Linking Aadhaar to Bank Accounts will Destroy the Banking System

Anupam Saraph

Anupam Saraph

anupamsaraph@gmail.com

Unique ID is not unique, does not certify anything, says UIDAI

In a shocking admission, the UIDAI (Unique Identification Authority of India) has admitted, in response to a RTI (Right to Information) query, that it does not certify the identity, address, date of birth, resident status or existence of any individual or any Aadhaar number. The admission that the UIDAI does not certify anything is a blow to every organisation and process that relies on the UIDAI for certifying the identity, address, date of birth, resident status or existence of any individual. It is now evident that not only is nothing identified, nothing is certified by the UIDAI. The UIDAI also admitted that the biometric data of an individual does not pull up a unique record. This is an admission that the biometrics does not uniquely identify any person. This completely demolishes the myth of providing a unique identity to Indians. The UIDAI has no idea about the identification documents used to assign an Aadhaar number to enrolment packets submitted by the enrolment agencies. This has damning repercussions for the genuineness of the entire Aadhaar database. In a previous RTI the UIDAI had admitted that the Aadhaar database or the processes of de-duplication had never been subject to verification or audit. Now an admission that even the data about the documents submitted for enrolment are not known to the UIDAI. Private agencies were paid for each enrolment packet they submitted. Private agencies also benefit by being able to use ghost identities that they may have created to claim subsidies, park black money, do benami (accounts and transactions undertaken using a ghost or a duplicate identity)transactions, and launder money. The RTI replies call to question the very basis of using the Aadhaar as a means to identify anyone, to use it to establish age, resident status, address or even existence of a person. It calls to question the use of Aadhaar in governance and financial systems. The UIDAI has refused information about the enrolment operators and supervisors registered with the UIDAI. Only 8 state governments and 12 PSUs (public sector undertakings) have been authorised by UIDAI to act as registrars for the purpose of enrolling individuals. These 20 registrars had hired enrolment agencies who hired these operators. The 20 Registrars put together do not have a geographical reach to the 707 districts, 600,000 villages and 5,000 towns and cities of India. With the information of enrolment operators being withheld, the entire enrolment process to create the world’s largest biometric database is called to question. The Supreme Court of India is hearing more than 22 PILs challenging the use of Aadhaar. The RTI replies make it evident that two successive governments have been taken for a complete ride by private interests controlling the Aadhaar ecosystem. The entire Aadhaar database is not worth the cost of the media used to store it and is the biggest technology scam since the invention of computers. It possesses the biggest risk to national security as every database in the country capable of identifying the citizens and beneficiaries is being replaced or destroyed by the Aadhaar database. Linking, seeding or using Aadhaar to construct or replace existing databases will make it impossible to protect the country’s economic, social, security and governance processes as they fail to identify threats, frauds, corruption, money laundering, and cyber war.

Destroying the banking system

Despite this fundamental defect with Aadhaar, on June 1, 2017, India’s Department of Revenue (DoR) issued a Notification mandating the linking of every bank account with an Aadhaar number before December 31, 2017. While lawyers have pointed out several illegalities, including the scope, of the notification of this subordinate legislation under the Prevention of Money Laundering Act (PMLA), the failure of the DoR to consistently protect national interest is unbelievable. This latest notification will enable the creation of benami bank accounts and allow benami transactions on such a huge scale that it will destroy the Indian banking system and hence the Indian economy. Aadhaar is the best state sponsored enabling mechanism for money launderers to enable benami bank accounts. Aadhaar can even help the money launderer to take over your bank accounts. Aadhaar is also the enabling mechanism to scale benami transactions. Here are just 4 ways in which linking the Aadhaar to PAN or a bank account will hurt you, destroy the Indian economy:

  1. The innocent will lose money, reputation and access to justice, dignity and livelihood as their Aadhaar numbers can act as mules for money laundering, their subsidy and other Aadhaar enabled payments can be easily compromised, their access to their own bank accounts be denied, or they can be framed for economic offences. Helpless citizens and businesses may also find themselves at the receiving end of covert human rights violations as even their access to money and existence is disabled by deactivation or blocking of Aadhaar leaving no recourse to survival.
  2. Linking Aadhaar to bank accounts or PAN converts India into the new tax haven for money launderers as it becomes easy to remotely create benami accounts and operate benami transactions while claiming complete legitimacy. This will destroy India’s economy and governance.
  3. Corruption will increase as it becomes easier when proceeds will not be traceable to the corrupt. It will be increasingly difficult to restore swarajya and impossible to ensure suraiya
  4. Banks will not be able to contain non-performingassets, fraud and financial misappropriation as the real users of banking services will be untraceable. The economy will be completely out of control as the black and white economies become indistinguishable.

