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Prevention of Money Laundering Act 2002 (PMLA)

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Tag: Prevention of Money Laundering Act 2002 (PMLA)

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Cox & Kings CA found dead after turning into a witness in the multi crore scam

Cox & Kings CA found dead after turning into a witness in the multi crore scam

Mumbai Police is investigating the death of a chartered accountant who was employed with the travel firm Cox & Kings marred by allegations of financial irregularities.

What happened?

  • Sagar Suhas Deshpande, a Chartered Accountant, was found dead on October 12 near railway tracks in Titwala city of Maharashtra’s Thane district.
  • Deshpande resided with his parents and sister in Thane. The 38-year-old went missing from his home on October 11, a few days before he had to report to police officials over the case.
  • The CA’s family identified his body on October 17 and police began investigating his death on the same day.
  • Deshpande turned a witness in a money laundering case on Cox & Kings which is being investigated by the Enforcement Directorate (ED).
  • He had reportedly promised crucial documents to the Economic Offences Wing (EOW) and was reportedly summoned by the crime branch on October 13.

What is the role of the ED?

The Enforcement Directorate (ED) is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance, Government of India, which enforces the following laws:

  • Foreign Exchange Management Act,1999 (FEMA) – A Civil Law, with officers empowered to conduct investigations into suspected contraventions of the Foreign Exchange Laws and Regulations, adjudicate, contraventions, and impose penalties on those adjudged to have contravened the law. 
  • Prevention of Money Laundering Act, 2002 (PMLA) – A Criminal Law, with the officers empowered to conduct investigations to trace assets derived out of the proceeds of crime, to provisionally attach/ confiscate the same, and to arrest and prosecute the offenders found to be involved in Money Laundering.

What was the Cox & Kings scam?

  • The Cox & Kings came under the ED scanner during a probe into the fraud loans issued by Yes Bank.
  • During the investigation, the ED found that Cox & Kings used ‘fictitious customers’ to launder thousands of crores it borrowed from Yes Bank. The firm was found to be involved in the falsification of accounts, overstating the sales figures and understating the debt figures and fictitious transactions.
  • According to the ED, during investigation in the Yes Bank case, irregularities were noticed in relation to the loan sanctioned to Cox & Kings Group.
  • The Group had created multiple layers of onshore and offshore subsidiary across the globe through which the monies were siphoned off.
  • Malvern Travel Limited, UK submitted the forged bank statement of RBS Bank, UK, State Bank of India, UK and forged end used certificates of a UK-based statuary auditor to avail the loan of Rs 422 crore from Yes Bank.
  • An amount of Rs 3,642 crore is outstanding against Cox & Kings Group in debt-ridden Yes Bank. It includes Rs 563 crore loan in the name of Cox & Kings Ltd (CKL), India; Rs 1,012 crore in the name of Ezeego One Travel & Tours Ltd (EOTTL), India; Rs 422 crore in the name of Cox & Kings Financial Services Ltd (CKFSL), India; Rs 1152 crore in the name of Prometheon Enterprise Limited, UK and Rs 493 crore in the name of Malvern Travel Ltd, UK.
  • The agency also found that from 2015 to 2019 sales of Rs 3,908 crore was made to 15 non-existent and fictitious customers.
  • The majority of the collection shown in ledgers from Ezeego was not found in the bank statements.
  • In another incident, the probe agency claimed that Cox & Kings sold Holiday Break Education Limited, UK (HBEL), a subsidiary of their firm, for Rs 4,387 crores and instead of discharging the liability of the bank, they siphoned off the majority of the money.
  • From this siphoning, USD 15.34 million was transferred to Kuber Investment Mauritius Pvt Ltd which was controlled by Peter Kerker.

What was the role of the deceased in the Cox & Kings scam?

