HSBC Money Laundering Case: Too Big To Fail does not

mean Too Big to Jail

September 24th, 2013 by Kara in Case Studies

The Problem
Some banking institutions have become so large criminal prosecutions resulting in revocation of
banking charters may negatively affect the national, and perhaps the global, economy. The U.S.
Attorney General and other prosecutors are thus left with a moral dilemma: ensure justice
through prosecution or forego criminal proceedings to protect the economy and society at large.
HSBC and Money Laundering
In December 2012, multinational banking institution HSBC was penalized a record $1.92 billion
by the United States for violating laws designed to prevent money laundering and other illegal
financial activity. HSBC was under consistent suspicion and twice given warnings and orders to
strengthen its anti-money laundering programs by the U.S. between 2003 and 2010 but failed to
make the proper adjustments. The $1.92 billion penalty, issued under the Bank Secrecy Act, was
handed down after a report and subsequent investigation that confirmed the bank had set up
offshore accounts for drug cartels and suspected criminals in Jersey. HSBC banking executives
admitted to laundering as much as $881 billion dollars.
Players
HSBC North American Holdings, Inc.: parent company of HSBC Group, one of the worlds
largest banking and financial services groups. HSBC has more than 6900 offices in over 80
countries.
HSBC Bank USA: federally chartered subsidiary of HSBC North American Holdings, Inc.;
headquartered in McLean, Virginia with its principal offices in New York City. HSBC Bank
USA is the specific entity charged with violating the Bank Secrecy Act.
Eric Holder: United States Attorney General; publicly defended the decision not to criminally
prosecute HSBC Bank USA executives.

HSBC Bank USA Executives: Specifically those responsible for the lax monitoring programs and
other negligence that violated the Bank Secrecy Act.
HSBC Bank USA Employees: would lose their jobs if HSBC were forced to cease banking
operations in the United States.
The United States (and possibly the global) economy: As stated by Attorney General Eric
Holder, the national economy will suffer greatly if HSBCs U.S. banking charter is revoked.
United States Department of the Treasury: As one of the regulators of HSBC Bank USAs
financial affairs the Treasury is tasked with advising the Department of Justice on the economic
effects of prosecuting HSBC.
Office of the Comptroller: As the regulator of HSBC Bank USAs banking charter, the
Comptroller can revoke HSBC Bank USAs banking privileges in the U.S. if its executives are
prosecuted and convicted.
Instruments
Bank Secrecy Act (31 USC 5311): enacted by Congress to require banks and other financial
institutions to create and maintain anti-money laundering programs and other practices to prevent
terrorist financing and other financial crimes. In addition to internal programs and monitoring,
the Bank Secrecy Act (BSA) also requires ongoing employee training and due diligence for
foreign correspondent accounts.
Deferred Prosecution Agreement: To avoid criminal prosecution for violations of the BSA,
HSBC executives agreed to pay a $1.92 billion fine and comply with elevated monitoring
standards for a probationary period of five years.
Events
From 2003-2006, HSBC Bank USA was under heavy suspicion by United States regulators and
operated under a written agreement to correct the deficiencies of their operational practices.
HSBC Bank USA specifically agreed to enhance its anti-money laundering program to achieve
adequate compliance with the Bank Secrecy Act.
Between 2006 and 2010, HSBC Bank USA violated several components of the BSA: Money
laundering risks associated with doing business with certain Mexican customers were ignored,
compliance issues at HSBC Mexico were overlooked, and a BSA-adequate anti-money
laundering program was not implemented. The Court notes four significant HSBC Bank USA
failures:
1. HSBC failed to obtain and maintain due diligence on HSBC Group Affiliates.

2. HSBC failed to adequately monitor over $200 trillion in wire transfers between 2006 and
2009 from customers in nations classified as standard or medium risk ($670 billion
in wire transfers specifically from HSBC Mexico).
3. HSBC Bank USA failed to adequately monitor billions of dollars in U.S. banknote
purchases.
4. HSBC Bank USA failed to provide proper staffing and resources necessary to maintain an
effective anti-money laundering program.
As part of the Deferred Prosecution Agreement, HSBC Bank USA admitted to gross violations of
the Bank Secrecy Act, including failure to establish and maintain an effective anti-money
laundering program, failure to establish due diligence, and involvement in the laundering of over
$881 billion.
The Penalty
The record-setting fine, comprised of $1.256 billion in forfeiture and $665 million in civil
penalties, allows HSBC to temporarily thwart criminal prosecution pending a probationary
period of compliance with anti-money laundering standards. The probationary period consists of
a five-year agreement with the U.S. DOJ that includes an independent monitor of HSBCs
internal anti-money laundering programs, bonus deference by the banks top executives, and
retraction of bonuses from some current and former executives who had particular involvement
in the willful breach of U.S. regulations.
Public Controversy
In March of 2013, Attorney General Eric Holder defended the U.S. governments decision not to
pursue criminal prosecution of HSBC by claiming that prosecution of such large institutions has
a negative impact on the national economy. His statement stirred some outrage. The notion that
the largest corporations, deemed equal to people under the law by the U.S. Supreme Court in the
Citizens United case in 2010, are now afforded freedom from criminal prosecution as well.
At the forefront of prosecution advocates is Senator Elizabeth Warren, who voiced publicly her
disdain for the decision not to prosecute HSBC for money laundering. She posed this question to
the Department of Justice (DOJ): How many billions of dollars of drug money do you have to
launderbefore someone will consider shutting down a bank? Not one Treasury or Justice
Department official offered her a direct answer. One thing is evident: The Justice Department
seems to hold all the cards in deciding the fate of HSBCs ability to continue operating in the
U.S. The Comptroller cannot revoke its charter without a criminal conviction and the role of the
Treasury is simply to advise the DOJ on an institutions impact on the economy. Regardless of
the economic reasons, the decision not to prosecute questions the integrity of the entire justice
system. Can we justify deferring prosecution for willful criminal activity in the name of
protecting the national economy? The debate presents an ethical dilemma between justice and
utilitarianism.

