DRI & ED scanner on large overseas remittances

by Harish Gupta, National Editor, Lokmat Group

DRI & ED scanner on large overseas remittances

Harish Gupta

New Delhi, Sep 12

The government is considering tightening of the Liberalised Remittance Scheme (LRS) and other legitimate routes for remitting money abroad. The government's re-thinking came after the probe agencies brought to the notice massive outflow of funds abroad during the past couple of years through legitimate routes. The Probe agencies, in a meeting last week with the Ministry of Finance and the RBI had raised concern over the unusual trend. 

The Directorate of Revenue Intelligence (DRI) and Enforcement Directorate  have detected outflow of money abroad in large amount to four countries namely; Thailand, Dubai, Singapore and Hong Kong

A number of foreign exchange dealers have come under the scanner for alleged misuse of Liberalised Remittances Scheme (LRS) of the Reserve Bank of India (RBI). An individual is entitle to remit $250000 abroad without any question being asked by the banks. But it was noticed by the agencies that huge chunks in tranche have been remitted to these four countries only. 

The ED & DRI have detected misuse of legal routes for remittance of the funds in foreign exchange which is considered  laundering of  money. Estimates suggest these countries have received Indian money of about Rs 20,000-30,000 crore in 2018 alone. Of this, Thailand alone has received Rs. 5000 crore.  

In order to avoid regulatory attention, Forex dealers often create fake invoices under the LRS thereby blurring the identity of many accounts a source pointed out. “we have issued notices wherever we have come across such irregularities “ the official quoted earlier said.

According to RBI guidelines, resident Indians are allowed to remit an aggregate sum of Rs 250000 per financial year for any permissible current account or capital account transaction under the LRS without any approval from central bank. However, the RBI routinely seeks clarification wherever technical lapses are detected, Penalties are also imposed.The ED has issued many notices under the Prevention of Money Laundering Act (PMLA) for unaccounted wealth parked abroad, after global leaks including he HSBC Swiss list and Panama Papers showing names of Indians. 

by Harish Gupta, National Editor, Lokmat Group

Nirav Modi plot getting murkier

Retired PNB official Shetty also untraceable

IT raids report against Nirav Modi gathering dust

Opposition considering JPC probe 

Nirav Modi reminds of Ketan Parekh scam

Harish Gupta

New Delhi, Feb 16

Even as two senior ministers, Rajnath Singh and Prakash Javadekar, joined the ranks to attack the UPA government for the Rs 11400 crores scam, the Opposition parties are veering round to the view that a Joint Parliamentary Committee (JPC) be constituted to probe the scam.

The reason for a JPC is that the PNB fraud case comes dangerously close to the 18 years old Ketan Parekh scam during the Vajpayee era. Ketan Parekh was the first conman to use the modus operandi of discounting a pay order deemed to be issued by one bank at another bank to raise money for trading in share market and jacking up prices astronomically. The end result was that when the Madhavpura Mercantile Cooperative Bank (MMCB) of Gujrat couldn't pay the discounted money to Bank of India, the whole scam was busted. The markets crashed and after the huge uproar, the then PM Vajpayee was forced to set up a JPC. Interestingly, Ketan Parekh had worked with securities' scamster Harshad Mehta of the 1990s era who incidentally was also a Gujrati and a shrewed businessman. He started trading in securities and took monies against those government securities to jack up share market.

Now 18 years later, another Gujrati, Nirav Modi, surfaced on the scene and used the same technology of “discounting” Letters of Understanding to con banks. The entire government machinery woke up from the slumber with PNB suspending 20 officials, Ministry of External Affairs suspending Nirav Modi's passport for one month, CBI and ED conducting extensive raids today.

But there is no trace of the key players; Nirav Modi, the king pin and the key PNB official who connived, former PNB Deputy Manager Gokulnath Shetty. Both are untraceable. Gokulnath shetty was posted at the on March 31, 2010 at PNB”s foreign exchange department at Brady House Mumbai. He retired in 2017 and three times his transfer orders were issued during 2013-17 as per the CVC guidelines that all key persons holding sensitive posts be shifted after three years. But each time, these orders were canceled due to “internal reasons”. K R Kamath (2009-2014), Gauri Shankar (Feb.15-Aug 15) and Usha Ananthsubramanian (Aug 15-May 17) who were at the helms of the PNB are also under the scanner of the CBI besides the current MD &CEO Sunil Mehta.

