INDIAN PAPER MONEY LAUNDERING
A story titled "The Money Launderers in India Really
Know How to Clean Up" was published in The Wall
Street Journal Monday, August 19. Here are a few
"NEW DELHI -- Bimal Jain stood in the cavernous lobby
of India's central bank, a garbage bag of ragged rupees on
a table in front of him. One of his assistants appeared, took
a bundle of torn 10-rupee notes and shuffled away on rubber
sandals to wait in one of a series of chaotic lines to turn the
bills in to the bank. Minutes later, another assistant returned
with a pile of crisp five-rupee bills, which Mr. Jain stuffed
into his bag.
"Some days we'll exchange more than 10,000 bills," brags
the portly Mr. Jain. "Business is good."
Mr. Jain is part of India's vast network of legal money
launderers. They use soap, water, tape and ingenuity to get
India's stressed-out bills into good enough shape to be cashed
in at the central bank.
Mr. Jain roams the crooked back streets of Delhi every day,
buying at a discount the dirty and decaying two, five, 10 and
20-rupee notes -- worth between four and 50 cents -- that no
one but beggars will accept. He then carefully washes, dries
and mends the bills before hauling them to the Reserve Bank
of India where he exchanges them for full face value.
The central bank has more than 5,000 employees checking to
see if bills are usable. In the Delhi branch, central bankers in
rows of dirty desks check envelopes full of questionable
notes, first to make sure they are real, then to confirm there
is enough of the bill left to make it exchangeable.
The amount of cash in the public's hands has almost doubled
in the last five years while the size of the central bank's staff
to process old bills has barely budged. "The soiled notes are
piling up and our capacity to handle them is limited," says M.P.
Kothari, head of the Department of Currency Management at
the central bank's headquarters in Bombay. "It's like a traffic
Dirty-money troubles aren't unusual in developing countries
that can't afford to print or mint more cash. India's neighbors
Pakistan and Nepal have similar problems. In developed
countries such as the U.S., for example, notes are taken out
of circulation by private banks and sent to the Treasury.
In India, bad bills are big business. On the cramped Kaccha
Bagh alley in Delhi's ancient center, a row of moneychangers
take in damaged notes. Each shop has cash cobblers, sitting
on the floor in front of wooden work tables, repairing bill after
bill, flattening them out, taping rips and pasting over holes with
pieces of brown paper. "People come from all over because
they know we accept damaged money here," says Ashok
Kumar, who owns a shop on the alley.
The toughest part of Mr. Jain's job, though, is mastering the
Byzantine system of rules around returning the bills. He spends
most of his day in the lobby of the central bank's New Delhi
branch, the vortex of a network of runners going back and
forth between him and dozens of bank windows. The knot of
lines, some of them hundreds of people long, is close to
impossible to untangle for the average person.
Runners and their bagmen arrive at the central bank two hours
before it opens to assure a good place in the right line. Mr. Jain
employs women because they are allowed to go to the front of
the line. Just knowing which line to pick is a challenge. Only a
few of the windows are for exchanging bad notes and each
window is specific to denomination, number of notes being
exchanged and how badly the notes are damaged.
Lines usually deteriorate into a mass of people around the
windows, with runners yelling and screaming that they were
first. Fights break out. The daily battles were so bad in April
that the central bank banned professional moneychangers from
entering for four days.
Nonprofessional moneychangers can be stuck all day trying to
change a few ripped rupees. That's where Mr. Jain's experience
comes in handy, and why others are willing to pay him as much
as a 20% cut to change their notes. "People don't have the
connections to do what I do," he says. "I've been doing this for
Wayne Homren, Editor
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