Utilitarian Approach
Utilitarianism, also known as the greatest happiness principle holds that decisions and actions
are proper as long as they promote proportional utility, and by the same accord improper as they
produce an overall negative utility. A utilitarian view, then, would advocate an act if a greater
benefit would be afforded to a larger number of individuals in society. This principle supports the
Department of Justice decision not to prosecute HSBC, because not prosecuting HSBC benefits a
greater number of individuals in society through protecting the economy from harm, even at the
expense of letting criminal activity go largely unpunished.
Under a traditional utilitarian view, then, the Justice Departments decision not to criminally
prosecute HSBC officials seems sound, as a larger portion of society benefits from HSBC
maintaining operations (not to mention the number of saved jobs) and keeping the economy from
further suffering in already difficult financial times. The record-setting monetary penalty and the
probationary monitoring period are presumably aimed at deterring future wrongdoing by HSBC
and other large financial institutions. However, in spite of $1.92 billion being the largest fine
imposed on any banking institution in history, it does not reflect an amount that could effectively
deter a financial institution the size of HSBC. According to Bankers Almanac, HSBCs annual
before-taxes profit totals more than $23 billion.
The $1.92 billion fine handed down by the U.S. represents roughly a months profit.
If HSBC and other large banks are not effectively deterred from continuing illegal and unethical
financial practices, at some point in time the utilitarian outcome of laundering money for illegal
organizations becomes adverse to the greatest number of people in society.
In fact, a deeper analysis shows that pursuing criminal prosecution of HSBCs executives likely
yields a greater utilitarian outcome in the long run. While the immediate effect of prosecution
may adversely affect a great number of individuals in society by means of a blow to the economy
and the loss of jobs, the long term effects of allowing a banking institution like HSBC to engage
in criminal activity with no risk of criminal prosecution, jail time, or even the loss of its banking
license, presents a moral hazard. A $1.92 billion fine for laundering upwards of $881 billion
hardly seems like incentive to exercise due diligence in future practices. In fact, the outcome of
HSBCs case can actually provide incentive for other banks to be more lax with their anti-money
laundering practices.
Among the most alarming effects the non-prosecution decision produces is the harm done to the
large number of individuals affected by drug trade. That being the case, both justice and utility
seem best served by criminal prosecution of HSBC executives.
Justice Approach: Retribution and Deterrence
Society has always had a keen interest in providing justice for the wrongdoings of individuals.
As for the intentional breaking of U.S. laws and sanctions by HSBC executives, justice can be
readily sought in the forms of retribution and deterrence. Retributive justice is simply providing
adequate punishment to lawbreakers in accordance with their offenses. Retribution provides two

important results: disincentive for the offender to recommit the wrongful act and a general
deterrence to the rest of society who may contemplate acting wrongfully. While retribution is
generally served as a calculated punishment proportional to the wrongful act, deterrence is most
often pursued by a punishment that outweighs the wrongful act, to ensure avoidance of future
wrongdoing in general. Often, these punishments come in the form of large fines.
The conduct of HSBCs executives in knowingly failing to adhere to U.S. sanctions and
regulations is certainly unjust. In making the decision to defer prosecution of HSBC Bank USA
executives, the primary consideration of the United States government was to prevent harm to an
already struggling economy. While instances may exist when other consequences may mitigate
an application of justice, the long-term effects of avoiding prosecution for the criminal acts of
HSBC are too great. When government allows big financial institutions to go largely unpunished
for laundering vast sums of money for criminal organizations such as drug cartels, it is
essentially endorsing the immeasurable amount of harm associated with the day-to-day activities
of global drug trade. Justice for perpetuating such criminal enterprises cannot be adequately
administered by a mere financial penalty.
Deontological Aspect: Prosecutorial Duty
A deontological approach asserts individuals are morally obligated to act according to a set of
principles regardless of outcome. Rational people have a duty to act ethically, no matter the
consequences. The criminal justice system of the United States is based largely on deontological
ideals. Prosecutors have a duty to carry out justice.
Prosecutors and Attorneys General, like all government officials, are elected or appointed under
the promise to uphold the laws. Prosecutors, by design, are charged with the responsibility to
fairly and appropriately pursue punishment for wrongdoers in society. While all human beings
have the same general obligation to act morally, prosecutors take on a special obligation, or duty,
when taking office. Prosecutors assume an elevated duty to make certain decisions as a part of
their role in the justice system. As prosecutors accept taking on the role of pursuing justice for
illegal behavior, they assume an ethical duty to do so fairly and diligently no matter the offender.
The Attorney General and the DOJ failed in their prosecutorial duties. They did not prosecute
HSBC officials because of an uncertain forecast outcome (economic harm). Ultimately, they
failed to provide justice for gross wrongdoing. The decision not to prosecute also prevents other
regulators from punishing HSBC. The Court, in upholding the financial penalty and the Justice
Departments decision not to prosecute, stated its need to give broad prosecutorial discretion to
the Executive Branch in matters like these. Hence, the Comptroller is unable to completely
revoke HSBCs U.S. banking privileges without some form of conviction by the Justice
Department. The Deferred Prosecution Agreement essentially lets HSBC off the hook with a
$1.92 billion pass for laundering more than $880 billion.
Conclusion
The ethical analysis above applies theories of justice, utilitarianism, and deontology to the
Department of Justice decision not to pursue prosecution of HSBC executives. The analysis

