Mumbai: Enforcement Directorate Investigates Parallel Trading Platform

The Enforcement Directorate (ED) has unearthed a parallel trading platform in India. While on the surface it resembles an international model, beneath it lies a network of activities involving shell companies, money laundering, and other illicit activities covered by the Prevention of Money Laundering Act (PMLA).

The complex strategy involves investors establishing dummy or shell companies in Dubai to engage in trading on foreign stock exchanges, sidestepping rules and regulations. If an investor has cash or cheque, then he would take cheque through a dummy or if cash send it through hawala.

Consequently, funds find their way into Dubai-based shell companies or dummy corporations. The invested money takes the form of US dollars in offshore accounts of investors, facilitating trade in foreign currencies and stocks. Investors are provided with a user ID and password to partake in international exchanges. Profits or losses are then routed back to depositors through shell companies or in cash.

Potential legal and ethical breach

This parallel trading platform has raised alarm due to its associations with black money, hawala, and shell companies. These practices prompt concerns regarding potential legal and ethical violations, encompassing issues like money laundering and tax evasion.

The ED has identified key players, including an individual suspected of pocketing significant commissions from this scheme. Interestingly, this person has a history linked to cryptocurrency scams, casting light on the broader challenge of digital fraud. ED sources reveal that this individual recently launched a credit cooperative society, attracting funds with monthly interest rates of 1per cent to 2 per cent.

Not the first time ED discovered such platforms

A few months ago, the ED discovered a similar trading platform. They stumbled upon numerous suspicious transactions within companies based in Dubai. These firms seemingly exist primarily to evade taxes, resulting in a plethora of transactions currently under scrutiny.

The ED's investigation has revealed that thousands of investors have been identified for channelling investments into Dubai-based shell companies via the hawala system. These investors are suspected of amassing substantial sums, whether through cash transactions facilitated by hawala or as deposits within these shell companies. Such actions potentially infringe upon the provisions outlined in the PMLA and established tax regulations.

In recent years, Dubai has emerged as a hub for digital assets and cryptocurrency trading, providing fertile ground for financial misconduct. During the operation of this parallel trading platform, the syndicate extended invitations to potential members of the financial criminal network, operating from various countries.

The worry is that these shady platforms may be used for terror funding.