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August 13, 2020

Know Modus Operandi of Chinese National who caught in Hawala Racket

by Rubina Dsouza in Compliance Law

Know Modus Operandi of Chinese National who caught in Hawala Racket

Introduction

Luo Sang, a Chinese national who was arrested on 11th August, 2020 night in a raid by the Income Tax Department for money laundering and representing fake Chinese companies in hawala transactions, is now under the scanner of multiple probe agencies.

He was also arrested by Delhi Police’s Special Cell on charges of espionage in September 2018. Luo Sang, who took a fake identity ‘Charlie Peng’ in India, was allegedly spying for China and also running money laundering and hawala transaction businesses. However, the court let him go.

How did the Delhi Police Special Cell get him in 2018?

  1. Lou Sang was first arrested in Delhi on 13 September 2018. He was on the radar of the intelligence agencies due to his “suspicious travels” and “money matters”.
  2. The sleuths then tracked his movements to Northeastern states and also Himachal Pradesh. After a background check, the agencies found that he belongs to Nanjing in China.
  3. The police then started working on developing information on him and arrested him in September 2018 after raids. He was booked under a case of impersonation and under sections of the Passport Act.
  4. Delhi Police also recovered cash, some dollars and Thai currency from his possession
  5. During interrogation by the Special Cell, Lou Sang claimed that he came to India from Tibet because of persecution of Tibetans by Chinese authorities.
  6. He also claimed to be a soldier of the People’s Liberation Army (PLA) and was asked to turn into a Chinese agent.
  7. He was giving different statements each time. Later he told that he had a criminal record was in jail for years and Chinese authorities forced him to become a spy. He repeatedly changed his Chinese background story several times to deceive the Authorities.
  8. However, what was clear was that Lou or Charlie was a trained spy.  He also said that the Chinese provided him finance to set up companies involved in e-commerce here.
  9. His job was also to arrange logistics for people in the Chinese embassy (Transfer money and arranged logistics for them like providing cars and arranging their travel).

Why was he let go?

  1. In September 2018, when Indian authorities contacted Chinese embassy officials, they denied Lou Sang is a Chinese.
  2. They did not even acknowledge the official communications that were sent.
  3. A case of impersonation and Passport Act was filed against him. In 2019, Lou Sang got bail and therefore he was let go and he set up new shell companies.

How did the IT Department nab Lou Sang on 11th August, 2020?

On 11th August, 2020, the Income Tax Department conducted searches in 21 locations in Delhi, Ghaziabad and Gurugram after getting “credible information” that few Chinese individuals and their Indian associates were involved in money laundering and hawala transactions through series of shell entities. Chinese national Luo Sang’s name emerged during these raids. He was nabbed from one of the 21 locations searched by the Department.

What is Hawala?

Hawala is an informal method of transferring money without any physical money actually moving. Hawala networks have been used since ancient times, and today are widely found among expats sending remittances home. It is a traditional system of transferring money, whereby the money is paid to an agent who then instructs an associate in the relevant country or area to pay the final recipient.

Modus Operandi of Hawala Operation

  1. According to the Central Board of Direct Taxes (CBDT), Lou Sang was using 8-10 bank accounts and represented fake Chinese companies in hawala operations worth Rs 300 crore.
  2. He was infusing cash of around Rs 3 crore through hawala on daily basis with the help of bank employees in Bandhan Bank and ICICI bank.
  3. Bank employees were also raided and it is suspected that the scam is worth over Rs 1000 crore.
  4. It is suspected that Lou Sang was running this scam from the last 3 years. The accused kept on changing his addresses at a regular time.
  5. Search action also revealed that on behalf of the Chinese individuals, more than 40 bank accounts were created in various dummy entities, entering into credits of more than Rs 1000 crores over time.
  6. A subsidiary of Chinese company and its related concerns had taken over Rs 100 crores bogus advances from shell entities for opening businesses of retail showrooms in India.
  7. Pieces of evidence of foreign hawala transactions involving Hong Kong and US dollars have also been found. The Chinese national also allegedly provided ‘money exchange’ services as well.
  8. Incriminating documents in respect of hawala transactions and laundering of money with the active involvement of bank employees and chartered accountants were found as a result of search action.

Fake Documents Recovered

  1. The Income Tax Department recovered two fake Aadhaar cards, a fake PAN card and a fake passport from Luo Sang’s possession.
  2. The first Aadhaar card was issued in the name of a Charlie Peng. The address given on the Aadhaar card belonged to Dwarka, Delhi. The second Aadhaar card was also in the name of Charlie Peng but the address given is of Manipur.
  3. The 40-year-old Chinese national also had an Indian passport issued in Guwahati.
  4. A PAN card was also recovered from his possession which carries the name of Charlie Peng.

Marriage to Indian girl for fake documents

Further, it also came to light that he illegally entered in India from Nepal in 2014 and had married an Indian girl earlier to make the process of his acquiring an Indian passport, easier. He also got an Aadhaar card and PAN card made in that name. His wife hailed from Lunglei in Mizoram. The investigating agency has recovered the wife’s passport as well.

Similar Cases arose a couple of weeks ago

Just a couple of days after 20 Indian soldiers were martyred during an hours-long brutal hand-to-hand combat in the Galwan Valley on the night of June 15, India had to brace itself for a spell of cyber-attacks from Chinese hacker groups.

The commercial tax officials in Bengaluru, Karnataka have found 60 GST registrations linked to a Chinese national from Wuhan. Chinese goods worth Rs 4 crore were seized from an undeclared warehouse here during a raid. A total of 25,446 Chinese made electronic and Fast Moving Consumer Goods were seized from the warehouse on Old Airport Road during the recent raids.

It was learnt that the Chinese national was operating the business from Wuhan City since January 2020 with the assistance of some of his agents or employees in Bengaluru.

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