suggests that criminal prosecution is probably the right move, rather than the deferred
prosecution agreement currently in place. The reasons are:
1. The $1.92 billion fine and 5-year probationary monitoring period is unlikely to deter
future misconduct.
2. The long-term consequences of the Deferred Prosecution Agreement may outweigh its
immediate utility.
3. The DOJ is not fulfilling its prosecutorial duty to pursue punishment for those who
violate the law.
While some may believe the Deferred Prosecution Agreement promotes the best interests of the
United States, its long-term effects may ultimately pose a greater danger.

Money Laundering in the EU

Home

Methods and Stages

Methods and Stages of Money

Laundering
There are three stages involved in money
laundering; placement, layering and integration.

The explosion of money laundering

Macroeconomic Consequences

The Risks to Financial Institutions

The Risk to the Financial System

Money Laundering as Tax Evasion

Social and Political Costs

International Conventions

Placement This is the movement of cash from

its source. On occasion the source can be easily
disguised or misrepresented. This is followed by
placing it into circulation through financial
institutions, casinos, shops, bureau de change and
other businesses, both local and abroad. The
process of placement can be carried out through
many processes including:
1. Currency Smuggling This is the
physical illegal movement of
currency and monetary instruments
out of a country. The various
methods of transport do not leave a
discernible audit trail FATF 19961997 Report on Money Laundering
Typologies.
2. Bank Complicity This is when a
financial institution, such as banks,
is owned or controlled by
unscrupulous individuals suspected
of conniving with drug dealers and
other organised crime groups. This
makes the process easy for
launderers. The complete
liberalisation of the financial sector
without adequate checks also

EU Directives on Money Laundering

provides leeway for laundering.

The Achilles Heel

Bibliography and some useful links

3. Currency Exchanges In a number

of transitional economies the
liberalisation of foreign exchange
markets provides room for currency
movements and as such laundering
schemes can benefit from such
policies.
4. Securities Brokers Brokers can
facilitate the process of money
laundering through structuring large
deposits of cash in a way that
disguises the original source of the
funds.
5. Blending of Funds The best place
to hide cash is with a lot of other
cash. Therefore, financial institutions
may be vehicles for laundering. The
alternative is to use the money from
illicit activities to set up front
companies. This enables the funds
from illicit activities to be obscured
in legal transactions.
6. Asset Purchase The purchase of
assets with cash is a classic money
laundering method. The major
purpose is to change the form of the
proceeds from conspicuous bulk
cash to some equally valuable but
less conspicuous form.

Layering The purpose of this stage is to make

it more difficult to detect and uncover a
laundering activity. It is meant to make the
trailing of illegal proceeds difficult for the law
enforcement agencies. The known methods are:
1. Cash converted into Monetary
Instruments Once the placement is
successful within the financial
system by way of a bank or financial

institution, the proceeds can then be

converted into monetary
instruments. This involves the use of
bankers drafts and money orders.

2. Material assets bought with cash

then sold Assets that are bought

through illicit funds can be resold
locally or abroad and in such a case
the assets become more difficult to
trace and thus seize.

http://www.irs.gov/uac/Examples-of-Money-Laundering-Investigations-Fiscal-Year2014

he following list notes some common superstitions of India.

This list is incomplete; you can help by expanding it.

Contents

1 Astrology

2 Animals

3 Luck and auspiciousness

4 Ghosts and other supernatural beings

5 Witchcraft

6 Sexuality and reproduction

7 See also

8 References

9 Further reading

Astrology

Rahukaalam (or Rahu kala) is an inauspicious period of time every day.[1]

A person born under the influence of Mars is called a manglik or having

Mangal Dosha. People avoid marrying such a person, especially if she is a
woman. Marriage with such a person is believed to cause marital discord and
divorce, even sometimes death. However, it is believed that if two mangliks,
marry the effects of both cancel out.[2][3]

Animals

It is believed that snakes can drink milk. During the festival of Nag Panchami,
snakes are captured and force-fed milk. As a result, several thousand snakes
die annually.[4][5]

To see a peacock before a journey is considered auspicious. [6]

Luck and auspiciousness

Adding one rupee to a gift sum is auspicious, i.e., sums like 21 or 101 rupees
are considered more auspicious than say 20 or 100. [7][8]

There are several methods of warding of an "evil eye". Lemon-and-chilli

totems are a common method.[9] Mothers put kohl on their babies' face, to
ward off evil eye, by making it imperfect. [10]

In some parts of India, it is considered inauspicious to sweep the floor at

night.[11]

Widows are considered inauspicious in many parts of India. [12]

Saturdays are considered very inauspicious, as it is associated with the god

Shani (Saturn).[13]

It is believed that looking in a broken mirror may bring bad luck. [14]

If a black cat crosses your way, it is treated to be very bad day. It may harm
your work, health and wealth.

