India’s demonetisation order may increase interest in trade-based financial crime

India’s surprise announcement of the withdrawal of high-value 500 and 1,000 rupee notes from circulation may increase the pressure on money launderers and those who investigate financial crime to look more closely at trade-based money laundering (TBML) as an alternative way to conceal so-called black money.

Earlier this month India’s population was given just 50 days to swap 500 and 1,000 rupee notes for newly printed 500 and 2,000 rupee notes.

Black money

The demonetisation was the latest move in prime-minister Narendra Modi’s efforts to try and stamp out tax avoidance across India.

It was justified as a move designed to fight corruption and target people who have been avoiding taxes by stockpiling cash, known in India as black money.

But the move may encourage such people to look at alternative ways, including trade-based financial crime, to conceal black money.

Under pressure

This could put pressure on the Supreme Court-appointed Special Investigation Team (SIT), established in July 2011 to specifically focus on illicit financial flows and trade-based financial crime. SIT has repeatedly flagged TBML as a well-used mechanism for channelling black money out of India.

In one of its reports, SIT recommended that there should be an institutional mechanism for examining mismatches between Indian export and import data with corresponding data from other countries.

It has also recommended a system for checking commodity prices of imports and exports against prevailing international market prices.



Categories: Trade Based Financial crimes News