Massive! International money laundering cartel busted; arrests in India, Hong Kong
The illicit scheme involved misdeclaring synthetic diamonds as natural ones, facilitating the remittance of foreign currency out of India. The investigation exposed a complex international cartel engaged in Trade-Based Money Laundering, resulting in arrests in both India and Hong Kong
FollowIn a noteworthy display of bilateral cooperation, Indian Customs and Hong Kong Customs have exposed a significant case of Trade-Based Money Laundering (TBML). The investigation revealed a complex scheme involving Hong Kong-based exporters and Indian importers located in Special Economic Zones (SEZ). The Directorate of Revenue Intelligence initiated the crackdown, exposing an international cartel engaged in illicit financial activities.
The case centred on a SEZ where synthetic diamonds were imported into India masquerading as natural diamonds to facilitate the remittance of foreign currency out of the country. The investigation disclosed a practice of misdeclaring cheap synthetic diamonds as natural ones, overvaluing them by more than 100 times. These diamonds were imported from Hong Kong-based firms to SEZs in India.
Furthermore, the probe uncovered instances where real diamonds were imported but later replaced with synthetic diamonds and smuggled out of the SEZ. The importing entity was also found to export jewellery studded with diamonds at significantly inflated values to Hong Kong and other countries. The investigation highlighted a discrepancy in the declared inflated value of imports, most of which was remitted out of the country, compared to the marginal remittances received for exports. This raised suspicions that the trade was a cover for money laundering.
The inflow of funds into the importing entity's bank account was traced through transactions by various dummy firms in India. Subsequently, the funds were transferred and laundered from the single bank account to overseas suppliers in Hong Kong, ostensibly for payment towards the import of diamonds. Evidence suggested that the mastermind behind this trade-based money laundering operation was based in Hong Kong.
The investigation led to the arrest of four individuals in India under the provisions of Section 104 of the Customs Act, 1962. Indian Customs issued Show Cause Notices for seized goods, involving Hong Kong-based entities, who, however, refused to respond to the Indian Customs.
Indian authorities, leveraging existing bilateral cooperation tools, communicated with Hong Kong Customs to inquire about the suspected firms based in Hong Kong. Last week, Hong Kong Customs conducted an enforcement operation, raiding eight premises across multiple areas, including residential and commercial units. Four individuals suspected to be connected with the case were arrested, and assets totalling $1 million were frozen. This action was a response to the enforcement actions taken by Indian Customs earlier.
The collaborative efforts resulting in arrests in both India and Hong Kong serve as a strong message to global criminal cartels that they cannot escape the law. This case is expected to act as a powerful deterrent against illicit financial activities on an international scale.