Ghosts and other supernatural beings

Peepul trees are believed to be the abode of ghosts and they are avoided at
night.[15] Banyan trees are also believed to be inhabited by malevolent spirits.
[16]

Spirit possessions are also reported frequently in India. Exorcisms may be

used to ward off the spirit.[17]

Witchcraft

Belief in witches is common in some parts of India. Witches are believed to

capable of killing cattle and humans, destroying crops and causing illness.
Witch-hunts have been known to happen.[18]

In parts of Jharkhand, it is believed that if the name of a witch is written on a

branch of a Sal tree, the branch would wither away. [18]

Sexuality and reproduction

It is believed that masturbation may cause health problems including

impotence.[19][20]

Dhat syndrome is culture bound syndrome where the sufferer believes he is

losing dhat or semen in urine.[21]

See also

Culture of India

Superstition in India

Superstition in India is considered a widespread social problem. Superstition refers to any

belief or practice which is explained by supernatural causality, and is in contradiction to modern
science.[1] Some beliefs and practices, which are considered superstitious by some, may not be
considered so by others. The gap, between what is superstitious and what is not, widens even
more when considering the opinions of the general public and scientists.[2] This article notes
beliefs or practices in India, which have been deemed of being superstitions or pseudosciences,
though opinions may vary on some issues.
Contents

1 Overview

2 Past
o

2.1 Sati

2.1.1 Death of Roop Kanwar

2.2 Human sacrifice

3 Prevalent
o

3.1 Astrology and fortune telling

3.1.1 Criticism

3.1.2 Defence

3.1.3 Historical predictions

3.1.4 Challenges and empirical tests

3.2 Godmen and faith healers

3.2.1 Notable persons and incidents

3.2.2 Criticism

3.3 Solar and lunar eclipses

3.4 Witch-hunts

3.3.1 Triple eclipses

3.4.1 Recent cases

3.5 Vastu Shastra

3.5.1 Notable incidents

3.5.2 Criticism

3.6 Other notable superstitions

3.6.1 Animal and bird sacrifice

3.6.2 Menstruation taboo

3.6.3 Widows

4 Incidents
o

4.1 1995 Hindu milk miracle

4.2 2001 University Grants Commission announcement

4.3 2012 Sanal Edamaruku and the Jesus statue incident

5 Surveys
o

5.1 Worldviews and Opinions of Scientists in India (2007)

5.2 Superstitions at Workplace (2012)

6 Legal aspects
o

6.1 Article 51 A (h), Constitution of India

6.2 Drugs and Magic Remedies (Objectionable Advertisements) Act,

1954

6.3 Indian Penal Code, Section 295A

6.4 Regional laws

7 Lawsuits
o

7.1 2001 Bhargava vs UGC, Andhra High Court

7.2 2004 Bhargava vs UGC, Supreme Court

7.3 2011 Janhit Manch vs Union of India, Bombay High Court

8 See also

9 References

10 Further reading

Overview

Superstitions are usually attributed to the lack of education.[3] But, in India educated people have
also been observed following beliefs that may be considered superstitious.[4] The literacy rate of
India, according to the 2011 census is at 74%.[5] The beliefs and practices vary from region to
region, with many regions having their own specific beliefs.[6] The practices may range from
harmless lemon-and-chilli totems for warding off evil eye[7] to serious concerns like witchburning.[8] Some of these beliefs and practices are centuries old and are considered part of the
tradition and religion, as a result introduction of new prohibitory laws often face opposition.[9][10]
Past
Sati
Main article: Sati (practice)

According to Commission (Prevention) of Sati Act 1987, Sati is defined as the act of burning
alive or burial of a widow (or any women) along with the body of her deceased husband
(including relatives, or object belonging someone like that), irrespective of whether it was
voluntary.[11] After he watched the Sati of his own sister-in-law, Ram Mohan Roy began
campaigning for abolition of the practice in 1811.[12] The practice of Sati was abolished in British

India in 1829 by Governor General Lord William Bentinck.[13] Although it has been therefore
illegal in India for almost two centuries, some incidents have been in recorded in recent years.
Death of Roop Kanwar
Main article: Roop Kanwar

On 4 September 1987, 17 (or 18) year old Roop Kanwar of Deorala village in Sikar district in
Rajasthan, who had been married for only 7 months,[14] burned to death on her husband's pyre.[15]
It was alleged that the victim had tried to escape, but she was drugged and forced on to the pyre.
[16][17]
On 1 October 1987, Rajasthan legislative assembly passed an ordinance against Sati, which
was later turned into an Act.[18] It was followed by pro-Sati rallies and protests in Jaipur.[18][19] On
3 January 1988,[20] the Indian parliament passed a new law, Commission (Prevention) of Sati Act
1987, based on Rajasthan's legislation of 1987.[14] This act also criminalised glorification of Sati.
[14]
Police charged her father-in-law and brother-in-law of allegedly forcing her to commit the act,
but they were acquitted in October 1996.[21]
Human sacrifice
See also: Human sacrifice in India

Although, human sacrifices are not prevalent in India, rare isolated incidents happen
occasionally, especially in rural areas. In some cases, human beings have been replaced by
animals and birds. But after backlash from animal rights groups, in some places they have been
replaced by human effigies.[22] The beliefs behind these sacrifices vary from inducing rainfall to
helping childless women conceive.[23] It is alleged that some cases often go unreported or are
covered up.[24]
In 2006, in a village in Uttar Pradesh state, a boy was kidnapped, mutilated and killed by a
woman and her two sons to cure her nightmares and visions. She had been advised to do so by a
tantric or witch-doctor.[24][25] In 2009, in a village near Vidarbha in Maharashtra state, a childless
couple were advised by a tantric to sacrifice eleven children, which would allow them to
conceive. The couple managed to kill five children, between December 2009 and March 2010,
by poisoning before they were discovered and arrested. A sixth child survived the poisoning.[23]
In 2011, the mutilated body of a girl was found in the Bijapur district of Chhattisgarh, she was
suspected to have been killed under the belief that it would ensure a better harvest.[26]
Prevalent
Astrology and fortune telling
See also: Hindu astrology and Astrology and Science

