Exclusive: Will Non-Serialised Electoral Bonds Enable Corruption?
The first batch of electoral bonds – Modi government’s new scheme for ‘transparent’ political funding – were released for ten days between 1-10 March. The Quint, with the help of a State Bank of India (SBI) employee, examined an original bond worth Rs 1 crore and can confirm that they are not serialised.
An implication of this, according to financial experts and Enforcement Directorate (ED) officers, could be potential misuse of these bonds to channelise black money and further corruption.
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Smaller than an A4 size sheet of paper, an electoral bond has space to mention the date of issue and the amount on top. It carries some other technical details and is signed by three signatories at the bottom. But with no serial number, it will be virtually impossible to track where the money promised in the electoral bond ends up.
While notifying the scheme in January 2018, Union Finance Minister Arun Jaitley described electoral bonds as a “substantial improvement in transparency over the present system of no transparency.”
Ideally, transparency would mean making public the information of who has donated how much money to which political party and through which means.
What Are the Implications of Non-Serialised Electoral Bonds?
1. Only SBI Will Know the Identity of the Beneficiary
Only the State Bank of India is authorised to sell and redeem electoral bonds. The receiving political party will have to open a current account with the bank in order to redeem an electoral bond.
For this, a party will need to submit its ‘Know Your Client’ (KYC) details, which means that the SBI will have full knowledge of which political party is receiving how much money through electoral bonds.
It will, however, not know the identity of the donor because not only are the bonds anonymous, they have no serial number to verify where they end up.
2. Ruling Power Can Track How Much Money It is Not Receiving
Considering SBI falls directly under the banking division of the finance ministry, the government will not have to make too much effort to procure data on transactions related to electoral bonds.
One way buyers can circumvent this and remain completely anonymous is by purchasing electoral bonds in the name of individuals instead of companies or trusts. Tracking individuals and ascertaining their political leanings would require dedicated effort.
However, if more companies were to purchase electoral bonds, it would be an easier task for the government to keep a tab on their political rivals.
3. Converting Black Money to White:
“I can imagine people using electoral bonds as an investment tool or to convert black money into white,” a financial expert employed by a political party tells The Quint.
If a political party wants to get rid of black money, electoral bonds are an ideal way to channel ill-gotten wealth into legitimate party funds. All the party needs to do is hand over cash to a company or an individual, pay a commission, and receive an electoral bond in return.
How the individual or the company justifies cash on their respective books depends on their imagination. From fudging books to floating shell companies, the options depend on one’s creativity (read: skills to side-step the tax system).
4. Converting White Money to Black: Despite the Modi government’s attempts at attacking black money, ease of doing business in India still depends on having access to cash on a short notice. This means there is no paucity of businessmen willing to convert white money into unaccounted cash.
The government’s rationale behind introducing electoral bond is to protect donors from being harassed by enabling anonymous donations. But this system can be used for bigger criminal offences that no party will be willing to rake up as it will serve their interests.