Tuesday, October 27, 2020

India: Shell companies used in complex money laundering scheme in INX Media Case


The Enforcement Directorates case against former Finance Minister P. Chidambaram is predicated on exposing a well-crafted scheme of money laundering by abusing his official position.

The affidavit submitted to the court outlines the creation of a web of shell companies both in India and in many other countries for routing/layering and laundering proceeds of crime.

The ED’s investigation conducted so far has revealed a strong prima facie case to reach to “reasons to believe” as contemplated under Section 19 of the Prevention of Money Laundering Act (hereinafter referred to as “PMLA”) to arrest the petitioner and also his custodial investigation which can be pointed out from the below mentioned facts.

Deconstructing the case, the ED said:

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“These shell companies were either incorporated by co-conspirators at the behest of the petitioner accused or the shareholding pattern of the existing companies was changed to use them for execution of scheme of money laundering.

The investigating agency has substantial evidence to support the aforesaid fact with the name of the company and the name of the persons who can be shown to be close to the petitioner-accused who created such shell companies which are used for laundering of proceeds of crime by petitioneraccused and his co-conspirators.

“It is respectfully submitted that he fact of the person/s incorporating shell companies in India and abroad being close to the petitioner-accused and being in touch with the petitioner-accused is also not based on surmises and conjectures and the investigating agency has evidence to substantiate the same.

“It is respectfully submitted that as a step in the offence of money laundering, two individuals are found to have acted as agents of the Petitioner-accused and interacted/liasoned with the parties applying for FIPB approval including INX-Media as well as collected the proceeds of crime on behalf of/at the behest of the petitioner-accused.

Related: Indian court orders ex-finance minister Chidambaram held for questioning in bribery and corruption case
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“It is submitted that the next step found so far during investigation is layering of proceeds of crime by use of web of shell companies most of which are abroad, which companies are only on paper, having no business and used only for laundering of proceeds of crime.

There is cogent evidence collected so for that these shell companies are incorporated by persons who can be shown to be close to and connected with the petitioner-accused and his co-conspirators/co-accused all of whom are acting in tandem with each other.

“It is submitted that the proceeds of crime are thereafter routed through the web of shell companies so incorporated for the purpose of laundering of proceeds of crime and the movement of such proceeds of crime from one company to another company (all of which are not doing any business and exists only on paper) just to make tracing of money trail difficult.

The said companies are incorporated and located in different countries so that it becomes difficult for the law enforcing agency/investigating agencies to follow the trail of laundered money.

“It is submitted that the petitioner and his co-conspirators/co-accused have created these layers of money laundering web in a manner which is sufficient to make it difficult for law enforcing agencies to track the money trail of proceeds of crime.

Though the Enforcement Directorate has collected substantial material to satisfy this Hon’ble court about existence of the evidence of the evidence to show the facts narrated in detail here in above, to justify the arrest of the petitioner and his interrogation, it is only after the custodial interrogation of the petitioner that the investigation is capable of being fully complete and the truth being unravelled.

“This exercise is not only the duty of the Enforcement Directorate towards the nation but considering the menace of black money and its laundering by/on behalf of persons in public life, it is in national interest to do so.

“It is submitted that the next step was to park/invest/hide the laundered money in movable and immovable properties in India and most of them outside the country that is to say in various other countries of the world.

“It is submitted that it has come on record of the investigation conducted so far that the proceeds of crime, as deposited in the web of shell companies referred hereinabove, were used for making deposits in various benami bank accounts and making benami investments in movable and immovable properties both in India and mainly outside India either in the name of such shell companies or in the name of close confidants of the petitioner-accused and his co-conspirators whose relationship can be pointed out to this Hon’ble court from the investigation papers.

“It is submitted that during the investigation conducted so far and subject to the custodial interrogation of the petitioner-accused to be conducted hereinafter, the investigating agency has found out several such shell companies, 17 benami foreign bank accounts (directly referable to the petitioner and his co-conspirators) through which money is laundered and are invested in several properties out of which 10 expensive properties situated outside India have been identified so far.

Several other shell companies, many more bank accounts and properties abroad have been identified on the basis of intelligence inputs which are received by the investigators working abroad under the PMLA and the investigation is still continuing which can be complete only after the arrest and interrogation of the petitioner-accused and other.

Related: India: ED files charge sheet against Chidambaram in money laundering case

“It is respectfully submitted that having received such material and having found the accused to be completely evasive and non-cooperative during the dates on which he came for being questioned viz.

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on 19.12.2018, 7.1.2019 and 21.1.2019, the investigating agency has formed an opinion that the arrest and custodial interrogation of the petitioner-accused is absolutely essential as the investigating agencies has strong reasons based up-on cogent evidence in its possession, to believe that the accused has directly as well as indirectly indulged in and/or knowingly assisted and became a party in the process/activity connected with the proceeds of crime and is guilty of a very serious offence of money laundering.

“It is submitted that money laundering being a serious menace internationally as well as within India and as international community is united in its fight against money laundering, every country has legislated money laundering laws.

As a part of its international obligation, India also has a robust statutory mechanism for detection, investigation, prosecution and prevention of money laundering and connected offences.

Such mechanism also provides creation of Financial Intelligence Unit (FIU) in other countries by the Indian investigation agencies from which help/information/assistance/inputs is regularly received by the investigating agency in cases under its investigation.

“It is respectfully submitted that when the international community is taking the offence of money laundering seriously and India is a Member of International Forum viz.

“Financial Action Task Force” and has committed itself to the global resolve of being firm with money laundering offence, irrespective whether petitioner-accused is the former Finance Minister and former Home Minister or an ordinary citizen of India, it will be travesty of justice if this Hon’ble Court considers the prayer made by the petitioner-accused and grant him protection of pre-arrest bail, without examining the case records, investigation material maintained in regular course of the present statutory investigation conducted and which contains the evidence which is incapable of being fabricated as loosely alleged on behalf of the accused.”


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