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Some ultra-rich or high net-worth individuals (HNIs) create corporate structures across various foreign jurisdictions to transfer unaccounted funds and delay investigations in case the law catches up with them, the federal anti-money laundering agency, the Enforcement Directorate (ED), has claimed.
In a charge sheet filed on November 2 against Madhya Pradesh chief minister Kamal Nath’s nephew Ratul Puri in connection with alleged irregularities in the AgustaWestland helicopter deal, ED has a separate section dealing with the modus operandi adopted by such individuals to launder the proceeds of crime,particularly the foreign entities they create to do so.
Several territorial jurisdictions are involved in money laundering transactions and the launderers are usually technology savvy. For them, ED said, “protecting their identity is of paramount importance”.
Describing how HNIs stay hidden behind a corporate veil, the ED charge sheet said: “They create or use entities maintained by Hawala operators or associates. In order to instruct the transfer of proceeds, alternate email IDs are created and efforts are made to ensure that no evidence leads to them.”
“One of the purposes of creating corporate structures across various foreign jurisdictions is to ensure that if law catches up them, investigation is delayed,” the charge sheet added.
HNIs incorporate such companies abroad by infusing equity in the name of shareholders, some of whom are nationals of that country. “Essentially, the shareholders are trusted name lenders who facilitate the incorporation of such companies,” it said.
For managing the day-to-day affairs, “a director and a management company are appointed as it is not possible for HNIs to run the company. Such directors or the management company are not actual beneficiaries. They receive fees in lieu for their services of managing the accounts as per the instructions from their client who is the actual beneficiary”.
The ED said the HNIs were assisted by management companies, name lenders, dummy directors, relationship or portfolio managers and bankers to help in open bank accounts and route transactions.
ED said in many cases, it has come to notice that same persons and corporate structures manage money for different individuals/HNIs. The solution, it adds, is to gather evidence from various entities involved in these money laundering activities.
Delhi-based lawyer Sherbir Panag, an expert on white collar crimes, said, “There have been instances when the HNIs have transferred funds abroad using the LRS (liberalised remittance scheme) or through other lawful means but it would be wrong to generalize that everyone in this category has ill-gotten wealth which he or she is laundering abroad”.
In Ratul Puri’s case, ED has named several companies and individuals who allegedly managed his money. Puri’s lawyer Vijay Aggarwal declined to comment on the ED report.
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