Cases of commercial fraud, including trade based money laundering (TBML), to the tune of over Rs 3,100 crore have been detected by Directorate of Revenue Intelligence (DRI) in the last fiscal--2013-14.
DRI, which acts as lead agency to check smuggling and commercial fraud, has detected 694 cases of commercial fraud involving customs duty evasion of Rs 3,112 crore in the last fiscal, official sources said.
These cases related to mis-declaration and under invoicing of imported and exported goods, misuse of government schemes to facilitate trade (like foreign or preferential trade agreement--FTA/PTA) and misuse of importer exporter code (IEC) and other exemptions to promote trade, and TBML, among others, they said.
An IEC, which is a unique ten digit number allotted by the Directorate General of Foreign Trade (DGFT), is a mandatory requirement for any importer or exporter.
DRI has issued show cause notices demanding customs duty of about Rs 2,600 crore from the fraudsters during 2013-14, besides initiating necessary legal action against them. It has received duty of Rs 1,246 crore during 2013-14, which ended in March, the sources said.
During 2012-13, DRI had detected 709 cases of commercial fraud--both in import and export--involving government's revenue of worth Rs 4,742 crore. It had recovered a duty of Rs 1,130 crore in 2012-13, they said.
DRI officials said they were taking necessary action to keep a check on trade based money laundering which has emerged as a new modus operandi by certain elements to illegally route proceeds of crime or black money.
Financial Action Task Force describes TBML as the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origins. In simpler terms, TBML is the process of transferring or moving money through trade transactions.
According to a Finance Ministry report on black money, the international trade system is subject to a wide range of risks and vulnerabilities, which provide unscrupulous entities the opportunity to launder money.
"A common technique used to circumvent currency restrictions is to 'over-invoice' imports or 'under-invoice' exports. The primary method used is the falsification of import and export invoices...
"Several cases of forgery of export promotion scheme scrips or licences, meant to claim duty exemption in imports have been detected, which highlight another aspect of black money generation and movement," the report had said.