Astrology plays a great role in people's lives in India. People consult astrologers to decide names
for their new born children.[27] People compared horoscopes before marriage and marriage only

between couples with compatible horoscopes.[28] Marriages and other functions are conducted at
auspicious times (muhurta) specified by astrologers.[27][28] Several politicians also reportedly go
to consult astrologers before important decisions.[29]
Criticism

U. R. Rao, former chairman of Indian Space Research Organisation, has criticised astrology
noting that astrology is more popular than astronomy, which may be affecting India's recognition
in science.[30][31] Meera Nanda, historian and author, has written that India cannot become a
superpower in science, unless it eradicates its various superstitions including astrology.[32] Others
who have criticised astrology include, Jayant Narlikar (astrophysicist),[28]P. M Bhargava (founder
of Centre for Cellular and Molecular Biology), Ram Puniyani (former IIT professor) and Yash
Pal (physicist and educator).[33]
Defence

Ashis Nandy, political psychologist, has argued that astrology should be considered a science
and it is considered superstition only due to modern science being defined from a western
viewpoint.[34] In the Judgement, Supreme court of India in 2004, said that teaching of 'Jyotir
Vigyan' can under no circumstances be equated with teaching of any particular religion.Court
further said that it was for the pupil concerned to select any particular field or subject in
furtherance of his future career, and merely because the subject has got its basis or origin
traceable to some cult, it cannot be held that the same would only result in propagation of a
particular religion.
Historical predictions

In September 1951, responding to a newspaper article about an astrologer

predicting an imminent war with Pakistan, the first Prime Minister of India,
Jawaharlal Nehru expressed his desire to pass a law against astrology and
sooth-saying.[35]

In January 1962, Indian astrologers predicted a global catastrophe on Sunday

4 February 1962. People took refuge in hills to escape the event. The
Maharajah of Sikkim, Palden Thondup Namgyal postponed his marriage to
Hope Cooke to 1963 on the advice of some astrologers. Business and travel
also slowed down.[36] People organised mass prayer meetings. Prime Minister
Jawaharlal Nehru called it a "matter for laughter". [37][38]

In January 1981, several astrologers predicted 12 more months of Iran-Iraq

war, a Indian general election in 1983 and a world war in March 1984. A
doomsday prediction was also made by an astrologer for 1995, when 7080
percent of the world population would be destroyed. [39]

In June 1981, an astrologer made the prediction that Indira Gandhi, then
Prime Minister of India, would be assassinated in September 1981. Her son
Rajiv Gandhi would also be assassinated shortly afterwards. Then, following
these events H. N. Bahuguna would become the Prime Minister. The
astrologer was arrested in December for questioning. [40] Indira Gandhi
reportedly consulted astrologers herself.[41]

In October 2004, several Indian astrologers predicted that John Kerry would
win the 2004 US presidential election. They also predicted it would
"rejuvenate" the United States, and bring to peace in in Iraq, the Middle East
and Afghanistan.[42]

In February 2008, some astrologers predicted victory for then senator Barack
Obama over senator John McCain in the 2008 US presidential election.[43]

In January 2012, several astrologers predicted that there will be no doomsday

in 2012 and it will be a good year for India and the Indian economy. [44][45]

In March 2012, some astrologers predicted victory for Obama in the 2012 US
presidential election.[46]

Challenges and empirical tests

Before the general election in 2009, rationalist activist Narendra Nayak laid
an open challenge to any soothsayer to answer 25 questions correctly about
the forth coming elections. The prize was set at 1,00,000 (about US$1,500).
About 450 responses were mailed to him, but none were found to be correct.
[47]

Godmen and faith healers

Main articles: Godman and Faith healer

The word godman is a colloquial blanket term used for charismatic spiritual leaders in India.[48][49]
Locally, they may be referred to as baba, swami, guru, shastri, bapu or bhagat.[50] Many of them
claim to have magic or psychic powers and perform miracles.[48][49] On the other hand, some only
provide spiritual advice.[51] There are also female gurus.[52] Many of them are worshipped by their
followers as avatars or living gods.[52] Many of them belong to ancient ascetic lineages or claim
to be successor to some previous spiritual predecessor.[52] Some of them have built large panIndian or international networks.[52] Their recent success has been attributed to the use of mass
media and public relations techniques.[48][51]
Notable persons and incidents

Originally from Sri Lanka, Swami Premananda moved to India in 1984 and
founded an ashram in Pudukkotai, Tamil Nadu, in 1989.[53] In 1996, one of the
girls living the ashram escaped and reported that she was raped and was
pregnant.[54] In view of the so-called spiritual powers of the accused, which

included doing miracles like materialising vibhuti and regurgitating small

Shiva lingams, an illusionist was invited to the court and he performed both
the miracles in the open court. [53] In 1997, the Swami was sentenced to life
imprisonment and fined 60 lakh for 13 counts of rape and a murder.[55]

Chandraswami, astrologer and spiritual guru, was a close associate of former

Prime Minister Narasimha Rao.[56] He was indicted in several lawsuits
including in the assassination of Prime Minister Rajiv Gandhi.[57] In 2011, the
Supreme Court of India fined him 9 crore (US$1.4 million) for multiple
violations of the Foreign Exchange Regulation Act (FERA).[58]