We are in a policy vacuum as the NITI Aayog and the bureaucracy have failed to recognise the Trojan horse and protect national interest. Unless the RBI de-licenses the payments systems based on Aadhaar (AEPS) immediately and the government stays linking Aadhaar to PAN and bank accounts, our leadership will have failed to protect India from this fast colonisation of India by the private interests driving Aadhaar

Enabling benami bank accounts

dentify the real customers who own the accounts. The Panama Papers exposed data of thousands of benami accounts created through a Panamanian law firm, Mossack Fonseca. The Panama Papers exposed one modus operandi of hiding the real owners of the assets in tax havens. Prudent bankers recognise the importance of knowing who they bank with. Before it bowed to pressure from the Ministry of Finance in January 2011, the RBI had warned that the Aadhaar enrolment process does not have due diligence. It pointed out that for Aadhaar enrolment verification is not compulsory, as confirmed by the UIDAI in the Demographic Data Standards and Verification Procedure, and does not require document based verification. The RBI also highlighted that such use of Aadhaar as third party identification is against Prevention of Money Laundering Act. While resisting the use of Aadhaar, the RBI also raised the issue of the perceived misuse of such accounts for terrorist financing. Under pressure from the UIDAI and the Department of Revenue, Ministry of Finance, the RBI, through its circular dated January 27, 2011, allowed bank accounts to be opened exclusively on the basis of Aadhaar number. However the RBI required such accounts to be put to restrictions and be subjected to conditions and limitations prescribed for small accounts, so as to prevent money laundering. Not happy with the restrictions, the UIDAI pressed the RBI to lift these restrictions placed on accounts opened with Aadhaar numbers. On September 28, 2011, the UIDAI succeeded in getting the RBI to backtrack and suspend the restrictions of the PMLA on bank accounts opened solely through Aadhaar. The UIDAI also succeeded in causing the RBI further to accept eKYC (the electronic version of KYC administered by UIDAI) or remotely using information associated with an Aadhaar number as KYC. To put the problem in perspective, Aadhaar enrolment was completely outsourced to private parties by the UIDAI with the sole aim of building the worlds largest biometric database. No one in the Aadhaar enrolment process was required to identify anyone. At best they had to merely verify documents that were submitted for enrolment. Needless to say anyone in possession of your documents could enrol with minor changes in any demographic information or with different biometrics. Field stories of enrolments are full with descriptions of biometric jugaad including using combination of persons, use of biometric masks, biometric modifications, and other ingenious methods to maximise registrations. According to the IT Minister Ravi Shankar Prasad, 34,000 operators who tried to make fake Aadhaar Cards have been blacklisted. Even if each operator worked for a year before being blacklisted, assuming that each of them made about 100 cards a day, this amounts to over a billion cards. That is more than 95 percent of the database. The Aadhaar enrolment has been unlike that of any other identity document, easily scaling the creation of duplicate and ghost identities. While there is widespread belief that biometric authentication at time of opening a bank account prevents benami, it ignores the field realities of mobile phone SIM cards being issued on Aadhaar photocopies and used to open bank accounts, of having remotely “downloadable” accounts, and also plain simple use of photocopies of Aadhaar or parallel Aadhaar databases to open bank accounts. With Aadhaar, banks do not have any trace of the real customer. The real customer is simply masked by a benami owner using an Aadhaar number. Even your Aadhaar can be used, without your knowledge, by a perpetrator to open multiple accounts in order to use it to collect bribes, park black money, or siphon your subsidies. In the eyes of law enforcement, if these accounts are discovered, you will be the criminal. To compound the problem, UIDAI has no liability for benami bank accounts opened with Aadhaar. After the introduction of the Aadhaar to open bank accounts, the accounts and deposits have doubled in 5 years. No one knows who really controls these accounts.

