Forex specials
Shishir Asthana Mumbai October 15, Last Updated at IST Six people have been arrested including employees of Bank of Baroda and HDFC Bank in what is now known as the Forex scam. But the details that are coming out in media suggests that this is only the tip of a much bigger scam. Raids were carried out over last weekend on some branches of BoB and residences of a few employees. There is nothing new in the modus operandi on one of the transactions used by money launders who try to earn a quick buck by exploiting government schemes. Duty drawback is a refund given by the government to recoup the amount paid by way of custom and excise duties on the raw materials used and service tax on input services used for the manufacture of exported goods. Government uses the duty drawback scheme to promote exports Here is an example. Suppose a garment company sells Rs 1,000 worth of shirts for which it used Rs worth of cloth and other materials. The custom duty paid on imports of the cloth or other materials or the excise duty paid on domestic purchases and service taxes forex on all inputs of services will be refunded by the government. If 20 per cent is the tax paid on its raw material, then Rs per cent of Rs can be claimed as duty drawback In this case, dummy companies were opened in Hong Kong. The exporter who had foreign exchange — black money parked forex, used these entities as clients forex send the money back to India to make the transaction look genuine. Government on receiving the foreign exchange disbursed the duty drawback money to the exporter since the entire transaction was closed The problem, as ED points out is that the accused traders evaded custom duties, taxes and over-claim duty drawbacks to generate slush funds. Funds were sent through 38 current accounts to various overseas parties numbering to 400, mainly based in Hong Kong and one in UAE Advance remittances for imports are basically part payment that an importer makes to confirm his imports. Generally, after the initial advance is paid, specials exporter sends the remaining amount either on receipt of the goods or after a lag, depending on the negotiation with forex seller. Banks on their part have to check if the remaining amount is sent and the goods have landed by confirming it with import documentations The modus operandi in this specials was that a number of current accounts were opened in the Ashok Vihar branch. The money launderers exploited this loophole to pass under the specials. They also smartly selected commodities which are prone to cancellations on account of quality or sharp price fluctuations like fruits, pulses and rice The Players The scam started taking place by mid when companies were getting formed in Hong Kong. One such company, Star Exim was incorporated in Hong Kong on August 1,as reported by DNA. The company belongs to one Om Prakash Rungta, living in the mining town of Chaibasa in West Specials district of Jharkhand. Dhawan, an exporter of readymade garments, helped Bhatia. All the accused are alleged middlemen for at least 15 fake companies, out of the total 59 which were involved. ED is now investigating further to check the activities of the remaining suspected 44 fake firms which pumped in money to overseas locations in a similar manner The question is if those arrested are forex then who is the kingpin of this racket. Like all financial scams, there is a money trail which will ultimately lead to the beneficiary Money involved ED said BoB informed them that the total amount deposited in the 59 accounts is Rs 5,151 crore and only percent Rs crore of this amount has been deposited in cash in the bank while remaining amount of Rs 4,808 crore came through other banking channels. Banks are expected to raise exceptional transaction reports ETRs and suspicious transaction reports STRs with the RBI in case of discrepancies. Team Business Standard Your subscription - access to premium content has expired. Kindly Click Here to renew. Your subscription - access to premium content has expired. The raids were in connection with the alleged illegal remittance of around Rs 6,172 crore to Hong Kong between 1 August and 12 August Prima facie it seems that two different types of transactions took place, but both the transactions can be related. They also smartly specials commodities which are prone to cancellations on account of quality or sharp price fluctuations like fruits, pulses and rice The scam started taking place by mid when companies were getting formed in Hong Kong. Like all financial scams, there is a money trail which will ultimately lead to the beneficiary ED said BoB informed them that the total amount deposited in the 59 accounts is Rs 5,151 crore and only percent Rs crore of this amount has been deposited in cash in the bank while remaining amount of Rs 4,808 crore came through other banking channels. Unilever Hindalco Inds ICICI Bank Idea Cellular IndusInd Bank Infosys ITC Kotak Mah.
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