 "SIT tells probe agencies to tighten noose around shell companies")
The Special Investigation Team (SIT) on black money has recommended that law enforcement and intelligence agencies such as the Serious Frauds Investigation Office (SFIO) and the Enforcement Directorate (ED) examine the cases of persons holding directorships in more than 20 companies and more than 20 companies operating from the same address to detect shell companies involved in generation of black money.
In its third report, SIT has found that 2,627 persons are directors of more than 20 companies in violation of the new Companies Act. To tighten noose around shell companies, it has recommended that SFIO to actively and regularly mine (Ministry of Corporate Affairs) MCA-21 database.
“These red flag indicators could be based on common DIN (Director Identification Number) in multiple companies, companies with same address, same contact numbers, use of only mobile numbers, sudden and unexpected change in turnover declared in returns,” the report said.
In case after investigation or assessment by CBDT, a case of creating accommodation entries is clearly established, the matter should be referred to SFIO to proceed under relevant sections of IPC for fraud. SFIO should also refer the matter to Enforcement Directorate for taking action under PMLA for all such cases of money laundering, SIT said.
Amit Maheshwari, Managing Partner, AShok Maheshwary & Associates, said, “What the SIT has said is a very well-known fact and these bogus companies have long been a major facilitator of domestic black money. A complete 360 degree profiling by data mining from Ministry of Corporate Affairs, along with sharing of data with Financial Intelligence Unit and CBDT will become an effective deterrent for these shell companies operators and will wipe them out.”
SIT found out that a total of 345 addresses have at least 20 companies operating from the same address. There are 13,581 companies that share their address with at least 19 others. While there is no specific Act or rule which debars companies from having the same address, SIT has desired greater vigilance be accorded by law enforcement and intelligence agencies — CBDT, CBEC, ED and FIU, while examining the operations of such companies. SIT also said that in many cases of creation of shell companies, the shareholders or directors of such companies are persons of limited financial means like drivers, cooks or other employees of main persons who intend to launder black money.
In its third report, SIT has found that 2,627 persons are directors of more than 20 companies in violation of the new Companies Act. To tighten noose around shell companies, it has recommended that SFIO to actively and regularly mine (Ministry of Corporate Affairs) MCA-21 database.
“These red flag indicators could be based on common DIN (Director Identification Number) in multiple companies, companies with same address, same contact numbers, use of only mobile numbers, sudden and unexpected change in turnover declared in returns,” the report said.
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It said these indicators are illustrative in nature and the SFIO office could prepare a set of indicators based on its experience and consultation with other law enforcement agencies such as the Central Board of Direct Taxes (CBDT), the Enforcement Directorate (ED) and the Financial Intelligence Unit (FIU). Once certain companies are identified through data mining, the list of such high-risk companies should be shared with CBDT and FIU for closer surveillance, SIT said.
In case after investigation or assessment by CBDT, a case of creating accommodation entries is clearly established, the matter should be referred to SFIO to proceed under relevant sections of IPC for fraud. SFIO should also refer the matter to Enforcement Directorate for taking action under PMLA for all such cases of money laundering, SIT said.
Amit Maheshwari, Managing Partner, AShok Maheshwary & Associates, said, “What the SIT has said is a very well-known fact and these bogus companies have long been a major facilitator of domestic black money. A complete 360 degree profiling by data mining from Ministry of Corporate Affairs, along with sharing of data with Financial Intelligence Unit and CBDT will become an effective deterrent for these shell companies operators and will wipe them out.”
SIT found out that a total of 345 addresses have at least 20 companies operating from the same address. There are 13,581 companies that share their address with at least 19 others. While there is no specific Act or rule which debars companies from having the same address, SIT has desired greater vigilance be accorded by law enforcement and intelligence agencies — CBDT, CBEC, ED and FIU, while examining the operations of such companies. SIT also said that in many cases of creation of shell companies, the shareholders or directors of such companies are persons of limited financial means like drivers, cooks or other employees of main persons who intend to launder black money.