The Central Bureau of Investigation has admitted that Indians are the biggest depositors in banks abroad, with around $500 billion of illegal funds hidden in tax havens around the world, according to local reports.

The director of the Indian government agent Amar Pratap Singh said at the Interpol global programme on anti-corruption on Monday, that the country suffers the most from deposits flowing into offshore banks.

“India, in particular, has suffered from the flow of illegal funds to tax havens such as Mauritius, Switzerland, Lichtenstein, British Virgin Islands, etc. It is estimated that around $500 billion of illegal money belonging to Indians is deposited in tax havens abroad. Largest depositors in Swiss banks are also reported to be Indians," said Singh.

“Fifty-three per cent of countries that are least corrupt according to Transparency International Index are offshore tax havens. Most of the corrupt money goes there. The tax havens include New Zealand (ranked the least corrupt country), Singapore (No 5) and Switzerland (No 7),” Singh added.

He said that the well-trodden money laundering route usually involves at least one or two offshore destinations. “In some recent cases investigated by the CBI such as the 2G scam, financial irregularities during the 2010 Commonwealth Games and the Madhu Koda scam, we find that money is taken to countries like Dubai, Singapore and Mauritius. It then goes to Switzerland followed by the British Virgin Island, Cayman Islands and other tax havens,” Singh said.

He added that current banking infrastructure makes it relatively easy for criminals to hide their funds. “For the criminals, it only involves setting up a few shell companies and making layered transfers from one account to another within hours as there are no boundaries in banking transactions,” he said.

He called for relentless crackdown on such activities to ultimately make tax avoidance a “no profit high risk” proposition. His comments mark the latest anti-tax evasion flag from the Indian government, which has been making its stance evident to the rest of the world. In January it signed a multilateral agreement with 31 other countries to ensure administrative co-operation between tax authorities.

“India has moved very quickly since its commitment to the convention at the November G20 ceremony in Cannes and I expect it will be the first non-OECD (Organisation for Economic Co-Operation and Development) G20 country for which the updated convention is in force”, said Jeffrey Owens, director of the OECD Centre for tax policy and administration, at the time of the signing of the convention. 

A report published by the OECD after the G20 summit in November, showed that India more than doubled its requests to obtain classified funds information from tax havens and other countries in the last two years.

During the last two years India has negotiated 19 new double taxation avoidance agreements and 17 new tax information exchange agreements. It recently teamed up with the US' Internal Revenue Service to train an India-based team on the intricacies of unearthing hidden funds. 

India became a full-member of global economic body the Financial Action Task Force last year and strengthened its Financial Intelligence Unit to detect suspicious transactions in economic channels, which will also help its relationships with other global governments.