| Date: |
28-10-2014 |
| Subject: |
Diamond trade a front for siphoning off money, warn intelligence agencies |
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NEW DELHI: Intelligence agencies have raised an alert over diamond trade being used to siphon off money out of the country through banking channels. "Some instances have come to light where (diamond) trade has been used as a front to take money out," said an official with an agency dealing with trade frauds. The method is very simple.
Importer will show a higher value of the goods purchased than their actual worth, and make the payment. The extra amount remitted is parked in a foreign bank. This is easier in the case of unworked diamonds as valuations are difficult. Incidentally, one of the three people identified before the Supreme Court as Swiss bank accountholders on Monday is a bullion trader.
The Directorate of Revenue Intelligence and customs authorities have already alerted the Reserve Bank of India ( RBI) on official remittance channels being used for illegitimate transfers.
Besides over-invoicing of imports, scrupulous traders also use multiple invoicing for siphoning off money from the country. In a recent case cracked by Mumbai customs authorities, it was found that funds were remitted overseas from banks on the basis of multiple bills of entry — the document that gives details of the actual shipment for importing a consignment of diamonds.
Operators involved managed to transfer illegitimate funds with a legitimate import transaction as a front before being nabbed by customs authorities. A customs official said it was not a case in isolation. "This is a new kind of hawala modus operandi where official channels have been used to transfer funds," he said.
With transfer of currency in physical form becoming difficult and premium charged by unofficial channels having gone up to as much as 5%, dodgy elements are resorting innovative means to park black money overseas, the official said.
In 2013-14 while overall imports fell, import of unworked diamonds rose to $22.1 billion from $21.6 billion in the year before.
Global Financial Integrity had earlier said that India was among the top ten nations in terms of illicit outflows with $123 billion in outflows in the ten years to 2010. Part of the problem lies in the fact that banking and customs data management systems do not talk to each other, making it easy for fraudulent operators to use diamond trade as a front.
The bill of entry does not specifically mention any authorised dealer's code or name that would restrict fund transfer service to just one authorised dealer (AD) like it's done in the case of exports. In the recent Mumbai case, money was remitted from five banks. Banks' IT systems could not verify if import had been carried out before remitting funds overseas.
"There should be no problem in introducing a column (for AD) in bill of entry if it can prevent such incidents," said Ajay Sahai, director general and CEO of Federation of Indian Export Organisations. In some cases cracked by customs, same set of diamonds were being brought in and sent out, and funds freely transferred. "Valuation of diamonds is a huge issue...There can be vast differences of opinion over valuation," said the customs official quoted earlier.
Source : economictimes.indiatimes.com
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