Massive crackdown on money laundering shell companies in 100s of locations

The Enforcement Directorate in what may be a massive exercise against money laundering, raided hundreds of locations in 16 cities in order to crackdown on shell companies. The raids were launched by the ED from the early hours of Saturday.

Various teams comprising of 300 officials raided the premises in cities like Delhi, Chennai, Kolkata, Chandigarh, Patna, Ranchi, Ahmedabad, Bhubaneswar and Bengaluru to name a few.

Some of the companies which were raided had links to prominent politicians like YSR Congress chief Jagan Mohan Reddy, NCP leader Chhagan Bhujbal and a controversial Noida bureaucrat Yadav Singh. Incidentally Reddy, Bhujbal have been under investigation for money laundering in the past.

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The companies which fit into ED and other agencies definition of Shell Companies are:

Companies setup using nominal paid up capital, high reserves and surplus on account of receipt of high share premium, investment in unlisted companies, no dividend income, high cash in hand, private companies as majority shareholders, low turnover and operating income, nominal expenses, nominal statutory payments and stock in trade and minimum fixed asset.

ED believes that these companies are in violation of the the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA) acts.

In the past three years the agencies have identified 1155 shell companies which they believe were used to carry out dubious transactions worth over 13,300 crores. This report also indicated that the Saturday’s raids were based on authorities suspecting over 550 people of laundering 3,900 crore after demonetization via such companies.

This action by the ED stems from the government’s announcement of cracking down on shell companies on 10th February. The ED was one of the intelligence agencies and ministries which were empowered under a special task force set up under the direction of the PMO. The govt has set up a target of prosecuting 10 lakh of such firms and also to prepare an Aadhaar-based KYC registry to check future instances of money laundering by them.

This expedition of searching for shell companies was largely successful as the authorities found a whooping 700 shell companies registered at a single address in Mumbai.


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