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How to launder black money officially?

The Cobra’s second sting tells us that India is run by black money

May 06, 2013 4:33 IST | India Infoline News Service
Digital magazine Cobrapost has detailed how bankers and insurance companies help convert black money to white. The Cobra’s second sting tells us that India is run by black money.

Cobrapost has drawn attention to clauses in the Indian Penal Code (IPC) as well in as the Prevention of Money Laundering Act (PMLA) which go to say that offering to support an offence, even if that is not committed, is also punishable by law.

The various modus operandi used are as follows:
  • Accept huge amounts of unaccounted cash to invest it in insurance products, and sometimes in gold as well.
  • Open an account to route the cash into various investment schemes of the bank or insurance arms.
  • Do it even without the mandatory PAN card or adhering to KYC norms.
  • Arrange forged PAN cards to facilitate investment of huge unaccounted cash.
  • Split the money into tranches, below the reporting threshold, to get it into the banking system without being detected. 
  • Use accounts of other customers to channelise the black money into the system for a fee.
  • Get demand drafts made for the client—either from their own banks or from other banks to facilitate investment without it showing up in the client’s account.
  • Keep the identity of the investor secret.
  • Open multiple accounts to invest the unaccounted cash directly in cash-investment schemes.
  • Buy as many policies as you can to accommodate the huge unaccounted cash.
  • Open an account in some extension of a branch a couple of months before the investment matures, credit the returns in that account and close it as soon as you withdraw all your money. The point: Extension branches are seldom audited.
  • Advise the investor to remain invested for a certain number of years, say, seven years, to keep the taxman at bay.
  • Allot as many lockers as the client needs for safekeeping the illegitimate cash.
  • Personally come to the residence of the client to take the black money deal forward and collect the cash, even bring along a counting machine.
  • Use provisions like Form 61 to show the unaccounted cash as income from agriculture, making the investment of black money and returns thereof unquestionable.
  • Promise to help transfer overseas huge sums of black money with the help of such operatives as hawala kingpins.
  • Promise to convert all your unaccounted cash into white through other conduits, someone like builders who need cash for their own operations, or someone who owns a company.
Cobrapost states: One interesting fact that emerged in our investigations is that some bankers and insurers suggested us to buy insurance products in whomsoever names we wanted and assign those instruments in our name, that is, our imagined minister, so that at the time of maturity we could harvest the returns. This is akin to holding a benami property where the owner of the property is not the one in whose name the property has been bought.

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