New Delhi/Mumbai: Is Robert Vadra, son-in-law of Congress party president Sonia Gandhi, a “private citizen”?
This has emerged as the core of the Congress party’s defence of Vadra, whose transactions with real estate company DLF Ltd have come under public and media scrutiny.
The argument may not be a tenable one, say legal and financial experts, citing international law and even a circular issued by the central bank. None of the people wanted to be identified given Vadra’s position.
The experts point to India being a full signatory to the Financial Action Task Force (FATF) on money laundering, which clearly defines a “Politically Exposed Person” (PEP) and the set of people who qualify to be PEPs and cannot, therefore, be treated merely as private citizens. FATF, the agency’s website says, is an “inter-governmental body established in 1989 by the ministers of its member jurisdictions... to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system”.
FATF defines domestic PEPs as “individuals who are or have been entrusted domestically with prominent public functions, for example, heads of state or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials”. It goes on to say that the “requirements for all types of PEPs should also apply to family members and close associates of such PEPs”.
“The government cannot ignore the FATF guidelines. Doing so would be reading the law too narrowly,” a New Delhi-based lawyer said.
India became a full signatory of FATF in 2010.
“Domestic politically exposed persons are now covered by the standards and financial institutions are required to take into account the associated risks of doing business with them,” says a June 2012 report to Group of Twenty leaders presented by FATF.
“Family members and close associates of politically exposed persons are also to be treated in a similar way to politically exposed persons,” the report adds.
“You cannot have different standards for different people when you have signed a set of regulations framed by an international body,” said a second person, who has previously served on the board of stock market regulator Securities and Exchange Board of India (Sebi).
To make things even more explicit, a report, prepared by the Wolfsberg Group, a grouping of global banks the objectives of which are similar to those of FATF, defines the concept of “close family” in relation to PEPs.
It says that while considering PEPs, “close family” should include “a PEP’s direct family members including spouses, children, parents and siblings of the PEP”.
To be sure, it does provide for exceptions.
“In any of these cases, there may be circumstances which mitigate against such a categorization including separation and estrangement, although these facts should be investigated and recorded,” the report adds.
The Wolfsberg report also defines the concept of a “close associate”, who it says will include “a PEP’s widely and publicly known close business colleagues and/or personal advisors, in particular financial advisors or persons acting in a financial fiduciary capacity”.
On 2 July, the Reserve Bank of India (RBI) sent an advisory to banks on PEPs that pretty much repeats what FATF and the Wolfsberg Group said, specifically adding that “the norms may also be applied to the accounts of the family members or close relatives of PEPs”.
L’affaire Vadra came to a head after Arvind Kejriwal and Prashant Bhushan of India Against Corruption (IAC) alleged on 6 October that the land deals struck by Vadra with DLF were in return for political favours. “Is there a nexus between DLF and the government of Haryana?” asks a press release on the IAC website. To be sure, there’s so far been no evidence of any quid pro quo.
On 7 October, law minister Salman Khurshid rejected demands for a probe into the issue. And several Congress leaders, including its spokesperson Manish Tiwari, went on record and said Vadra was a “private citizen”.
“You cannot investigate lies. Mr Vadra has done his duty as a private citizen and according to law,” Tiwari told CNN-IBN news channel on 11 October.
Only, that may not be the case.
A third expert said that if an RBI or Sebi circular includes FATF guidelines, in whole or in part, it implies that the guidelines are legally applicable in India to that extent.
Which would mean that Vadra may not just be another private citizen.