India is considering a proposal to integrate its Indian Customs Electronic Commerce and Electronic Data Interchange Gateway (ICEGATE) with the country’s banking system to prevent trade-based and other types of money laundering as well as illegal foreign exchange remittances.

ICEGATE is the customs’ electronic repository of bills of entry, shipping bills and other import and export documents.

The move responds to several cases under investigation by India’s Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED), including the US$900 million outward foreign remittance scam involving Bank of Baroda and several other banks (AML Newsflow, 18 September 2015).

Benefits

The proposed integration of ICEGATE with the banking system aims to help banks check the validity of traders’ invoices before remitting money.

ICEGATE has details of all import and export invoices, so if it is integrated in the financial system, banks would be able to access the system.

Commenting on the proposed integration, managing director of consultancy firm Alvarez & Marsal, Dhruv Phophalia, said that to prevent remittance fraud and trade based money laundering, banks need to focus on developing data intelligence monitoring mechanisms and conduct adequate due diligence on significant counterparties to whom funds are being transferred.

Export advances

Apart from the Bank of Baroda case, the ED in Mumbai is probing three separate cases of illegal foreign remittance of over US$4.6 billion involving UCO Bank, HDFC Bank, ICICI Bank, IndusInd Bank, ING Vysya, YES Bank, Kotak Mahindra Bank and Bank of India.

In the UCO Bank case, the ED is inspecting suspected misuse of up to US$3.2 billion in export advances paid out by the bank.

Categories: Trade Based Financial crimes News