Money Laundering and IT

Many Software Companies are Vehicles of Money Laundering

Software companies are mushrooming in India at a rocket speed. India has become a rich country of Techno-entrepreneurs. Many techies are getting handsome orders from US & European countries but the darker side of this silver lining is that many software companies There are some software companies, which do not really have great desire to attain excellence by creating new products are also the vehicles of money laundering. 

A few lines of programming commands  may be worth nothing, or everything, depending on one's point of view. It's quite tricky to assess the worth of the code. There is no physical movement involved which can be tracked by the Custom officials. It requires nothing to show the exports of software. 

Consider a criminal or a politically exposed person who has money stacked away in an obscure bank in Bahamas or Cayman Islands. Software companies have become a big boon for these profiles. The money which is considered to be worth nothing in Bahams and Cayman Islands as it yield nothing and can not be even spent was introduced in the legal channels.

Legal money has a huge spending capacity against the huge restrictions on the black money.

When a political leader or criminal or a launderer sets up two companies, one in India (Completing the EOU, SEZ, STP or EHTP formalities to avail complete tax exemption) and the other in the US.

Indian company gets his US company to place an order for software services with his Indian company. The US company pays for the service, which may be so silly that it can be done by e-mail, but who is to assess its real worth? With time, the relationship between the two companies grows. Orders get bigger.

Launderer then uses this money to pay himself a hefty salary, buy a Beamer and generally have a good time. 

Banks, from which a common person cannot withdraw money without being taxed, tagged and questioned,  will vie with each other to give the deposited money to the Indian software company at concessional rates of interest.

The Indian company gets a prestigious award for its export performance. It declares handsome dividends which are tax-free in the hands of the investors.

The investors are, of course, launderer, his shell companies, his family members and benami friends and associates. He laughs all the way to the bank where he now keeps what was once Black money, now laundered in pristine white!

This is the magic of technology !

Mayur S.Joshi*

Author is promoter of Indiaforensic Research Foundation and also the winner of the prestigious global ACFE award. Author can be reached at mayur@indiaforensic.com

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