Mumbai: The enforcement directorate, the economic crime investing wing of the ministry of finance that had earlier blamed UBS AG for non-cooperation in tracking down a multinational trail of money transfers across Switzerland, New York, the Virgin Islands and Pune, has now given the Swiss bank a clean chit.
Following this, the Reserve Bank of India (RBI) has cleared UBS’ branch licence that had been pending with the central bank since 2004 and was recently put on hold over the money trail issues.
RBI deputy governor V. Leeladhar confirmed UBS’ retail banking licence has been cleared. Last year, the banking regulator issued a licence, allowing UBS to open its first branch in Mumbai, but later put it on hold.
“It (licence) was given and then it was asked to be kept on hold because of some transactions which had to be clarified,” Leeladhar said. “It has been cleared…they have now been permitted to go ahead and they can start a branch.”
THE GO-AHEAD (Graphic)
A person close to the central bank said the enforcement directorate’s clearance was given late last week following which RBI cleared the licence.
“You must understand that the regulator has nothing against UBS. Once the ED (enforcement department) cleared it, it went ahead (and cleared the bank licence),” said this person who didn’t want to be identified.
RBI’s clearance also means that, technically, UBS can go ahead and buy the Indian mutual fund business of Standard Chartered Bank. UBS’ reluctance to cooperate with Indian authorities to unravel a multinational trail of money transfers between Indian stud farm owner Hasan Ali Khan and a fugitive Saudi arms dealer had not only cost the Swiss bank its banking licence but also the mutual fund deal.
UBS was set to buy the mutual fund business of Standard Chartered for $118.2 million (Rs470 crore) but RBI declined to give its nod in the absence of certain clarifications that it had sought in regard to some transactions of the Swiss bank, involving alleged money laundering out of India.
“UBS has given those clarifications and the enforcement directorate has also cleared the bank of any misdoings,” this person said.
Manisha Girotra, managing director and chairperson of UBS India, couldn’t immediately be reached for comment. An email sent to her did not elicit any response. The Hong Kong-based spokesperson of UBS declined to comment on the future plans of UBS in India, citing “confidentiality”.
UBS is present in India through UBS Securities India Pvt. Ltd, a broking and investment banking arm, headed by Girotra. It also runs a private wealth management business and an offshore unit in Hyderabad.
Standard Chartered officials also refused to comment on whether the bank will revive the deal. It called off the deal with UBS in December and said it would be looking for a new buyer soon after RBI refused to clear the deal.
Standard Chartered Plc., the parent company of Standard Chartered Bank in India, sent a notice to stock exchanges in London and Hong Kong, where it is listed, in the last week of December saying it will not proceed with the proposed sale of mutual fund. It did not give any reason other than saying the “contract with UBS...has expired. Standard Chartered will now seek a new buyer”. The proposed deal was signed in January 2007 and was subject to regulatory approvals.
On 2 February, Mint had carried a report by its sister publication, the Hindustan Times, saying a top official in enforcement directorate confirmed that the agency’s officials, in December, had advised the Centre not to clear the mutual fund deal because the Swiss bank had not helped track international money transfers of Khan.
Investigators from the agency said they have evidence of a $300 million transfer to him (via a Chase Manhattan bank account in New York) from Saudi arms dealer Adnan Khashoggi, whose arms supplies to Tamil terrorists, the LTTE, were revealed during an investigation into the 1991 assassination of Rajiv Gandhi.
In a recent interview with Mint, Swiss Bankers Association (SBA) chairman Pierre G. Mirabaud had put the onus of the delay in unravelling the money transfer deals on Indian authorities, saying the government here did not respond to a request from Swiss authorities for certain clarifications.
The Swiss government, according to him, will always obtain from any bank the relevant information when a foreign government requests it. “There is no banking secrecy; there is no protection,” insisted Mirabaud.
In the case of UBS, “there was a request from the Swiss government to Indian authorities, for which, I understand, there was no answer from the Indian government as of now,” Mirabaud had said.