http://www.moneylife.in/article/how-aadhaar-linkage-can-destroy-banks/38736.html

 

Originally published here.

In a landmark challenge to Aadhaar on the grounds of privacy being an inalienable fundamental right, a 9 judge bench of the Supreme Court of India upholds Right To Privacy as an Intrinsic Part Of Right To Life And Personal Liberty

Supreme Court of India has once again come to rescue the citizens of India by declaring that right to privacy is a fundamental right. This is a big jolt to a government which was turning itself to a surveillance state by intruding every aspect of the life of the individual. This decision was made unanimously reflecting the absolute legal voice on the issue.

The decision was given by a big bench of nine judges who ruled that right to privacy is an intrinsic part of Right to Life and Personal Liberty under Article 21 and entire Part III of the Constitution.

The part III is related to the fundamental rights which have been given to people to live their life as they wish for and develop their personality in full manner. The decision is linked to the government’s effort to make Aadhaar mandatory for the social welfare policies; government also amended Income Tax Act to make Aadhaar mandatory for the IT which SC accepted as valid but government was attempting to extend Aadhaar based surveillance almost in all aspects of the individual’s life. The decision may help to halt this process though SC has to deliver decision on Aadhaar later but is now established that Indian government cannot be a surveillance state as the privacy of the individual cannot be explored and penetrated in absolute manner extending in all aspects of private domain of the person.

The decision has thus overruled the M P Sharma verdict of 1950( six judges judgment) and that of Kharak Singh of 1960 (eight judges) judgments of the same court that right to privacy is not protected under the Constitution..

The decision has been based on article 21 of the fundamental rights. The article is the most interpreted article of the constitution as SC has interpreted it in different dimensions of human life. The article states that “No person shall be deprived of his life or personal liberty except according to procedure established by law.” In the same article by 86th Constitution Amendment, 2002 the 21A was added stating that ‘under 21A the State shall provide free and compulsory education to all children of the age of six to fourteen years in such manner as the State may, by law, determine.’

The Supreme Court has taken a wider view of the right to personal liberty that it cannot be controlled by the administrative fiats and the legislations. Aadhaar issue will be heavily impacted after the decision and its decision will be dealt during the coming time but the recent decision has illuminated the hopes that SC will also limit the government powers with respect to Aadhaar. It was felt by the citizens that compulsion of Aadhaar was unnecessarily placing them under stress. From banks to entrance examinations Aadhaar was becoming a compulsory identity. In several places the old person s were faced with the problem of not getting their pensions as they were not in a position to attach the Aadhaar cards. The practical problem was that they were so old that their fingerprints did not appear or were not in position to Aadhaar camp where these cards were being prepared due to old age or no one support them to take them to the camps. Several old women have complained about this sorry state of affairs.

Government did not take a flexible view and attempted to monitor every action of the individual. The fear was that Aadhaar compulsion might put the person always under stress. That day was not far away when government could ask the person attach Aadhaar whenever anyone you purchased a newspaper or visited a restaurant for a dinner or stayed in a hospital or was hanging out in a park.

In the societies where governments are fearful of the force of the citizens such steps are contemplated. Supreme Court by its decision has placed the limits on any malafide intention and has empowered the citizens of the country.

Supreme Court is really a custodian of humane values and lives of the Indian citizens. Constitution is paramount and so the WE THE PEOPLE OF INDIA. Supreme Court has upheld it and no power can dilute it is now a well established fact.

Originally published on CounterCurrents.org

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This one on the disproportionate increase in wealth of crorepatis in Union Cabinet lived briefly and died silently on the Times of India website. The beginning of a trend of vanishing reports on questionable increases in wealth that would later be seen more dramatically in Reports of suspicious growth in assets of Gujarat politicians removed from news sites

The Association for Democratic Reforms (ADR) has faulted the format for declaration of assets adopted by the government saying it did not provide a correct indicator of the ministers' wealth and defeated the exercise towards transparency.

Several ministers in the cabinet have shown a dramatic increase in assets in just the last 5 months which ADR has attributed to lack of a standardized format for ministers' asset declaration. It said that in many cases ministers have either not given the value of their moveable and immoveable assets or not given the present market value which has led to discrepancies. For instance ministers including Jitendra Singh, V K Singh, Ananth Kumar, and Sripad Naik have not given value for moveable assets to the PMO while Harsh Vardhan, Venkaiah Naidu and Sushma Swaraj have not given value for their immoveable assets.

