Crackdown on shell companies used to dodge note ban

NEW DELHI: Over 550 people laundered nearly Rs. 3,900 crore through shell companies after the government banned high-denomination notes on November 8, the Serious Fraud Investigation Office (SFIO) told the Prime Minister’s Office on Friday that decided to set up a task force to track action taken against deviant shell companies.

The task force – to be co-chaired by the Revenue Secretary and Corporate Affairs Secretary – signals the centre’s intent to crack down on companies that do not conduct any operations but are used to launder money and evade taxes. The government will create a database of shell companies and their directors by leveraging technology, the first step towards shutting them down.

The Special Investigation Team on Black Money had told the government way back in 2015 that taking down these companies was going to be key to fighting black money.

There are about 15 lakh registered companies in India but only 6 lakh companies file their annual return. “This means that large number of these companies may be indulging in financial irregularities,” a government statement said.

It is a point that was reinforced when the SFIO conducted a small sample analysis of such companies after Prime Minister Narendra Modi announced the ban on Rs. 1,000 and Rs. 500 denomination currency notes. It turned that such companies deposited 1,238 crore cash during November-December 2016.

In all, the SFIO has detected attempts to launder 3,900 crore involving 550 people including 54 professionals, most of them chartered accountants who face disciplinary proceedings initiated by their regulator, the Institute of Chartered Accountants of India.

Criminal prosecution has also been launched against people running 49 shell companies suspected to have helped in tax evasion.