Nationwide raids on shell firms

New Delhi: In one of its biggest operations, the Enforcement Directorate (ED) on Saturday conducted raids in more than 110 locations across the country, investigating about 300 shell companies.

Among the companies targeted in the raids are those connected to YSR Congress chief, Y.S. Jagan Mohan Reddy, Maharashtra’s former deputy chief minister Chhagan Bhujbal and tainted Noida bureaucrat Yadav Singh. Searches were also conducted in connection with the National Rural Health Mission (NRHM) scam in Uttar Pradesh. No one has been arrested, but sources said questioning of suspects is underway.

The crackdown on black money, in which almost the entire ED staff was involved, took place across 16 states and is part of the mandate given to investigating agencies under a Special Task Force (STF) created recently on the directions of the Prime Minister’s Office (PMO).

The PMO’s directive is to check illegal operations of companies and entities that “do not have any substantial business but are suspected of having been used for laundering ill-gotten money and facilitating bogus foreign transactions”.

The government had recently told Parliament that the income-tax department has identified 1,155 shell companies which were used to launder Rs 13,300 crore over three years, till March 2016.

On Saturday, ED sleuths swooped down at market places, business centres, residential premises and even houses put up on rent to hunt down allegedly dubious and suspicious firms.

“This is part of our concerted plan of action in the fight against black money and is one of our biggest operations where almost our entire staff was employed. There will be questionings now and more searches are possible. These raids may continue,” ED director Karnal Singh told this newspaper on the phone.

“Some of the companies were involved in major money laundering cases related to Chhagan Bhujbal, Y.S. Jagan Mohan Reddy, Yadav Singh, NRHM, AGS Infotech, Rajeshwar Exports etc. while some other entities were found to have been used for laundering demonetised currency during post-demonetisation period,” an ED release said.

“Searches have also been carried out in the cases of related professionals who are the brain behind creation and operation of such shell companies,” the ED said.

ED said it found a Mumbai-based operator who was running 700 shell companies with 20 dummy directors and had “converted Rs 46.7 crore for Chhagan Bhujbal”, the jailed ex-Maharashtra deputy CM.

Shell companies, known to be the backbone of India’s black economy, are set up to conceal the nature, origin, or destination of misappropriated funds by concealing the beneficiary/owner. The money shell companies hide is usually generated out of corruption, fraud or crime.

The ED is one of the members of the STF set up to target shell firms. The STF is co-chaired by the revenue and corporate affairs secretaries.

Officials said Saturday’s raids in major metros and cities, including Mumbai, Delhi, Kolkata, Bengaluru, Hyderabad, Ahmedabad, Panaji, Kochi, Lucknow, Patna, Jaipur, Jalandhar, Srinagar, Indore and Chandigarh, were carried out under the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA).