Mumbai: The enforcement directorate (ED) on Monday arrested two officials of Axis Bank Ltd in Delhi and seized 3kg of gold, saying they were helping money launderers convert banned currency notes into gold, the ED said.
“Banks have been advised to stop activity in eleven accounts,” the ED added.
A spokesperson for Axis Bank said, “The bank is committed to following the highest standards of corporate governance and has zero tolerance towards any deviation on the part of any of its employees from the set model code of conduct. In this particular case, the bank has suspended the erring employees and is cooperating with the investigating agencies.”
According to ED officials, the conversion of banned currency notes involved individuals using old currency notes to buy gold at Rs45,000-50,000 per 10gm—almost 30-40% higher that the current market price of Rs30,000-32,000. The money was laundered through banking channels.
Money was deposited in accounts that belonged to shell or dummy companies. These firms then transferred the funds to another account which also belonged to a shell company. The money was finally given to bullion dealers to buy gold bars, and these were then handed over to the original purchasers.
“Shell companies were used for depositing Rs39 crore in 10 days, post-demonetisation in connivance with employees of Axis Bank. The bank employees were using unverified documents and were exchanging notes in bulk; amounting to several lakhs,” said a senior ED official.
The cash deposits were in instalments of Rs90-99 lakh to avoid detection and reporting to government agencies.
“In several instances more than one such cash deposit in a day were made in these accounts,” said the official.
The Narendra Modi government on the midnight of 8 November withdrew Rs500 and Rs1,000 currency notes in a bid to crack down on black money.
However, the banning of the currency notes led to a spurt in activity by hawala operators, money launderers and agents who were willing to aid tax evaders convert their old currency notes into legitimate assets for a commission.
On 22 November, Delhi police intercepted three people carrying Rs3.7 crore in old denomination notes. The ED action on Monday is based on an inquiry in the same matter. The ED on 30 November had conducted searches on hawala operators at 40 locations across India. They were allegedly helping individuals convert unaccounted-for old bank notes into legitimate currency.
Hawala is an alternative remittance channel that exists outside of the traditional banking system. It is a method of transferring money without any actual movement.
So far, the operators have been using accounts that fall under the ‘tax-exempt’ category such as agricultural income or tribal communities in north eastern regions.
As per media reports, the Jan Dhan accounts opened under the prime minister’s financial inclusion scheme are also being used to evade taxes and scrutiny.
A clutch of shell companies, which have a common set of promoters and whose directors are people of little or no means are being used to deposit larger sums of money without fear of scrutiny, according to ED officials.