Post DeMo, ED probing 3700 cases involving illegal assets worth Rs 9900 crore
Heightened crackdown through 620 search operations across the country has led to the discovery of illegal assets worth more than Rs 9,900 crore.india Updated: Nov 10, 2017 00:00 IST
The Enforcement Directorate (ED) has reported that it has registered over 3700 cases of money laundering and forex violations and issued close to 600 show-cause notices in the last one year, after demonetization in November 2016.
In a report the directorate has said that this heightened crackdown through 620 search operations across the country has led to the discovery of illegal assets worth more than Rs 9900 crore. This data for the period between November 2016 and September 2017, also shows that 54 people have been arrested for money laundering.
The report details that 3567 cases have been registered under FEMA violations involving Rs 4600 crore and 191 cases have been registered under PMLA (prevention of money laundering act). Assets worth Rs 5335 crore have been attached under PMLA.
The report shows the scurry to convert black money into white and to bring it into the regular financial system, right after demonetisation. ED lists six most popular methods of this conversion: bribing bank officials, creation of shell companies, buying gold, over-invoicing imports, hawala and investment in real estate.
“In most cases…use of shell companies was an important factor,” said the report. In fact, in 24 hours on April 1, 2017, ED searched 134 locations in 16 states involving more than 1000 shell companies, the report said.
“A general review of the cases post demonetization shows that business and professionals have collaborated with each other to use shell companies for converting illegal wealth into legitimate assets,” the report said.
In a risk assessment exercise, ED has found that 43% of money laundered in India is through financial institutions by cheating them using shell companies and real estate. Bribes involving government officials and bureaucrats account for generating 31% black money in the economy, while drugs and narcotics contribute 6.5% and arms and explosives account for 4.5%.
In the report, ED lists financial institutions as the sector most vulnerable to money laundering, followed by real estate.
The report said that the “menace of shell companies” to launder money came to the forefront during the post-demonetization investigation. It details how shell companies are used to wash black money by first receiving it and then routing them through a web of companies for layering the transactions, before finally transferring them to the beneficiaries in the form of banking transaction. Thus, the ill-gotten money enters the regular financial system.
“Most of these firms have dummy directors. They sign balance sheets and other documents on the instructions of the operators (called entry operators). Many such firms are either registered at fictitious addresses or at one-room locations,” the report explains.