ADR claimed that railway minister Sadananda Gowda's wealth increased by over Rs 10.46 crore from Rs 9.99 crore in May to Rs 20.35 crore in October and assets worth Rs 10 crore had been acquired in the interim. However in response to reports Gowda tweeted that the properties were bought earlier with a loan worth Rs 8 crore from Federal Bank and Rs 2 crore had been paid in advance. He is followed by heavy industry MoS Radhakrishnan P who has shown an increase of Rs 2.98 crore (from assets worth Rs 4.09 crore to Rs 7.07 crore) and finance minister Arun Jaitley whose wealth has increased by 1% from Rs 113.02 crore to Rs 114.03 crore.

Union ministers Rajnath Singh, M Venkaiah Naidu, Sushma Swaraj and Anant Kumar at BJP headquarters in New Delhi
Union ministers Rajnath Singh, M Venkaiah Naidu, Sushma Swaraj and Anant Kumar at BJP headquarters in New Delhi (PTI Photo)

Minister for social justice and empowerment Thaawar Chand Gehlot whose personal wealth increased by 323% in the last two years has seen the sharpest rise in a cabinet dominated by crorepatis. He is followed by power and coal minister Piyush Goyal whose assets have increased by 212% since 2010. According to ADR analysis the overwhelming majority of ministers (91%) that is 41 of the 45 ministers are crorepatis with average assets worth Rs 14.32 crore.

Among the ministers—who did not contest the Lok Sabha polls—whose personal wealth has risen sharply are social justice and empowerment minister Thaawar Chand Gehlot whose assets increase by 323% in two years. According to the declaration he made to the Rajya Sabha in 2012 Gehlot's assets were Rs 86.12 lakh which have shot up to Rs 3.64 crore in October 2014. Coal and power minister Piyush Goyal came in second with his assets increasing by 212% from Rs 30.34 crore in 2010 (according to the affidavit submitted to the Rajya Sabha) to Rs 64.31 crore. MoS for Petroleum Dharmendra Pradhan's assets grew by 61% since 2012 from Rs 1.54 crore to Rs 2.48 crore. Communications and law minister Ravi Shankar Prasad's wealth rose by 27% in two years while urban development minister Venkaiah Naidu's assets grew by 28% in four years.

Kailash Vijayvargia is the BJP cabinet minister for industries and employment in Madhya Pradesh. While the BJP online propaganda machine makes sure you know that Delhi is the "rape capital of India", fewer people know that BJP ruled Madhya Pradesh is the worst state on this front. Not surprising, if you have ministers like this in the Cabinet.

The BJP MLA Kailash Vijayvargia Controversy

In the wake of the Delhi Gangrape, this is what wiseguy MLA Kailash Vijayvargiya, BJP Industries Minister in Madhya Pradesh  had to say:

"Ek hi shabd hai - Maryada. Maryada ka ulanghan hota hai, toh Sita-haran ho jata hai. Laxman-rekha har vyakti ki khichi gayi hai. Us Laxman-rekha ko koi bhi par karega, toh Rawan samne baitha hai, woh Sita-haran karke le jayega. (One has to abide by certain moral limits. If you cross this limit you will be punished, just like Sita was abducted by Ravana)," Kailash Vijayvargiya said.

MLA Kailash Vijayvargiya

Kailash Vijayvargiya MLAUnder severe criticism, Vijay Vagaria retracted his comment *if* he had hurt people's feelings after BJP National Spokesperson Ravi Shankar Prasad promptly distanced BJP from the joker "“The Party disassociates itself from the comment and request him to take it back”.

Then he defended it:

 "I gave a speech for one hour, you will understand my point if you listen to the complete speech. But one part of it was picked and presented as if I am against women...I myself am hurt,"

There is something about ministers who are attracted to cricket that makes them insensitive to people, I think, because Kailash Vijayvagaria had apparently contested the elections for Madhya Pradesh Cricket Association for two consecutive years in 2011 and 2012 and lost both times. 

This is not just obscene and absurd to say, such attitudes in leaders of the state will ensure that Madhya Pradesh continues under its burden of victimized women. TMC and Congress both fired people acting against women's dignity in recent days, so let us hope BJP takes a few hard stands too.

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