Investigations into the over Rs 6,000-cr “forex scam”, in which the employees of Bank of Baroda and HDFC Bank have been arrested, have revealed that traders are using Hong Kong to launder money and convert black into white. According to preliminary investigations carried out by various Central agencies, including the Central Bureau of Investigation and the Enforcement Directorate, at least 15 fake companies have been created in Hong Kong to launder money and bring it back to India. At least 45 more “fake” companies are still being investigated, including the one that has been registered in the name of a trader from the coal belt of Chaibasa in Jharkhand. Around Rs 65 crore was transferred to these companies through the Bank of Baroda. The initial estimate regarding the black money sent to these fake companies is stated to be around Rs 8,000 crore.
Officials said that banks based in Hong Kong, too, are aiding these unscrupulous traders in return for higher than normal fees for facilitating these illegal transactions. The agencies have not ruled out the connivance of bureaucrats in the scam, as the involvement of a PSU bank in the scam could not have been missed by the bureaucrats unless they deliberately ignored the fraud.
Officers familiar with the case said that in the wake of the thrust on increasing business with China, more and more traders are using the “opportunity” to convert their black money into white by routing it through Hong Kong.
“These traders, in collusion with bank officers, have been paying the difference between the actual price of the product and the invoice price through hawala channels, while quoting a very low price of the product on the invoice. For instance, a Chinese product with the actual selling price of Rs 1,500 in China, is imported with the invoice showing it as Rs 500 to avoid import duties, while the balance payment is made through the illegal route using black money. However, the import duty is calculated on the basis of the invoice price and as such the exchequer is also losing,” said a CBI officer. This “under pricing” has become a major source of black money entering into India in the past two years, he added.
CBI officers, who have so far carried out over 50 raids related to the scam in the second week of October, said the raids were carried out in connection with the alleged illegal remittance of around Rs 6,100 crore to Hong Kong between 1 August 2014 and 15 August 2015. “One can imagine the amount of money that has been transferred over time when you consider that our raids were only in relation to the one-year period between August 2014 and August 2015 and that amount was over Rs 6,000 crore,” an official added. Officials said that agencies like the Intelligence Bureau and the Directorate of Revenue Intelligence have repeatedly expressed their concern to the government over this new route, both verbally and in writing.