I-T raid reveals money laundering of crores through UCB

Ujjain : Raid conducted on local business firms by the income tax officials on Monday has revealed money laundering to the tune of cores of rupees through an Urban Cooperative Bank (UCB) here.

Tax men on Monday raided the cooperative firm of Manish Kothari at Vikrmaditya Cloth Market and his residence. Kothari is the president of Shri Vardhman Sakh Sahkari Sanstha Maryadit. The officials of Financial Intelligence Unit (FIU) Bhopal took the statement of accomplices and merchants who had used the UCB for evading tax and money laundering. Sources revealed that Kothari used his UCB to transfer more than Rs 300 crore in less than three years and was also taking percentage commission from other merchants for transferring the money.

The late night search conducted by the I-T officials revealed that UCB run by Kothari has been used for laundering crores of rupees with tax evasion by local merchants, who found the easy way. The UCB was used continuously by hundreds of local businessmen and merchants to evade tax amounting up to several lakhs. The bank had found a loop hole in the cheques issuing facility of commercial banks and was using it to evade the tax through commercial banks, payable to the government.

The UCB was used for high value transactions which are normally not found in cooperative societies, perhaps these high valued transaction may have came to regulators notice. As the UCB’s don’t have that much regulations issued by Reserve Bank of India (RBI), this certain UCB was using the cheque transfer facility of big banks to evade tax.

However, the implementation of core-banking system and the facility of multi-city banks have enabled many to go one step closer to mimicking banking functions by issuing cheques that serve as demand drafts. With the recent probe of the income tax department hundreds of local business men are falling in the net of I-T department for evading tax. Given that relative low-level of regulation compared to banks, depositors in connivance with a society could bring unaccounted money to make payments through the banking system. Co-operative societies are using their own accounts with commercial banks to acquire multi-city cheque books, which are treated as local cheques, irrespective of the city where they are deposited.

Multi-city cheques have been facilitated by the introduction of core-banking solution by banks, where all customer information is in a centralised database. In some cases, the cheques issued by co-operative credit societies are passed off as demand drafts. The executives at this UCB may or may not be aiding and abetting money laundering, there is a thin line between tax evasion and money laundering. In the case of the latter, the funds may not necessarily need to flow out of a country. There could be domestic money laundering, too. These transactions may have been carried out to evade tax, and because of this the income-tax I-T authority may have gotten involved in the investigation.

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