What has come as a shock to the investigators is Nirav Modi continued to thrive even after the massive raids by the Income Tax department on his premises and also of Mehul Chowksi in January 2017- two months after Demonetization. While the DRI and Customs had slapped a separate case against him of duty evasion which he paid, the IT department found Rs 4900 crores unexplained funds in his accounts. The DRI & IT had probed Nirav Modi and Chowksi several times between 2013-17 and each time he came out with flying colours. This was despite IT department finding 10 types of illegal modus operandi adopted by Nirav Modi and clearly stated that “sources and creditworthiness of these fund remained unexplained. The IT report also pointed out that international transactions to the tune of Rs 5100 crores had not reported by Modi. Incidentally, the IT report is based on the probe done by the DRI during 2013-14 which had first detected the custom duty evasion.

However, it is yet to be seen whether the ruling BJP will go in for the JPC probe demand.

Ends

Ravi Shankar Prasad interview of the week

by Harish Gupta, National Editor, Lokmat Group

Interview of the Week with Ravi Shankar Prasad, Union Law & IT Minister  

Law is taking its genuine course in probes against the corrupt

We can’t look the other way in corruption cases

India is free from cyber attacks, our systems are in place

Digital payment charges are being looked into

By Harish Gupta

Lokmat: Where do you stand on Triple Talaq now that the SC has heard it ?

R S Prasad: I will not make any comment now that the SC has completed hearing on its validity. But we have stated our views very clearly. Its not an issue related to any religion or community. It relates to gender justice, gender dignity, gender equality. After nearly 70 years of India`s Independence, the issue of right to live with dignity has been raised by a big segment of country. Our view is clear; It is unconstitutional and must go.

Lokmat: What is the alternate machination if the SC strikes it down?

R S Prasad: We will have to decide after the court judgment.

Lokmat: It is said that you may come out with Muslim Marriage Act?

R S Prasad: All these things are going on. I do not wish to make any comment. But surely the government is open to have a fair mechanism if it is needed.

Lokmat: But you have doing this lip service. Your party has done nothing for Muslims in terms of giving them tickets or positions of eminence ?

R S Prasad: This concern for dignity of women is not for Muslims. What is BETI BACHALO BETI PADHAO, What is Sukanya Samridhi Yojna which I am handling as postal department minister. Why is out of almost 7 Crores transactions in MUDRA 2/3 are woman. Of the nearly 40 lakh IT employees nearly 1/3 are women.

Lokmat: I was talking about giving them political recognition by your party?

R S Prasad:  May be you have a case that we ought to give them more tickets. But there I have differences and I am happy that you asked this question. But other parties symbolism ends by giving them tickets. The real issue is of denial of empowerment of the Muslim women. These parties maintain silence when it comes to their empowerment. 

Lokmat: So you are empowering Muslim women?

R S Prasad: Obviously. Now their voice is heard. Rajiv Gandhi ultimately surrendered despite having a massive majority in the Shah Bano`s case. But the Muslim women in India have got a strong leader in Modi who stands by them in their pain and agony.

Lokmat: You are needling your political opponents one by one by using state agencies in every state and also at the Centre?

R S Prasad: Did we tell Lalu Prasad`s sons to have big land in Delhi and Patna ? Did we advise his daughter to have huge farm houses through means which are questionable?

Lokmat: You have lodged cases against Mayawati’s Brother, congress leaders in Karnataka, Himachal, Haryana and other states ?

R S Prasad: Has any one been chased without any evidence? If there is a case against a Karnataka Minister and crores of rupees are found,  you want Income Tax dept to remain quite? If Mayawati’s brother`s issue is discovered by agencies, you mean to say they should look the other way.

 Lokmat: So you are saying that your CBI, ED, DRI, IT are not going after the opposition parties.

