CHENNAI: An investigation by the Enforcement Directorate (ED) into a money-laundering scam where at least Rs 120 crore worth US dollars were sent to Hong Kong through multiple shady accounts with two Chennai banks has given the agency six of its 42 all-India Prevention of Money Laundering Act (PMLA) convictions till date.
While the first conviction was in 2019, the latest of the six was obtained by a special PMLA Chennai court in September 2024. A few more related cases are still at the trial stage.
The probe is significant for multiple reasons; firstly, ED got the convictions even before investigation of the predicate offences of forgery, impersonation and cheating were completed by the Greater Chennai Police and CBI. Secondly, one of those convicted by the PMLA court was not even an accused in the predicate offence booked by Chennai police.
During trial, ED not only proved money laundering, but produced evidence to also establish the charges of forgery, impersonation and cheating. These points passed the judicial test even in the Madras High Court, establishing PMLA as a standalone offence.
This led to the cases emerging as a case study across India and in meetings of the Financial Action Task Force (FATF), sources said.
The investigation began in 2016 when it was found that multiple shell companies in Chennai used fake bills of entries to show import of electronics to Chennai. Laundering was then done by making payments in US dollars to Hong Kong-based entities for these fake imports that never happened.
The payments were made through multiple current accounts in the Indian Bank’s Thousand Lights and Syndicate Bank’s Armenian Street branches. The accounts were opened using forged documents of intermediaries who were Hawala agents and name lenders with no financial wherewithal for such multi-crore international trade.
ED found that these accounts were controlled by handlers in-charge of the laundering; the Hong Kong bank accounts were also controlled from Chennai by a Hawala operator, who is among the seven convicted so far.
For instance, one of the eight Indian Bank accounts used to launder money was in the name of B Kannan, proprietor of the shell firm BK Electro Tool Products. However, the photo on the account opening form was of one Kavin Siddharth.
While Kannan’s photo was used to get an Import Export Code (IEC) for the business, the signature on the documents was not his.
It was found that both Kannan and Kavin, like the proprietors of all other shell firms, were financially poor and were working on a meagre commission to lend their names for the laundering exercise.
The eight accounts in Indian Bank were operated by Mani Anbazhagan, the son of former DMK minister Ko Si Mani. Anbazhagan was the convict whose name did not feature as an accused in the Chennai police’s FIR. During interrogation, Anbazhagan revealed that he was a silent partner in these firms.
A similar modus operandi was also used in the Syndicate Bank case, which ED initiated in 2017 based on a CBI probe into Rs 3,500 crore worth foreign exchange sent out through 60 accounts. ED’s probe showed both cases were interlinked; one of the accused hawala operators Liyakath Ali was convicted in both cases, and some shell companies used for laundering featured in both probes.
The probe was conducted by a four-member team led by then ED joint director P Manikkavel and deputy director M Rajasekar, while special public prosecutors N Ramesh and Rajnish Pathiyil argued the cases for the agency.
The facts also indicate that ED has only scraped the tip of the iceberg in this scam and has not yet identified the ultimate beneficiaries of the laundering. Only around Rs 18 crore of the proceeds have been confiscated. Sources said further investigation is under way.