700 cases against Chinese companies suspected of economic disruption

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The Ministry of Corporate Affairs (MCA) has registered more than 700 cases across the country against companies with Chinese nationals as promoters and directors who have recorded “suspicious transactions” or “questionable credentials”. The move followed reports shared by the Home Office that companies were being “abused” for a variety of purposes, including “tax evasion” and “money laundering”, according to government insiders.

The cases were registered by the Registrar of Companies (RoC) at local police stations under various sections of Indian Penal Code and Information Technology Act. Maximum cases were recorded in Delhi, followed by Bangalore and Mumbai. “While about 300 cases have been registered in Delhi, more than 200 have been filed in Bengaluru and 34 in Mumbai,” said a government insider familiar with the development.

Following the information, MCA published a two-step action plan. “The first step was the review of the documents filed by the directors and the company and the identification of the fraudulent documents and the prima facie fraudulent activities of the company,” an official said. “In the second stage, RoC filed FIRs at the police stations where the companies were located and followed up on the matter,” the official said. The RC is required to complete the survey and submit reports to the ministry. “Each report must detail the fraudulent activities, the amount of money involved and other relevant findings, including non-compliances with Companies Act and LLP Act,” the official said. In addition to the MCA, law enforcement agencies such as the Directorate of Law Enforcement and the Department of Income Tax also investigate money laundering and suspected cheating. tax evasion, based on the information collected.

“It is suspected that the companies are being used as a vehicle for money laundering. Investigation is being undertaken to find the source and ultimate recipient of the money and whether there is a political or economic connection,” another said. responsible.

In one of the investigations, ED found that fintech companies had allegedly used equity received from overseas, mainly China, to provide loans at usurious interest rates to unemployed youths and sections through NBFC by making security deposits equivalent to the amounts of loans granted by NBFC to borrowers. On Wednesday, ED provisionally seized assets worth Rs 6.17 crore deposited in various accounts/trader IDs of various fintech companies/associated persons maintained with various banks/payment gateways, under the 2002 Act on the prevention of money laundering.

An ED insider said the accused along with Chinese nationals allegedly opened companies on behalf of various people for illegal transactions, issuing loans and increasing investments through mobile apps such as Cash Master, Krazy Rupee, Cashin , Rupee Menu, etc. incorporated during Covid-19 at common addresses through the active involvement of some Chinese nationals in collusion with Indian chartered accountants who assisted in the incorporation of the companies using KYC documents of young Indian nationals in need of money. They have been appointed directors/shareholders of these companies,” ED alleged in a statement Wednesday.

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