As delving continues for routing black money, a new route viz. the global depository receipt (GDR) is being used for bringing back suspected illicit funds stashed abroad suspect regulatory and other agencies. Laundering money via GDR route is been flagged by public companies in India.

 

The modus operandi in cases currently under scanner involves an intricate web of entities registered in various jurisdictions, including Switzerland, Hong Kong, Singapore, Mauritius, Dubai and Canada, for multi-layered transfer of funds before bringing them back to the country.   

 

Sources said that the Securities and Exchange Board of India (Sebi) has come across quite a few cases where the GDR route could have been used for round tripping of funds in the name of capital-raising activities of listed companies from abroad. The issue has also been highlighted by some other agencies while probing financial matters.

GDR is a popular financial instrument used by listed companies in India, as also in many other countries, to raise funds denominated mostly in US dollar or Euros. GDRs are typically bank certificates issued in more than one country for shares of a company which are held by a foreign branch of an international bank.

While shares trade on a domestic stock exchange, which happens to be in India in the present case, they can be offered for sale globally through the empanelled bank branches.

In the cases under scanner, it has been noticed that the companies have shown having raised funds without actually involving the real investors hinting possible routing of black money, a senior official said.

 

Besides, links have emerged in some cases between the entities linked to the issuer company and those from whose accounts such funds get transferred in the name of fictitious investors, the official added. Such practices also involve inflating the size of business transactions without making any real profits.

 

Besides money laundering via GDRs route, the regulatory and other agencies are already probing the suspected misuse of stock markets within India to evade taxes and launder money through trading in companies that mostly exist on paper. For further transfer of funds, purportedly raised through GDRs, the companies show fictitious business dealings and several bank accounts are used before the money reaches the final beneficiaries. Rounding tripping of funds has been a major route for those laundering black money.

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