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Here's how banks, insurers help clients launder black money

Banks are accepting huge amounts of unaccounted cash to invest it in insurance products, and sometimes in gold as well. Forged PAN cards are being arranged to facilitate investment of huge unaccounted cash.

May 06, 2013 / 10:55 AM IST

Moneycontrol Bureau

Media website Cobrapost Monday presented evidence that the money laundering racket in this country was happening on a massive scale with at least 23 financial services companies, including state-owned banks, LIC and private insurers, being party to it.

Also read: LIC, SBI, pvt insurers part of money laundering

An extract from the Cobrapost release on how banks and insurers are helping their customers launder money:

*Accept huge amounts of unaccounted cash to invest it in insurance products, and sometimes in gold as well.

*Open an account to route the cash into various investment schemes of the bank or insurance arms.

*Do it even without the mandatory PAN card or adhering to KYC norms.

*Arrange forged PAN cards to facilitate investment of huge unaccounted cash.

*Split the money into tranches, below the reporting threshold, to get it into the banking system without being detected. 

*Use accounts of other customers to channelize the black money into the system for a fee.

*Get demand drafts made for the client either from their own banks or from other banks to facilitate investment without it showing up in the client’s account.

*Keep the identity of the investor secret.

*Open multiple accounts to invest the unaccounted cash directly in cash-investment schemes.

*Buy as many policies as you can to accommodate the huge unaccounted cash.

*Open an account in some extension branch a couple of months before the investment matures, credit the returns in that account and close it as soon as you withdraw all your money. The point: Extension branches are seldom audited.

*Advise the investor to remain invested for a certain number of years, say, 7 years, to keep the taxman at bay.

*Allot as many lockers as the client needs for safekeeping the illegitimate cash.

*Personally come to the residence of the client to take the black money deal forward and collect the cash, even bring along a counting machine.

*Use provisions like Form 61 to show the unaccounted cash as income from agriculture, making the investment of black money and returns thereof unquestionable.

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