AAP funding: Disclosures on co registration, PAN or KYC do not make donations legit

Nitin Gadkari, the former BJP President, was on the receiving end of the self-righteous Aam Aadmi Party (AAP) and media jibes and vilification a couple of years ago. Reporters went door to door to find out if the investors in his companies were genuine or mere name lenders.

Many of the so-called investors were indeed men of straw and were in fact blissfully unaware of the investments purportedly made by them. Gadkari and his CA friend Gurumurthy were at pains to explain that the so-called investors were not known to Gadkari for the simple reason that they were roped in by his co-promoter.

AAP backed off when the income tax department gave Gadkari a clean chit but kept repeating that he ought to have verified the antecedents of his financial collaborator.

Operation Gadkari has come back to haunt the AAP. The revelations made by the NGO Avam that Rs 50 lakh each from four shell companies controlled and managed by the same person landed into the AAP’s bank account has made the party squirm uncomfortably.

AAP is saying pretty much what Gadkari had said in defence – how on earth was he responsible for verifying the antecedents of investors roped in by his equity partner. The AAP has been preening with pride over its transparency in disclosing all its donations on its website and shunning cash donations.

It has sadly not occurred to it that neither receipts through banking channels nor disclosure vests a transaction with legitimacy. Its representatives have been defending the bizarre receipts on the flimsiest of grounds - the donors are all companies registered by Registrar of Companies (ROC), granted permanent account numbers (PAN) by the income tax authorities and banks have allowed them to open accounts after complying with the KYC norms.

It is now bristling with self-righteous anger that these three authorities ought to have verified the antecedents of the donor companies. It has not occurred to it that ROC is no guarantor of continued good conduct just as KYC, which is all about laconic verification of name and address, is.

PAN too isn’t guarantee either that its holder would be a good individual or corporate. If that were the case, there won’t be tax frauds committed by PAN holders. Much of the tax frauds are committed by PAN holders who hide behind the veneer of respectability conferred by it.

Industrialists create black money through over-invoicing of imports mainly of machinery and its concomitant kickbacks right under the nose of the banking, accounting and tax regulators. Most of the slush money lies in banks.

Indeed Switzerland has had to fight the charge of propping up crooks through its friendly banking regime that affords anonymity to them. Therefore, holding bank account is no ground to believe that all transactions done through such accounts would be legitimate. Mind you, bribes in the form of agency commission to the spouse of a corrupt bureaucrat are glibly paid through cheques.

Disclosure like confession is believed to get absolution. This is a myth and often a self-serving alibi. The AAP might have transparently disclosed all its donations on its website but that doesn’t mean it is not responsible for the quality of money it is receiving especially when they have been received through cheques and not directly deposited in its bank account.

The AAP’s credibility stands seriously eroded despite its innocent protestations to the contrary. It has invited revulsion and even its die hard supporters concede that the AAP being Caesar’s wife should have ensured that it was beyond reproach.

It held mirror to other parties mainly the BJP and Congress little realising that one day in none distant a future, its self-righteous attitude will make it a subject of greater and intense scrutiny. That, however, does not detract from the laudable stand taken by the AAP in insisting on receiving donations only through banking channels and disclosing them upfront.

Where it erred was in smugly thinking that disclosures would be accepted at their face value. It did not occur to it that someday such disclosures would be latched on with alacrity first by the disgruntled insiders and later by political opponents.

The AAP may be held guilty of throwing stones from its glass house. But it is more guilty rather of smugness in believing that receiving donations through banking channels and disclosing them would protect it from scrutiny and reproach.

One doesn’t know if it is guilty of violating FCRA and to cover it up it roped in a clutch of shell companies. If it is, it would rue its decision to have been naïve in being transparent. In future, it might even toy with the idea of flowing with the current — accepting cash donations from moneybags and splitting them each to less than Rs 20,000, the Rubicon beyond which alone names of the donors have to be disclosed.

The AAP is being disingenuous when it tries to shift the blame on banks because under the anti-money laundering law of 2002 it is the money launderer who is the prime culprit with the banks’ role only being questioned for laxity.

In other words, if indeed the AAP or the donor-shell companies were indulging in money laundering, the blame cannot be deflected onto the banks. The Supreme Court too it seems is not going to be amused by the AAP’s grandstanding – request through a memo for constituting an SIT to investigate the funding of three political parties, the AAP, Congress and BJP.

When caught with pants down, the AAP has the habit of raising fingers at its opponents without answering uncomfortable questions raised against it.