  • Sagar Suhas Deshpande, joined Cox and Kings in July 2010 and rose to become Manager Finance. The deceased Chartered Accountant, worked at Cox & Kings as a general manager up until a year ago.
  • The travel agency ended their operations and Deshpande had been unemployed since then.
  • He was one among the firm’s employees questioned by the Enforcement Directorate (ED) and the Economic Offences Wing of the Mumbai Police in connection with alleged siphoning of several thousands of crores of rupees borrowed from Yes Bank.
  • The deceased was not named as an accused in the case but was cooperating with the ED in their investigation into the multi-crore scam.
  • Deshpande was asked to appear before the police on October 13 and bring along the said documents.
  • However, he went missing just two days before he could do that and was later found dead.

Police said they had initially registered an accidental death report but they are now investigating whether it was a suicide or murder.

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ED conducted searches at 8 locations in Delhi Directors of several tour and travel companies and their CAs

ED conducted searches at 8 locations in Delhi Directors of several tour and travel companies and their CAs

Introduction

The Directorate of Enforcement is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India. It is part of the Department of Revenue, Ministry of Finance, Government of India.

The prime objective of the ED is the enforcement of two key Acts namely, the Foreign Exchange Management Act 1999 (FEMA) and the Prevention of Money Laundering Act 2002 (PMLA)

In concurrence with its objectives, the Enforcement Directorate (ED) had conducted searches at eight locations of tour and travel companies in Delhi and Ghaziabad in a case related to unauthorized foreign exchange dealings. On 11th July, 2020 the ED said that it has seized Rs 3.57 crore unaccounted cash in those raids.

What was uncovered at this raid?

  1. The probe under FEMA, 1999 were initiated against various entities including tour and travel companies on basis of specific inputs that they were involved in the unauthorised receipt of foreign remittances through payment gateways in the name of providing e-visa services to foreigners
  2. Officials in the central financial probe agency said the searches were conducted at eight different locations in Delhi and Ghaziabad, including residences and offices of directors of many tour and travel companies and their chartered accountants (CAs) on July 9, 2020 and seized unaccounted Indian currency of Rs. 3.57 Crores.
  3. Several incriminating documents and digital records were also recovered in the searches at these premises.
  4. Investigations conducted in the cases so far revealed that two such entities received foreign remittance of more than Rs 200 crore for processing Indian e-visa applications of foreigners without any authorisation from the Government of India.
  5. These entities were also involved in high value suspicious transactions.
  6. The probe also revealed that certain CAs played a key role in managing the affairs of these entities and were behind the suspicious transactions carried out by them.

The seizure of unaccounted cash of Rs 3.57 crores during the search operations has raised further suspicion about the operations of such entities and their blatant violation of the statutory requirements. Further investigation, in this case, is under progress.

The main functions of the ED are as under:-

  1. Investigate contraventions of the provisions of FEMA. Contraventions of FEMA are dealt with by way of adjudication by designated authorities of ED and penalties upto 3 times of the sum involved can be imposed
  2. Investigate offences of money laundering under the provisions of PMLA and to take actions of attachment and confiscation of property if the same is determined to be proceeds of crime derived from a Scheduled Offence under PMLA and to prosecute the persons involved in the offence of money laundering.
  3. Adjudicate Show Cause Notices issued under the repealed Foreign Exchange Regulation Act, 1973 (FERA) upto 31.5.2002 for the alleged contraventions of the Act which may result in imposition of penalties. Pursue prosecutions launched under FERA in the concerned courts.
  4. Processing cases of fugitive/s from India under Fugitive Economic Offenders Act, 2018. 
  5. Sponsor cases of preventive detention under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974(COFEPOSA) in regard to contraventions of FEMA
  6. Render cooperation to foreign countries in matters relating to money laundering and restitution of assets under the provisions of PMLA and to seek cooperation in such matters.

India’s income tax (IT) department and the Enforcement Directorate (ED) have over the past decade become busier than ever, but still struggle to see their cases through a court of law and secure effective convictions.

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