Were Jan Dhan accounts used to launder black money?

Accounts saw deposits to the tune of crores following demonetisation. Two years after the note ban, no probe has been initiated even as glaring evidence points to these illegal funds 

Information obtained under the Right to Information (RTI) Act has provided glaring evidence for what demonetisation critics have been saying for a long time: that the shock treatment which the Narendra Modi administration gave to the economy on November 8, 2016 served as an instrument for those with illicit money to launder it through the banking system. This is far from Prime Minister Modi’s initial words about how demonetisation was aimed at neutralising black money - a claim that his own government has since backed down on. In fact, a Reserve Bank of India report last month stated that 99.3% of demonetised notes were returned to banks. Again, this went against the earlier official statement that Rs 4-5 lakh crore of illegal money in circulation would not return to the banking system and would thus be invalidated.

So how did all the black money come back and how was this facilitated? Financial news website Moneylife reported last week that information obtained from public sector (PSU) banks under RTI indicates that this was done through deposits into Jan Dhan bank accounts; it is pertinent to note that the zero-balance bank account scheme, or the Pradhan Mantri Jan Dhan Yojana (PMJDY), is a financial inclusion programme, that Modi announced in his first Independence Day speech as prime minister on August 15 2014. The bank accounts were meant to provide affordable access to banking and financial services for the poor, who are largely ignored by the financial services industry. These bank accounts were among the first to be compulsorily seeded to user’s Aadhaar numbers.

Moneylife sought information from banks about the deposits made into Jan Dhan accounts post-demonetisation. The responses, by 18 banks, reveal windfall deposits into these bank accounts, and provide an insight into their misuse for money laundering operations. When asked to identify the highest deposit into any single PMJDY account after the note ban, nine PSU banks responded under RTI. United Bank of India stated that deposits of Rs 93.82 crore were made in the name of one account holder/beneficiary. Bank of India stated Rs 3.05 crore was deposited in one account; Union Bank stated Rs 1.21 crore; Bank of Maharashtra Rs 98.45 lakh; Dena Bank Rs 94.45 lakh; Punjab & Sind Bank Rs 52 lakh and so on.

When asked to identify the highest deposit into any single PMJDY account after the note ban, nine PSU banks responded under RTI. United Bank of India stated that deposits of Rs 93.82 crore were made in the name of one account holder/beneficiary. Bank of India stated Rs 3.05 crore was deposited in one account

Such huge inflows are clearly in violation of RBI guidelines which state that the maximum amount of money credited into a single PMJDY account cannot exceed Rs 1 lakh in a year even as withdrawals are limited to Rs 10,000 a month. According to banking industry professionals, the red flags should have gone up as and when the upper limit was breached. That this did not happen demonstrates that either bank employees were compliant and/or complicit or that the scrutiny system was breached while transferring money into such accounts.

In fact, a staggering 20.80 lakh PMJDY accounts received more than the stipulated deposit, according to information provided by the 18 banks. At 11.8 lakh, United Bank of India has the most such PMJDY accounts; Union Bank 3.2 lakh accounts; Oriental Bank of Commerce 2.8 lakh accounts; Bank of Baroda 79,240 accounts and IDBI Bank 68,147 accounts. This is just the tip of the iceberg since the list does not include all PSU banks and hundreds of cooperative banks.

I am working hard to devise a formula to send all those who deposited their money illegally into your accounts to jail and to ensure the money goes to the poor households
Prime Minister Narendra Modi, in December 2016

As of today, little is known of the investigations carried out by tax authorities into illegal transfers/deposits of funds post-demonetisation. There’ve been occasional reports about bank accounts being frozen but it is not known whether these are the same as the Jan Dhan bank accounts with large deposits. Any probe, experts warn, must be a meticulous one since innocents cannot be prosecuted for the misuse of their accounts for money laundering without their knowledge or approval. Investigating Jan Dhan accounts with huge credit inflows will also be tricky for investigators because of the following reasons:

* The PMJDY accounts were opened in great haste because banks were set impossible targets. Some 1.8 crore bank accounts were opened between 23-29 August 2014, setting a Guinness World Record for the maximum number of accounts opened in a week.

* Post-demonetisation, about 4.30 crore PMJDY accounts were opened, mostly in urban centres, over the period of a year.

* The accounts were primarily opened by presenting Aadhaar cards or even a self-attested photograph at the bank. No regular KYC procedures were followed to verify the identity of the new account holders. It is likely that many accounts were opened with fictitious names.

* The Unique Identification Development Authority of India (UIDAI) acknowledged in an RTI reply to a query posed by Aadhaar activist Anupam Saraph in January 2018 that it does not acknowledge, certify or take responsibility for the identification of any person. It merely matches biometrics submitted against a name, but cannot certify that the person is authentic or vouch for the agencies which collected the person’s data. So, it may be difficult to legally establish the identity of those who opened fake accounts using Aadhaar.

* The accounts may have been misused without the knowledge of the account holder. Former RBI Deputy Governor SS Mundra had alerted bankers about this in May 2016. “The newly opened accounts under the PMJDY could be very vulnerable to fraud practises. Banks need to clearly guard against misuse of these accounts from money muling (illegal transfer of money),” he had said at a conference in Mumbai.

In December 2016, a few weeks before assembly elections took place in Uttar Pradesh, PM Modi had addressed a public rally in Moradabad wherein he had promised that illegal monies deposited in Jan Dhan bank accounts would be given to the poor. “All those who are Jan Dhan account holders, you should not return the money that others have put in your accounts,” he had said then. “If you promise to do so, I am working hard to devise a formula to send all those who deposited their money illegally into your accounts to jail and to ensure the money goes to the poor households.”

No such money has been forthcoming, at least not thus far. Neither are such promises being kept.

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