In December 2002, Santosh Madhavan defrauded an Indian expatriate

woman living in Dubai of AD400,000 (50 lakh) by claiming he had
supernatural powers, and disappeared. The Interpol issued an alert for his
arrest on the advice of Dubai police. Later in 2008, his photograph was
recognised by the woman in a magazine and she realised that the person was
living in Kochin pretending to be a godman called Swami Amritha Chaitanya.
[59]
On learning of the Interpol alert, he denied the allegations, but the local
police were suspicious and decided to search his properties. The police
discovered CDs containing child porn from the premises. [60] He was convicted
of raping under-aged children and sentenced to 16 years of imprisonment in
May 2009.[61]

In August 2002, when psychic surgeon Reverend Alex Orbito visited

Bangalore from Philippines, some rationalists file a case in the city case. The
city court declared psychic surgery to be a trick and ordered the organizers to
stop the event. The organizers ignored the order and decided to go ahead.
The court ordered arrests for contempt of court but Alex Orbito evaded arrest
and escaped from the country.[62][63] Bangalore police has stated that there are
no plans to extradite him but he will be arrested if he tries to return to
Bangalore.[64]

Criticism

Sanal Edamaruku, president of the Indian Rationalist Association, has criticised TV channels
broadcasting shows featuring godmen. Narendra Nayak, president of Federation of Indian
Rationalist Associations, has stated that politicians patronising godmen serves to sanction
superstitions of the general public.[65] Nayak has also debunked several so-called miracles of
godmen like psychic surgery,[64] materialising vibhuti, money, jewellery, and fire eating. He
travels through villages demonstrating the tricks behind these miracles.[66]
Solar and lunar eclipses

There are several superstitions associated with solar eclipses. Solar eclipses are associated with
war, violent events and disasters.[67] Any cooked food considered to have become impure during
the event, they are thrown away or given to beggars.[68] People don't eat or cook food during the
event.[69][70] Temples are closed before the event and reopened after the event is over. Many shops
also remain closed.[69][71] It is also believed that asuras are worshipped during the period.[69]

Pregnant women are advised to stay indoors. It is considered inauspicious to give birth during the
event. Solar eclipse are also said to cause miscarriages[67][72] Other people also avoid venturing
outside.[70] It is believed that the sun rays become toxic during the event and a bath must be taken
after the event.[72] Indian stock exchanges also observe a drop in trades during eclipses.[70] There
are some reports of disabled children being buried neck-deep in sand or mud in hopes of curing
their disabilities.[71][73] Similar beliefs exist around lunar eclipses, where food is avoided and
people refrain from venturing outside.[74] Rationalist organisations have been trying to eradicate
these superstitions by organising events during eclipses, where people are encouraged to drink
water and eat food.[75]
Triple eclipses

It has been claimed by some astrologers that years with three eclipses have brought great
disasters in the past, including the fall of Dwarka supposedly in the year 3031 BCE.[76] Before the
solar eclipse of 22 July 2009, D. K. Hari, an astrologer, published a book called Will History
Repeat Itself? Triple Eclipse of July 2009, which was released by the Art of Living Foundation.
The citing events from Hindu mythology and history the book claims disasters and wars
supposedly coincided with three eclipses. The author clarified that this book is not a doomsday
prediction, but points to parallel events in the past. The year 2009 had three eclipses, two lunar
and one solar, visible from India.[77] Sanal Edamaruku, the president of Indian Rationalist
Association, rejected such claims saying astrologers are merely seeking to enhance their
business.[78] The director of the Nehru Planetarium, N. Rathnasree, also discredited any cause for
apprehension, citing that eclipses are not a new phenomenon.[79]
Witch-hunts

Some people, mostly in villages, have the belief that witchcraft and black magic are effective. On
one hand, people may seek advice from witch doctors for health, financial or marital problems.[10]
On the other hand, people, especially women, are accused of witchcraft and attacked,
occasionally killed.[80][81] It has been reported that mostly widows or divorcees are targeted to rob
them of their property.[82] Reportedly, revered village witch-doctors are paid to brand specific
persons as witches, so that they can be killed without repercussions. The existing laws have been
considered ineffective in curbing the murders.[83] In June 2013, National Commission for Women
(NCW) reported that according to National Crime Records Bureau statistics, 768 women had
been murdered for allegedly practising witchcraft since 2008 and announced plans for newer
laws.[84]
Recent cases

Between 2001 and 2006, an estimated 300 people were killed in the state of Assam.[85] Between
2005 and 2010, about 35 witchcraft related murders reportedly took place in Odisha's Sundergarh
district.[86] In October 2003, three women were branded as witch and humiliated, afterwards they
all committed suicide in Kamalpura village in Muzaffarpur district in Bihar.[87] In August 2013, a

couple were hacked to death by a group of people in Kokrajhar district in Assam.[88] In

September 2013, in the Jashpur district of Chhattisgarh, a women was murdered and her
daughter was raped on the allegation that they were practising black magic.[89]
Vastu Shastra
See also: Vastu Shastra

It has been compared to China's Feng Shui.[90]

Notable incidents

In 2008, after a Member of the Legislative Assembly (India) Member of the

Legislative Assembly (MLA) was killed in a car crash, some MLAs pointed out
the Madhya Pradesh Legislative Assembly building is not Vastu compliant.
The building, which was designed by Charles Correa and completed in 1996,
has been connected to the deaths of 18 sitting MLAs. [91][92][93]

