“You know, if you were to, and you wouldn’t ever, but if you were to meet my clients, you would...”“No, no, I’m not interested in meeting your clients. I’m only interested in...”“I don’t want you to either. But if you were in a room with Lee Iacocca , they would mix in quite well with him.”“I’m sure. I’m sure.”“And he sells cars and they sell cocaine. And that’s the end of it, never to be brought up again.”“I don’t... (laughs). I don’t want to know this. I don’t want to know what they sell....We know your business and we keep all client relations confidential.”This smooth conversation happened sometime in the late ’80s between an undercover US Federal agent and the director of BCCI’s Latin American arm during the famous sting operation that brought down the rogue bank. But the probe, though it spread across the globe, was limited in nature: it was a straight battle against the “Bank of Crooks & Criminals” which had become the financial handler for gunrunners and drug lords.There was very little concern — and even if there was, it was well below in the priority list — on whether men in legitimate businesses were using offshore banks with loose rules to hide money and escape tax.The focus widened a decade later as terror strikes drove governments to pass new laws and hire more sleuths to find out how loveless souls from the Arab world used banks and currency houses in New York and London to wire money to blow up towers and trains. But still, the mission, even post 9/11, was not aimed at discovering slush funds, bribes and unreported earnings parked away in idyllic islands These were still comparatively minor offences with the unwritten rule being that the rich would not be harassed too much for their numbered accounts, maze of trusts and investment outfits as long as their phone calls cannot be traced back to numbers of hardcore criminals. That rule began to crack as the world slipped into an economic turmoil.Harsh new laws, closer vigil and pressure on governments after every terror attack pushed enforcement agencies to dig out a mountain of data that simply confirmed what everyone suspected. Businessmen, both flamboyant and staid, diamond merchants in Mumbai and Belgium, African warlords, politicians — could be Indian, Pakistani or from anywhere — have bank accounts with large Swiss wealth managers , were beneficiaries of trusts registered in places like the Bahamas and British Virgin Islands and owned shares in unknown, undisclosed outfits in distant jurisdictions.Thousands of well-heeled individuals across the world who came under the radar had no links with al-Qaeda nor had they ever dealt with drug kingpins of Bolivia. But it was information that was too precious to let go.Across markets, high-street banks were looking for lifelines, sovereigns were on the brink of default, governments were clueless on how to — and if ever they can — bridge the deficits that had ballooned to finance one bailout after another. In such a world, governments stumbled on armies of filthy rich tax dodgers who have for years found ways to stash away their wealth in destinations where the nature of conversation between bankers and clients have not changed dramatically since the bad, old days of BCCI.The glare fell on tax havens that conjure up images of clever lawyers and crafty bankers who don’t ask too many questions. The game changed. The concern was just not about banks and Western Unions of the world, but on all tax-free territories.The little islands came under pressure. What began as an anti-money laundering drive to stop terror funding boiled over to information-sharing treaties with tax havens that sensed that their status as hideaways would be short-lived.Countries tweaked rules to plug tax loopholes. For instance, in 2004, India, whose citizens, according to earlier statements by members of the Swiss banking industry , accounted for one of the highest numbers of secret account holders, changed the law to make residents pay tax on any amount received without proper consideration. This was a blow to those who, as beneficiaries of offshore trusts, paid no tax on money received from overseas.The mechanism that flourished since 1998 when gift tax was abolished collapsed. To sidestep the rule, trusts started paying in kind by asking local developers to register properties in the name of beneficiaries. It didn’t work for long. In 2009, the Indian tax office said that such beneficiaries would be taxed on the value of the property given by trusts.The game’s changingBut another game is unfolding now. Along sterner rules, there is leeway. Countries like Singapore and Dubai are opening the doors to liberal tax regime as they eye the business that tax havens and Switzerland are losing.Few years ago, one of the largest Swiss banks shifted its private banking division, catering to the ultra-rich, to Singapore. Indians who are forced to shut their Swiss bank accounts, move the money to a bank in Dubai Free Trade Zone, which allows a fully foreign-owned company, before transferring the money, after a decent interval, from the newly formed outfit’s account in Dubai to bank account in Singapore.For some countries, the plight of tax havens could be an opportunity to collect more tax. Tax havens may be staring at a bleak future, but forcing individuals to admit ownership of unreported foreign bank accounts and holdings could take years of tortuous court proceedings.Governments know it. India, which finds it politically impossible to offer tax amnesty, levies a tax of 15% — half the standard income tax rate — on dividends earned by an Indian entities from overseas subsidiaries.Rich Indians don’t have to hire lawyers to set up funny structures and carry out elaborate fund transfers to park their Swiss bank and tax haven money in Singapore where they will end up paying almost the same tax.For many, bringing back the longhidden money and paying a smaller tax on it may be a way to avoid those unsettling calls from the tax office and enforcement department. Tempting, isn’t it?