Round tripping black money as `foreign funds`

Discussion in 'Economy & Infrastructure' started by parijataka, Aug 31, 2013.

  1. parijataka

    parijataka Senior Member Senior Member

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    How 3 European banks helped bring back black money as foreign funds

    At least three large European banks’ dealings with Indian companies and individuals are being probed for alleged round-tripping of funds by using certain multi-layered transactions in violation of regulator Sebi norms.

    It is suspected that some portfolio managers at these banks, which have significant presence in Indian financial markets, could have helped their Indian clients to route their money back into India in disguise of foreign funds through use of investment vehicles across various jurisdictions. The regulator fears that some promoters might also have been involved in such practices to boost share prices of their companies by showing a strong FII interest, a senior official said.

    Sebi is coordinating with other regulators and agencies in India and abroad as part of investigations into this case, where some well-known companies and industrialists are also suspected to be involved, the official added.

    Two of these three banks are from Switzerland and one is from the UK, sources said, while adding that they might not be involved directly and it could be the case that their employees were dealing with the clients directly without keeping the banks in the loop.

    Still, the banks could face action on the negligence ground if allegations of wrongdoing come true, a senior official said, while refusing to divulge the identity of the banks and their Indian clients.

    Among others, Sebi is looking into the possible use of Protected Cell Companies (PCCs) from places like Mauritius, British Virgin Islands, Cayman Islands and Seychelles for alleged round-tripping of funds back into the capital market in the form of foreign institutional investors (FIIs) and overseas venture capital money.

    In 2010, Sebi had barred PCCs to invest in Indian markets through FII (Foreign Institutional Investor) route after it came across instances where certain Indians had used these entities to route their money back into markets as FII funds.

    However, the regulator fears that funds structured as PCCs, which are legal entities in many jurisdictions, might be looking at a re-entry into Indian markets through routes like Foreign Venture Capital Funds and other avenues for the purpose of round-tripping of funds.

    PCCs are specially designed entities that might comprise of various cells, having funds of various investors, in such a manner that there is legal segregation and protection of assets and liabilities for each cell. Also, the insolvency of one cell does not affect the business of the entire PCC or that of the other cells. Besides tax-related benefits for being considered as a single entity despite having various cells, foreign banks have also been found in the past of hard-selling these schemes to their wealthy clients for reasons like protection of identity.
     
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  3. t_co

    t_co Senior Member Senior Member

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    This is par for the course in East Asia (HK <--> China; Singapore <---> ASEAN) - not sure why India is clamping down on it.
     
  4. anoop_mig25

    anoop_mig25 Senior Member Senior Member

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    I donot understand why doesnt goi makes iteasy for those who have to get investment directly into india instead of taking this round the word trip.

    off topic i bet such money would be invested in real-estate.
     
  5. t_co

    t_co Senior Member Senior Member

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    Even real estate investment would help at this point. The CAD is not going to fall on its own...
     
  6. Yusuf

    Yusuf GUARDIAN Administrator

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    Its black money trail they are after. I kind of feel a pragmatic approach will be to allow the money to come in as it is we are facing forex crunch.
     
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  7. pankaj nema

    pankaj nema Senior Member Senior Member

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    In the Current scenario the Colour of Money has NO role to play

    Whether it is Black or white we need several billions of US dollars coming in to the country

    All rules will be set aside for a while
     
  8. pmaitra

    pmaitra Moderator Moderator

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    Why do people resort to keeping money in Swiss Banks?
    To prevent theft by Reserve Bank if India.

    It is about time we de-criminalized this so called "black-money."
     
  9. Patriot

    Patriot Senior Member Senior Member

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    It will be like approval stamp on the tax theft of thusands of crore.
     
  10. pmaitra

    pmaitra Moderator Moderator

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    Well the Income Tax Department is the greatest thief, or perhaps the second greatest after the Reserve Bank. It is like the pot-kettle story.
     
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  11. Patriot

    Patriot Senior Member Senior Member

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    Whatever, but the tax theft & black to white conversion is against the law and should not be justified in any manner.
     
  12. indiatester

    indiatester Regular Member

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    I have not been really happy with the way my tax rupees are spent. GoI has to reward its tax payers in on way or the other. Right now, most of us feel like the kid whose candy has been taken away to be given to someone else.

    Ya... I do know that is necessary and all the crap, but the feeling remains.
     
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  13. pmaitra

    pmaitra Moderator Moderator

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    Have you always gotten your tax return back? If yes, then you are very lucky. It has not been the case with me. The people of the country are in a situation that they are trying to save their money from being laundered by the various government institutions. With the free all that the rupee is in, I am sure people are hoarding gold, because the paper currency is worth little more than nothing at the moment.
     
  14. Ray

    Ray The Chairman Defence Professionals Moderator

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    Big Fish with clout may get netted.
     
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