Enabling benami transactions

Benami accounts get created when banks fail to identify the real customers who own the accounts. The Panama Papers exposed data of thousands of benami accounts created through a Panamanian law firm, Mossack Fonseca. The Panama Papers exposed one modus operandi of hiding the real owners of the assets in tax havens. Prudent bankers recognise the importance of knowing who they bank with. Before it bowed to pressure from the Ministry of Finance in January 2011, the RBI had warned that the Aadhaar enrolment process does not have due diligence. It pointed out that for Aadhaar enrolment verification is not compulsory, as confirmed by the UIDAI in the Demographic Data Standards and Verification Procedure, and does not require document based verification. The RBI also highlighted that such use of Aadhaar as third party identification is against Prevention of Money Laundering Act. While resisting the use of Aadhaar, the RBI also raised the issue of the perceived misuse of such accounts for terrorist financing. Under pressure from the UIDAI and the Department of Revenue, Ministry of Finance, the RBI, through its circular dated January 27, 2011, allowed bank accounts to be opened exclusively on the basis of Aadhaar number. However the RBI required such accounts to be put to restrictions and be subjected to conditions and limitations prescribed for small accounts, so as to prevent money laundering. Not happy with the restrictions, the UIDAI pressed the RBI to lift these restrictions placed on accounts opened with Aadhaar numbers. On September 28, 2011, the UIDAI succeeded in getting the RBI to backtrack and suspend the restrictions of the PMLA on bank accounts opened solely through Aadhaar. The UIDAI also succeeded in causing the RBI further to accept eKYC (the electronic version of KYC administered by UIDAI) or remotely using information associated with an Aadhaar number as KYC. To put the problem in perspective, Aadhaar enrolment was completely outsourced to private parties by the UIDAI with the sole aim of building the worlds largest biometric database. No one in the Aadhaar enrolment process was required to identify anyone. At best they had to merely verify documents that were submitted for enrolment. Needless to say anyone in possession of your documents could enrol with minor changes in any demographic information or with different biometrics. Field stories of enrolments are full with descriptions of biometric jugaad including using combination of persons, use of biometric masks, biometric modifications, and other ingenious methods to maximise registrations. According to the IT Minister Ravi Shankar Prasad, 34,000 operators who tried to make fake Aadhaar Cards have been blacklisted. Even if each operator worked for a year before being blacklisted, assuming that each of them made about 100 cards a day, this amounts to over a billion cards. That is more than 95 percent of the database. The Aadhaar enrolment has been unlike that of any other identity document, easily scaling the creation of duplicate and ghost identities. While there is widespread belief that biometric authentication at time of opening a bank account prevents benami, it ignores the field realities of mobile phone SIM cards being issued on Aadhaar photocopies and used to open bank accounts, of having remotely “downloadable” accounts, and also plain simple use of photocopies of Aadhaar or parallel Aadhaar databases to open bank accounts. With Aadhaar, banks do not have any trace of the real customer. The real customer is simply masked by a benami owner using an Aadhaar number. Even your Aadhaar can be used, without your knowledge, by a perpetrator to open multiple accounts in order to use it to collect bribes, park black money, or siphon your subsidies. In the eyes of law enforcement, if these accounts are discovered, you will be the criminal.

To compound the problem, UIDAI has no liability for benami bank accounts opened with Aadhaar. After the introduction of the Aadhaar to open bank accounts, the accounts and deposits have doubled in 5 years. No one knows who really controls these accounts.

 

Preventing disaster

If the government and the Supreme Court implement the wisdom of the three orders of the Supreme Court of India on the use of Aadhaar, they can yet save the country from disaster resulting from the private interests driving Aadhaar.

In its first order of September 23, 2011 the Supreme Court had indicated that “no person should suffer for not getting the Aadhaar card inspite of the fact that some authority had issued a circular making it mandatory and when any person applies to get the Aadhaar Card voluntarily”.

On August 11, 2015, the 3 member bench restricted the use of Aadhaar and indicated that it may not be used for any other purpose.

On October 15, 2015, a 5 member bench led by the Chief Justice had emphasised that “the Aadhaar card Scheme is purely voluntary and it cannot be made mandatory till the matter is finally decided by this Court”. It had restricted the voluntary use of Aadhaar to public distribution system (PDS) Scheme, the liquefied petroleum gas (LPG) distribution scheme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), National Social Assistance Programme (Old Age Pensions, Widow Pensions, Disability Pensions), Prime Minister’s Jan Dhan Yojana (PMJDY) and Employees’ Provident Fund Organisation (EPFO).

In the meantime, following Mahatma Gandhi’s footsteps and refusing to link Aadhaar to anything may be the only option left for you.

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