• Tue. Sep 20th, 2022

An insider’s perspective on the seedy underside of Kolkata’s money laundering racket

ByChad J. Johnson

Aug 7, 2022


A shell company is a company that exists in name only and is used as a vehicle for shrewd financial maneuvering or a company that is kept dormant and activated for future use in another capacity.

Last week, when huge sums of cash were discovered at the residence of Arpita Mukherjee, actress and close aide to defiled TMC frontman Patha Chatterjee, investigators also uncovered traces of cash to more than 14 front companies, some of which were registered as Mukherjee Residential Belghora. address.

These shells – also known as “Jamakarchi” — businesses are used across India for money laundering – in simple terms, turning black money into white money.

Shell companies have an entire illicit industry to themselves. A person associated with this “industry” says that Kolkata is the hub of shell companies through which there was a constant flow of unaccounted money. “A front company is the best, almost legal, way to channel money. People have earned millions of rupees this way,” the person said.

News18 waded into the seedy underbelly of Kolkata’s shell company industry and spoke to insiders, who deal with such companies with regularity.

What is a shell company and how does it work?

A shell company is a company that exists in name only and is used as a vehicle for shrewd financial maneuvering or a company that is kept dormant and activated for future use in another capacity.

Such a company only exists on paper and has no office or employees. But, and this is a big but, the company may hold a bank account or passive investments, or may be the registered owner of assets such as intellectual property or ships.

The shell company culture started in Kolkata from the 1980s and has since flourished, insiders say.

News18 attempted to contact the shell company operators – many attempts later, a person who calls himself shell company agent in Mumbai but lives in Kolkata agreed to speak but strictly on condition of anonymity.

This person said News18 that millions of silver pass through Byzantine channels and change hands a dizzying number of times before being considered laundered – black to white, essentially.

“In 2011, India had almost 20 million front companies,” he said, “and then, strict regulation of the IT sector and other tough rules helped reduce that number.”

He claims that 5 lakh companies are still operating in Kolkata.

According to this “agent”, shell companies have three levels. “Suppose you want to launder Rs 5 crore, you will call me and tell me what you need. Then there is this frontline shell company, which is registered and meets all the standards,” he said. Explain.

He said this company collects the money and presents it as an investment or a loan, or “something like that”. “Your money is now ‘white’ and for that you will give me a 2 percent commission. Now the income tax officers only check up to the third level,” he said, “e.g. A, B and C started a shell company. IT asks ‘A’ about this money, ‘A’ says he got it from ‘B’. Asked, ‘B’ says he got the money from ‘C’.

Now, as to why Kolkata is considered a haven for shell companies, the agent explained, “You see, the commission in Kolkata for filing such shell companies is 2%. It is 10% in Bangalore and 8% in Delhi. This is why Kolkata is preferred.”

That said, the agent said the number of shell companies has been declining since 2012.

Asked about the volume of transactions, he replied: “Crores main khela hotha hain ma’am!”

All of the shell companies follow the fund transfer rules of the company and even hold annual general meetings, as was done in the Arpita Mukherjee case.

Strange how crores of rupees are legitimized by this system.

According to one businessman, who asked that his name not be mentioned, shell companies are now dying because of regulation but still, millions of rupees are funneled through this system.

“There’s another problem – there’s no set system that can show this to be criminal until IT or ED comes on the scene.”

A senior police officer said News18, “The offenses committed by front companies are mainly tax evasion and money laundering. Any case of money laundering or tax evasion is primarily cheating/fraud. It’s very minimal and not serious enough to attract serious punishment; moreover we do not have all the information, unlike the IT department, on these transactions.”

Taking advantage of this, shell companies have become a vehicle for money laundering.