R S Prasad: Your allegation is incorrect that’s what I can say.

Lokmat: All kinds of allegations and probes are being made against Arvind Kejriwal. But why have failed to chargesheet him?

R S Prasad: We do not interfere in the work of any of these agencies.  The law is taking its genuine course without any pressure and without resorting to any manipulation.

Lokmat: You mean the whole lot of Opposition is corrupt?

R S Prasad: There are court rulings in cases where Income Tax is probing cases against high & mighty people, you know. Now they are forming grand alliance. Its nothing but the congregation of the corrupt.

Lokmat: You are selective in acting against political class.In Maharashtra you bitterly campaigned against corruption of NCP leaders like  Ajit Pawar. But did nothing against him ?

R S Prasad: I do not have the facts of the case presently. But the legal process is on against all of  them.

Lokmat: Cyber security is one of the biggest issues and you are handling it……..

R S Prasad: Digital India is changing the face of India now. Two Crore people are on BHIM app for digital payments and more than 20 crore transactions have taken place by linking 27 crore Jan Dhan account with mobile and AADHAR. We have saved more than Rs  50000 crores by directly transferring the monies into their accounts eliminating the middlemen.

Lokmat: But why the banks are still charging higher for digital payments? It’s a great concern?

R S Prasad: There is no charge on BHIM app. The AADHAR PAY which the PM had launched, there is no charge. For other UPI apps, the cost is zero. 

Lokmat: But banks are charging more for digital payments while cash is free of charge?

R S Prasad: Its very low and we are already looking into this issue.

Lokmat: And what about the cyber attacks & security?

R S Prasad: India, fortunately, is free today except a few isolated incidents in AP and in Kerala.

Lokmat: May be India was not targeted by hackers?

R S Prasad: No, not at all. From March-April we have taken enough steps to make our systems secure because we were planning to go digital in a big way.

Lokmat: You mean to say that you had advance information about these attacks?

R S Prasad: All I can say is that we took steps to tighten digital and cyber security systems. We installed PACT system. We advised all the banks and govt. departments to put strong systems in place.

Lokmat: Controversies with regard to Aadhaar refuse to die down. P Chidambram says it was conceived for Direct Benefit Transfer Scheme and was optional?

R S Prasad: The problem of Chidambram is that he is yet to reconcile that he is no more in power. We are doing what they didn’t have the courage to do. We laid Optical fiber network for 2.5 lakh gram panchayats today while they connected less than 100 villages.  We are not making it mandatory.... section 7 says no one shall be denied the right of benefit but you must alternatively come on the AADHAAR system. Who is unhappy? The Poor ? Some people are unhappy because there are no middlemen. I am surprised at Chidambaram’ statements.

Lokmat: So the sinking feeling that Chidambram is having and expressing through his articles is only for him and his party?

R S Prasad: It is completely personal….. why it is so… I will not go into those details. The whole country knows why he is having this sinking feeling. For the Congress, in-spite of getting 44 seats...  in-spite of reduced to single digit in UP... in-spite of a washout in one election after the other, the party is unwilling to learn lessons. It is seeking space in only editorial pages.... good luck to them.

Rs.30L crore siphoned out of India in 10 yrs

by Harish Gupta, National Editor, Lokmat Group

Rs.30L crore siphoned out of India in 10 yrs

Black Money

￭ SIT orders DRI probe

India ranks 4th in money laundering

Harish Gupta New Delhi, Feb. 15 :

The Special Investigation Team (SIT) has directed the Directorate of Revenue Intelligence (DRI) to probe the estimated outflow of `30 lakh crore ($ 505 billion) during the 2004–2013 period. The mind-boggling figure of `30 lakh crore was given by the Global Financial Integrity panel in December 2015. The panel undertook this extensive study of Trade Based Money Laundering and released its report saying that India lost `30 lakh crore during the 10 year period when UPA was in power.

The report of the Global Financial Integrity panel and action of the SIT today came as a shot in the arm for the Modi government which had been alleging that money to the tune of billions of dollars was siphoned out of the country during the UPA regime. The Supreme Court had directed the UPA to constitute the SIT on Black Money. But it kept dithering and the Modi government agreed to form the SIT soon after coming to power.

