The Indian Customs and its Hong Kong counterpart have unearthed a major case of Trade-Based Money Laundering (TBML) involving Hong Kong-based exporters and Indian importers with the arrest of eight persons. About $65 million was laundered by the syndicate through import of cheap synthetic diamonds falsely declared as natural diamonds.
The Directorate of Revenue Intelligence (DRI) had initially busted the racket involving the import of cheap synthetic diamonds to a Special Economic Zone (SEZ) in India for remitting foreign currency abroad.
According to the agency, investigations revealed that cheap synthetic diamonds were being mis-declared as natural diamonds, overvalued more than 100 times, and being imported from some firms based in Hong Kong to the SEZ in India.
The DRI also detected some instances of real diamonds being imported, replaced with synthetic diamonds, and smuggled outside the SEZ.
“The importing entity was also found to be exporting jewellery studded with diamonds at a very inflated value to Hong Kong and few other countries...while most of the declared inflated value of the imports was remitted out of the country through banking channels, the remittances received for the exports was seen to be only marginal at around 0.2%, indicating that this trade has been a cover to launder money outside,” it said.
Dummy firms
The inflow of money into the importing entity’s bank account took place through bank transactions by various dummy firms in India and then the said money was transferred or laundered from that single bank account to the overseas suppliers in Hong Kong on the pretext of payment towards import of “diamonds”. “Gathered evidence also indicate that the mastermind of this trade-based money laundering was based in Hong Kong,” said the agency.
Further investigations resulted in the arrest of four persons in India. The Indian Customs issued show-cause notices for the seized goods, wherein Hong Kong-based entities were also included. The overseas firms refused to respond and present themselves before the Indian Customs. “...in almost all the cases, offenders of TBML operate through front companies overseas in a bid to escape enforcement action in India,” said the agency.
The DRI, under the bilateral international cooperation tools and network, reached out to the Hong Kong Customs to inquire into the existence of the suspect firms. “Last week, the Hong Kong Customs undertook an enforcement operation unearthing large-scale transnational money laundering syndicate that had laundered about $65 million using diamond trade,” it said.
Raids in Hong Kong
During the operation, the Hong Kong Customs raided eight premises across multiple areas there, including four residential premises and four commercial units. It arrested four persons suspected to be connected with the case and has initiated the process to freeze assets worth about $1 million held by the arrestees.
The collaborative bust comes close on the heels of the recently concluded Global Conference of Cooperation in Enforcement Matters organised by the Indian Customs and the DRI.
The Hong Kong Customs has also seized natural diamonds weighing about 290 carats and over 1,000 synthetic diamonds. As it turned out, the Indian “buyer” had remitted funds into 13 bank accounts belonging to five firms in Hong Kong.