The new symbol for the Indian rupee (), which was introduced in early 2012,
has been blamed by some for the recent (20122013) fall in the value of the
rupee, as the symbol is not considered to be compliant with the Vaastu
Shastra.[94][95]

In August 2012, a government official demolished a wall in the office allotted

to him in the Vidhana Soudha, the Karnataka Legislative Assembly building,
to make it more Vastu complaint.[96] In June 2013, another wall was
demolished for similar reasons.[97]

Criticism

Narendra Dabholkar, rationalist and anti-superstition activist, considered Vastu Shastra a

superstition and had built his house against Vastu principles.[98] Others who have criticised it
include Jayant Narlikar (astrophysicist),[99] Alan Sokal (physics professor and perpetrator of the
Sokal hoax)[100] and Innaiah Narisetti (chairman of Center for Inquiry, India).[101]
Other notable superstitions
Animal and bird sacrifice
See also: Animal sacrifice in Hinduism

The ritual sacrifice of animals like goats and buffaloes is observed around some festivals among
followers of some deities.[41] Owls are used in black magic rituals, their sacrifice notably spikes
around the Hindu festival of Diwali.[102]
Menstruation taboo
Main article: Menstruation taboo

Menstruating women are considered impure.[103] In many places, they are not allowed to cook or
enter temples during their periods.[104]
Widows

Widows are considered inauspicious. Some consider it bad luck to see a widow first thing in the
morning.[105] Many are driven away by their husband's families, who want to prevent them from
inheriting any property. Many of them migrate to the holy city of Vrindaban in Uttar Pradesh. It
is estimated that 50006000 widows live in the city.[106][107]
Incidents
1995 Hindu milk miracle
Main article: Hindu milk miracle

On 21 September 1995, a Ganesha idol in Delhi was reported to have drunk the milk offered to
it. Soon, as the news spread, similar phenomenon were reported from all over India and a few
from abroad.[108] Other idols, like those of Nandi and Shiva, were also reported drinking milk.
The price of milk soared due to shortage and policemen had to be placed at temples to maintain
order. Yash Pal, scientist and educator, called it an illusion. National Council for Science &
Technology Communication (NCSTC) scientists demonstrated that it was caused by capillary
action by mixing red dye with the milk.[109]
2001 University Grants Commission announcement

In 23 February 2001,[110] University Grants Commission (UGC) of India, a government

controlling body for higher education, announced that it had decided to provide non-recurring
grants of 15 lakh (about US$30,000) to universities to establish Vedic astrology and some other
related courses in colleges. About 35 universities expressed immediate interest.[33][111][112]
This drew strong criticism from Indian scientists. Hari Gautam, then chairman of UGC, defended
the move by claiming that Nobel laureate scientist C. V. Raman considered astrology to be
science. S. Ramaseshan, physicist and nephew of C. V. Raman, expressed dismay and stated that
C. V. Raman actually considered astrology to be irrational. About 100 scientists from various
institutes signed a statement demanding Hari Gautam's resignation as the chairman of UGC.[27]
[111][112]
P. M. Bhargava, founder of the Centre for Cellular and Molecular Biology, was upset that
not many from scientific community were condemning that move, especially the Indian National
Science Academy. He later filed a series of petitions in various courts. Yash Pal criticised the
move in strong words, the well-known physicist and former UGC chairman, said that he was
unopposed to the introduction of such courses in private institutions but he was against use to
public funds for such courses.[33][110] Sanal Edamaruku, president of Indian Rationalist
Association, condemned this move and called the use of public funds to teach astrology a "crime
against Indian society".[113]

In 2006, Delhi University introduced Jyotisha (astrology), Ayurveda and Vaastu Shastra in the
third year Bachelor of Arts, Sanskrit syllabus, as compulsory subjects.[113]
2012 Sanal Edamaruku and the Jesus statue incident
Main article: Sanal Edamaruka blasphemy case

On 10 March 2012, Sanal Edamaruku investigated a so-called miracle in Vile Parle, where a
Jesus statue had started weeping and concluded that the problem was caused by faulty drainage.
Later that day, during a TV discussion with some church members, Edamaruku accused the
Catholic Church of miracle-mongering. On 10 April, Angelo Fernandes, President of the
Maharashtra Christian Youth Forum, filed a police complaint against Edamaruku under Indian
Penal Code Section 295A.[114] In July while on a tour in Finland, Edamaruku was informed by a
friend that his house was visited by the police. Since, the offence is not bailable, Edamaruku
decided to stay in Finland.[115]
Surveys
Worldviews and Opinions of Scientists in India (2007)

In 2007, a survey was conducted by the Institute for the Study of Secularism in Society and
Culture of the Trinity College with the help of Center for Inquiry (India) called "Worldviews and
Opinions of Scientists in India". 1100 scientists surveyed from 130 institutes. 24% admitted to
believing that holy-men can perform miracles and 38% believed that God could perform
miracles. 50% believed homoeopathy to be effective and 49% believed in the effectiveness of
prayers. Whereas belief in faith healing was 16%, in Vaastu it was 14%, and in astrology it stood
at 14%. 31% strongly disapproved introduction of astrology courses in universities. 33% strongly
disapproved the tradition of seeking blessings of Tirupati before rocket launches. However, a
majority of them agreed that the aim of development of scientific temper, which is a fundamental
duty according to the Constitution's Article 51A (h), is not being fulfilled.[116]Y. S. Rajan
commented on this saying that most Indians don't feel there is a dichotomy between science and
spirituality.[117] Other the hand, Innaiah Narisetti, chairman of Center for Inquiry (India) and
Pushpa Bhargava, the former director of the Centre for Cellular and Molecular Biology, pointed
out the lack of scientific temper among Indian scientists.[118]
Superstitions at Workplace (2012)

