The high-level Special Investigation Team (SIT) probing black money in the country and abroad has recommended looking for red flags such as multiple directorships held by one person and several companies operating out of a single address. It has also asked the corporate affairs ministry to frame rules for disclosure on beneficial interest and ownership, as per a note issued on Tuesday.
SIT, which was created by the BJP-led government at the centre in May 2014 in its first cabinet meeting after coming to power, has said use of shell companies to provide accommodation entries to launder black money has been observed in a number of high profile cases investigated or under investigation in the recent past.
It has called for two-pronged measures to curb the problem- proactive detection of creation of shell companies through regular data mining and dissemination of information gathered to various law enforcement agencies for active surveillance; deterrent penal action against such persons.
SIT has said that the Serious Frauds Investigation Office (SFIO) under the Ministry of Company Affairs needs to mine the database for certain red flag indicators.
“These red flag indicators could be based on common DIN numbers in multiple companies, companies with same address, same contact numbers, use of only mobile numbers, sudden and unexpected change in turnover declared in returns, etc,” it said.
The team has also asked for sharing of information on such high risk companies with law enforcement agencies and if the investigation/assessment by tax authorities establishes a case of creating accommodation entries, the case should be referred to SFIO and it should also refer the matter to Enforcement Directorate for further action.
The SIT noted that in many cases of creation of shell companies, the shareholders or directors of such companies are persons of limited financial means like drivers, cooks or other employees of main persons who intend to launder black money. It has recommended the Ministry of Corporate Affairs to frame rules to cap such cases with mandatory disclosure norms for beneficial interest and ownership at the earliest.
The investigating team had also found that there are 2,627 persons holding directorship in more than 20 companies in violation of the new companies act. These directors are sitting with around 77,696 companies.
Moreover, it noted that a total of 345 addresses have at least 20 companies operating from the same address and the number of companies sharing their address with at least 19 more companies are 13,581.
It acknowledged that while there is no specific Act/Rule which debars companies from having the same address, it has called for greater vigilance while examining the operations of such firms.