FEMA AND MONEY LAUNDERING

Presented by: Sameer Mirani Sanjukta Sen Sanya Katyal Shreyasi Banerjee Shubham Chhabra S.S. Subramanya Sweta

INTRODUCTION
The Foreign Exchange Management Act (1999) or FEMA has been introduced as a replacement for earlier Foreign Exchange Regulation Act (FERA).  FEMA came into force on the 1st June, 2000  It consolidates and amends the law relating to foreign exchange  It facilitates external trade and payments  It promotes the orderly development and maintenance of foreign exchange market in India

security or property was owned or acquired when he/she was living outside India. along with the deals in foreign exchange and foreign security is restricted under FEMA  Deals in foreign exchange under the current accounts and capital accounts by an authorised person can be restricted under FEMA. based on public interest.MAIN FEATURES OF THE ACT Activities such as payments made to any person outside India or receipts from them.  People living in India will be permitted to carry out transactions in foreign exchange. foreign security or to own or hold immovable property abroad if the currency.  Exporters are needed to furnish their export details to RBI  . or when it was inherited to him/her by someone living outside India.

TO WHOM IS THE ACT APPLICABLE? The whole of India  All branches.  Broadly speaking FEMA covers three different types of categories and deals differently with them Person  Person resident in India  Person resident outside India .  Any contravention committed outside India by any person to whom this Act is applicable. offices and agencies outside India owned or controlled by a person resident in India.

Sri Lanka. Bangladesh. Iran. Nepal or Bhutan cannot purchase or transfer any kind of immovable property in India without taking permission of RBI Violations The Enforcement Directorate (ED) said that Sami had not taken approval of RBI to buy these properties  ED claimed that while taking loans to buy properties. any person. who is a citizen of Pakistan. China. Afghanistan. he had misled banks .SINGER ADNAN SAMI’S PROPERTIES CONFISCATED FOR VIOLATING FEMA   Adnan Sami had allegedly acquired eight flats and five car parking spaces located in Andheri and later gifted five flats and three parking slots to his wife by violating certain FEMA laws Under the FEMA regulations.

Penalty The Enforcement Directorate had confiscated the eight flats and the five car parking spaces of Adnan Sami and slapped a Rs 20 lakh fine on him In his defence  Sami had taken a stand before the FEMA adjudication authority that RBI had powers to grant ex-post-facto permission to acquire the properties  He said that he had taken loans from Axis bank to buy these properties and there was no question of foreign exchange violation .

He had also applied for Indian citizenship and his application was pending  He had got a PAN card and was paying income tax in India since last ten years.  Recently…  Adnan Sami has approached the Delhi high court seeking clearance to purchase property in the capital  In his petition. . Sami informed the high court he has been a resident of India for past 13 years and has even sung a World Cup Cricket song for the Indian team  The Act also recognizes the rights of 'person resident in India' and it is under this category that Sami claimed he is eligible to purchase property.

ED levies fine on True Axis for violating FEMA .

Even then.  Foreigners with business visas can purchase properties in the name of Indian entities registered with the registrar of companies and the local branch of RBI. . foreigners can buy land in India if they hold a business visa and have lived in the country for 182 days at a stretch in the previous financial year.FEMA SECTION 6(3) & SECTION 47  Under FEMA. they are not allowed to buy agricultural and plantation land.

 The . or FDI. Beyzer founded True Axis and infused capital in the firm as foreign direct investment. company and its directors accepted Rs 33.THE CASE  According to the directorate’s investigations. under the automatic route of RBI available for non-resident Indians.1 lakh from NRI account of a person in India as Foreign Direct Investment without permission of the government of India.

1 lakh from NRI account. and Section 47 of FEMA read with Reserve bank of India (Goa) directions. 2000. 33. Mr Valuilin Rashid. company and its directors were charged for accepting Rs.IMPACT  The three directors of the company. Mr Leonid Beyzer and Mr Pramod Walke were charged for violating Section 6(3) of FEMA 1999 read with notification no: 20/2000 RB dated May 3.  The .

. purchased agricultural properties and had brought in investment to the tune of Rs 2.  The company management was also charged for issuing fresh shares to Mr Rashid and Mr Beyzer even after the RBI had refused permission to form the company.  Both these foreign nationals had formed the company.29 Crores as FDI. They were also charged for not filing the required FC-GPR report within stipulated period of 30 days from the date of receipt of the amount of consideration.

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WHAT IS IT ? Legitimization of illegally obtained money to hide the true nature of the source. investments or transfers from one place ( or person ) to another.  .  Effected by passing it through legitimate business channels by means of bank deposits.

Mumbai Branch involved in a massive money laundering operation in 1995  Number of fictitious accounts were opened in the bank for depositing large currencies which were later remitted to Hong Kong. using the fraudulent documents covering legitimate imports  Account of M/s Chinubhai Patel & Co. Nariman Point.MONEY LAUNDERING THROUGH BANKS South Indian Bank Limited. was opened in February 1994 without following the RBI guidelines of obtaining photo of the account holder  .

387. Hong Kong using fraudulent documents.379. M/s R.Verification revealed that the account holder did not exist in the mentioned address of Vaishali Shopping Center.P.650 was remitted to Hong Kong in favour of M/s. International. International and M/s Deepee International which were all fictitious accounts were operating with the bank since 1992 resulting in a loss of foreign exchange worth $80 Million.  The Account was utilised for depositing a cash of Rs.000 and remittances amounting to US $ 12. Imports and Exports.048.M.  . R. M/s P.M.  Four more similar firms by the name of M/s Rakesh International.

.MODUS OPERANDI  Middlemen were employed to recruit persons : • Of small means for opening bank accounts in the names of fictitious firms. These deposits were utilized for making remittances. • For depositing cash or pay orders obtained from other banks. against (fraudulent) documents covering imports. • For maintaining proper liaison with bank officials. for depositing cash and pay orders. to ensure that the transactions were conducted smoothly.

All the bank papers. importers (who need foreign exchange to meet their requirements of underinvoiced imports). Packing lists.. Bills of Entry. were taken over in advance from those persons for withdrawal of foreign exchange remitted from the Indian banks to these accounts. viz. • For opening bank accounts in places like Hong Kong for receiving foreign exchange remittances from India. including signed cheque books. Customs duty paying documents to cover fictitious imports. exporters (who need foreign exchange for meeting their requirements of over-invoiced exports). • To sell foreign exchange so obtained in Hong Kong to gold smugglers. and others who need foreign currency for various purposes.• Specialised in preparing forged documents. . Invoices.

who have been absconding ever since it came to light that they are the real brains behind the racket.THE ACTIONS TAKEN Investigations conducted so far revealed that the main persons involved in this racket are Dinesh C.  .  Nearly 33 arrests have been made so far in this regard including those of the bank officials who were charged under the violation of the FERA Act. Bhuva and Hemant Barot.

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