In a survey, titled "Superstitons@Workplace", carried out by a staffing company called

TeamLease in 2012. The survey covered 800 companies in 8 cities. 61% of respondents admitted
to believing in a superstition and 51% admitted to following a superstition at their workplace.
48% believed that these practices had a positive effect on their productivity. It was noted that
managements didn't object to the practices as long as it didn't affect productivity. Most practices
were related to Vaastu Shastra or Feng Shui, but other personal practices were also observed.
80% of female employees were comfortable with the practices being followed in their

workplace, while it was 68% for males, and 63% admitted thinking that female employees are
more superstitious.[119][120][121]
Legal aspects
Article 51 A (h), Constitution of India

The Article 51 A (h) of the Constitution of India, lists "to develop the scientific temper,
humanism and the spirit of inquiry and reform" as a fundamental duty for every Indian citizen.
[122]
Rationalist Narendra Nayak has argued the Article 51 A (h) is contrary to IPC 295A and the
constitution should be held over to IPC 295A.[123] There has been calls to implement this article
more widely (e.g., 2011 Janhit Manch vs Union of India, Bombay High Court).[124]
Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954
Main article: Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954

This act prohibits advertisements of magical remedies, like amulets or spells, for certain diseases.
The law lists 56 of these diseases. The law also curbs sales and promotion of so-called miracle
drugs and cures.[125][126] But, the law is rarely enforced and several such products are freely
available to the public.[127] The law is considered severely outdated as 14 of the diseases in the list
are now curable, and newer diseases like AIDS are not on the list.[128] Some advertisements of
these categories are also known to appear on cable television channels without much
repurcussions.[129] Proposed amendments to this law has also raised questions regarding the status
of traditional medicine systems like Yoga and Ayurveda with respect to modern medicine.[130]
Indian Penal Code, Section 295A
Main article: Hate speech laws in India

The Section 295A of the Indian Penal Code criminalises "deliberate and malicious acts intended
to outrage religious feelings of any class by insulting its religion or religious beliefs", it includes
"words, either spoken or written, or by signs or by visible representations". The offence holds a
maximum penalty of three years of prison.[131] It has been argued that this law is unconstitutional
under Article 19 (freedom of expression) in the past (e.g., 1957 Ramji Lal Modi vs State of Uttar
Pradesh, Supreme Court).[132] It has also been stated by rationalist Narendra Nayak and T. V.
Venkateswaran of the Vigyan Prasar that IPC 295A is being used with a very wide definition to
prosecute critics of religion, anti-superstition activists and rationalists.[123][133]
Regional laws

The Prevention of Witch (Daain) Practices Act of 1999 outlaws witch-hunting in Bihar. It has
also been adopted by the state of Jharkhand. It carries a sentence of 3 months for accusing a
woman of being a witch and 6 months for causing any physical or mental harm.[134] In 2005,
Chhattisgarh passed the Tonahi Pratadna Nivaran Act. It holds a sentence of 3 years for accusing
a women of being a witch and 5 years for causing her physical harm.[135] The upcoming Women
(Prevention of Atrocities) Bill of 2012 in Rajasthan also covers witch-hunting.[136][137] In

December 2013, Odisha passed the Odisha Prevention of Witch-Hunting Bill which has a
maximum penalty of seven years.[138] Also in the same month, the Anti-Superstition and Black
Magic Act was passed in Maharashtra.[139]
Lawsuits
2001 Bhargava vs UGC, Andhra High Court

In 2001, following the UGC announcement of introducing astrology courses in universities, P.M.
Bhargava, founder of Centre for Cellular and Molecular Biology and others, filed a petition in
the Andhra Pradesh High Court against UGC. The court dismissed the case on 27 April 2001,
stating that it has no expertise in the subject and thus it cannot interfere unless UGC has clearly
violated a law.[33][140]
2004 Bhargava vs UGC, Supreme Court

In 2004, P.M. Bhargava and two other petitioners, filed a Special Leave Petition (SLP) in the
Supreme Court of India challenging the UGC decision to introduce astrology in universities. It
argued that astrology is considered a pseudoscience, several members of the Indian scientific
community have opposed the move, and it would undermine India's scientific credibility. The
Government of India responded by stating that the course was not compulsory, but optional and
several western universities allow astrology as a course choice. It sought dismissal of the case
stating that the petitioners' concerns were unfounded. The Supreme Court dismissed the case on
5 May 2004.[140]
2011 Janhit Manch vs Union of India, Bombay High Court

In 2010, Janhit Manch, a non-profit organisation, filed a Public Interest Litigation (PIL) in the
Maharashtra High Court seeking legislation to make teaching of scientific temper in schools
compulsory, under Article 51 A (h) of the Constitution using Article 266, which defines the
powers of the High Courts. It also requested that a disclaimer be added to advertisements about
astrology, Vaastu Shastra, Feng Shui, tarot cards etc., under The Drugs and Megical Remedies
(Objectionable Advertisements) Act, 1954, stating that these are for entertainment only. On 3
February 2011, the Bombay High Court disposed the plea citing the 2004 Bhargava vs UGC,
Supreme Court case. It further stated that Article 51 A (h) was too vague to be implemented
using Article 266.[124][141]