The customs departments of India and Hong Kong have jointly busted a money-laundering network, where foreign currency was remitted out of India against import of cheap synthetic diamonds, the finance ministry said on Friday.
The racket involved Indian traders who were importing synthetic diamonds from Hong Kong by wrongly declaring them as real ones, it said. The two authorities have arrested four people each.
“Indian customs and Hong Kong customs have unearthed a major case of trade-based money laundering involving Hong Kong-based exporters and Indian importers located in (a) special economic zone in an exemplary case of bilateral cooperation and exchange of information,” a finance ministry statement said.
Earlier this year, the Directorate of Revenue Intelligence (DRI) detected a case where cheap synthetic diamonds were imported into India by overvaluing them more than 100 times, to remit foreign currency out of India. During the investigation, it was also found that the importing entity was exporting jewellery studded with diamonds at a very inflated value to Hong Kong and a few other countries, the ministry said.
“Interestingly, while most of the declared inflated value of the imports was remitted out of the country through banking channels, the remittances received for the exports was seen to be only marginal at around 0.2%, indicating that this trade has been a cover to launder money outside,” the statement said.
The investigation also indicated that the inflow of money into the importer’s bank account was facilitated through bank transactions by various dummy firms in India while transfer was from a single bank account to overseas suppliers in Hong Kong.
The mastermind of this trade-based money laundering was based in Hong Kong, it said. While India’s customs department arrested four people in India and issued show-cause notice over the seized goods, Hong Kong-based entities refused to respond and present themselves in front of Indian authorities, the ministry said.
The DRI, under the bilateral international cooperation tools, reached out to Hong Kong customs to inquire into the existence of the suspected Hong Kong-based firms, the ministry said.