The Global Financial Integrity panel in its various reports, observed that Trade Based Money Laundering is a major source through which illicit money is taken out of the country. India ranked fourth amongst the developing nations with China topping the chart followed by Russia and Mexico. The SIT had recommended that there should be institutional mechanism through a dedicated set up which examines mismatch between export/import data with corresponding import/export data of other countries on a regular basis.

The SIT has also recommended that wherever possible, especially in case of commodities, a system for cross checking the prices of imports/exports with international prices may be done. Various reports including those by Global Financial Integrity have emphasised that Trade Based Money Laundering is the main medium or process through which funds are illegally taken out of countries. The DRI under the ministry of finance has been asked to verify the extent to which the calculations of money laundered are correct.

The SIT has also observed that since reports like those of Global Financial Integrity which calculate illicit financial flows from various countries, are widely used in academic circles and inform the debate on this issue, it is very crucial to ascertain the veracity of such reports. The SIT, however, refrained from making any statement on the findings of the report saying "further necessary action shall be taken after receipt of report from DRI". The details of the report obtained from the international panel, have been sent to DRI last week by the SIT. 

The Global Financial Integrity, in its report, "Illicit financial flows from developing countries 2004–2013" has estimated that illicit financial flows out of ten top countries is to the tune of $5 trillion. The report says developing and emerging economies across the world lost US$7.8 trillion in illicit financial flows from 2004 through 2013, with illicit outflows increasing at an average rate of 6.5 per cent per year - nearly twice as fast as global GDP. The Global Financial Integrity panel conducted this study which was supported by the Government of Finland.

Modi Govt. struggling to slap PMLA against Modi

by Harish Gupta, National Editor, Lokmat Group

Special report

The Modi government is struggling to invoke Prevention of Money Laundering Act (PMLA) against ex-IPL commissioner Lalit Modi who is holed up in London after various cases were slapped against him five years ago.

Top officials in various agencies including Enforcement Directorate, CBI, DRI, Corporate Affairs, Narcotics and Mumbai Police are scanning tons of files to zero on a fool-proof criminal case against him to enable the government to invoke PMLA.  Even the SIT was struggling yesterday through the day to zero on a criminal case against Lalit Modi so that he can be booked under PMLA. 

The UPA government slapped 15 cases against Lalit Modi for Foreign Exchange Management Act (FEMA), 1999 which does not provide ED powers to arrest him. The ED could not issue an arrest warrant against Lalit Modi due to this very reason and failed to press the Interpol to issue a Red Corner Notice. What ED issued was a “Blue Corner Notice” which is no meaning in law. Even Finance Minister Arun Jaitley admitted that there is some confusion over "the shades of blue" whether it was a Light Blue Corner Notice. 

Highly placed sources in the ED told this correspondent that the PMLA can be invoked only after a pre-dated criminal case is registered against a person under 28 Acts notified to invoke PMLA. Secondly, the PMLA case can be registered by the ED on its own if it has evidence to prove that the person laundered money which are “proceeds of crimes including drug, smuggling, terror” etc.  The problem is that if the ED converts a FEMA case into the PMLA after five years, it must have some fresh impeccable evidence to prove criminality.

Another reason for successive governments going soft on Lalit Modi is that it will also bring officials and members of the BCCI & IPL governing bodies. The game of Cricket being an all party affair, nobody wanted to precipitate the issue after Lalit Modi quietly eloped in 2010. If the UPA didn’t convert the FEMA cases into PMLA and not registered a single criminal case against Lalit Modi for four years, the NDA too looked the other way. 

Yet the pressure on the Modi government is so intense that a agencies have been told to register a criminal case against Lalit Modi under any of the 28 notified Acts to slap PMLA. Interestingly, the BCCI doesn't want to be a complainant in the matter. Therefore, the agencies are working overtime to find out a case against Modi not related to Cricket, IPL, Champions League etc. The government wants to file an appeal in the SC and for this a fresh case is considered necessary.