BoB case: Govt to plug holes in import policy to prevent scams

At a time when the government is introducing multiple reforms to improve ‘ease of doing business’, it has emerged that some loopholes in India’s import policy had given enough leeway for money launderers to carry out more Bank of Baroda (BoB)-type forex scams.

Sources in the Finance Ministry told Millennium Post that while the Centre is committed to create a business-friendly environment for small enterprises, there are some relaxations that need to be reconsidered again as they have led to commercial frauds. “As per current import policy importers can make per transaction advance payment of up to $1,00,000 to import goods without furnishing the details of the bank account to which money is being credited, leaving agencies no option to verify the accounts and its holders’ credibility in advance,” said an official.

Explaining the advantage of furnishing account details in advance, the official said that in export policy the Finance Ministry has a procedure under which all exporters have to furnish details of the accounts from which they are going to receive the money and within six months the particular bank shares the details with the RBI. The official further said by this RBI keeps a check on whether the transactions were actually made and it also gives enough time to verify the exporter’s financial capability to conduct the trades.

The senior official said that the BoB scam has forced concerned investigating agencies to look into the lapses in the procedure laid down in the existing trade policy. “BoB scam may turn out to be a catalyst as the government, based on the recommendations of multiple concerned central agencies, has started mulling over some stringent clauses that could be added in import policy to counter the shell transactions,” said the official.

Explaining the lapses in import policy the official said that it was a deliberate move not to ask for account details from importers in advance as it was understood that if a person was giving their money to somebody he would import the goods or he may have got some kind of assurance. “However, it has now emerged that importers are making sham transactions,” the official added.

Earlier, a joint team of the ED and CBI unearthed a case of massive trade-based money laundering, where alleged overseas transfer of Rs 6,172 crore were made to multiple shell companies based in Hong Kong in the garb of advance payment for import of goods. The probing agencies described the BoB case as one of ‘trade-based money laundering’, where traders evaded customs duties and taxes to generate slush funds and importers formed fake business entities in other countries to claim duty drawbacks by over valuing the export value.