1. Home
2. Analysis

Need to tackle money laundering & illegal transactions in JK

Zafar Bhat. Dated: 5/21/2018 8:35:09 AM

Zafar Bhat
Jammu, May 20
The instances of money-laundering and illegal foreign exchange transactions are becoming a common phenomenon globally and in India, even in Jammu and Kashmir. These instances are posing several challenges to governments and regulators for various reasons.
Whereas, shell companies, striking off names of dormant companies and freezing of bank accounts are the common instances of these criminal activities
Shell companies are needed to investigate in the state as they have been involved in tax evasion, money laundering, market manipulation, fake services schemes and bankruptcy fraud, in the past.
Recently, on Saturday, during the countrywide searches by Enforcement Directorate under the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA) in 16 states at over 100 premises in connection with over 300 shell companies, ED conducts raids at 4 companies and residence businessman in Jammu and Kashmir.
At the raids it was found the accused businessman of state who exports carpets and handicraft to foreign countries had recently exported goods worth Rs 15 crores and he was supposed to receive the payment in foreign currency, so it is doubted when the businessman has not shown any payment receiving entry.
Particularly, a shell company is a non-trading organization that does not engage in any activity but exists only as medium for another organization’s business activity. Such companies exist only on paper and have no physical presence. These companies are usually listed on the stock exchange and are not illegal inherently; however a significant number of them are used as a means for illegal activities like tax avoidance or for trying to cover up a trail of money.
The modus operandi of these companies is that they turn the illegally held money into legal for which tax has been paid and the sources if accounted for. While people holding large unaccounted money primarily levitate such types of companies.
However, to tackle with such hidden companies globally special cells have been created by countries globally, where a 180-nation body Financial Action Task Force (FATF) is an instance, which was created in 1989 with India also being part of it to combat money laundering, terrorist financing and other related threats to the integrity of the international financial system.
Finally, often fake will exist only in paper and have no office or staff working for them. So researching their business activity should give adequate clues. One needs to suspect companies that promise unduly high returns in a short span.