Money Laundering through Hospitals

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Amit Retharekar
Amit Retharekar
Amit Retharekar is a banker by profession. He has extensively worked in co-operative banking sector in India for more than a decade. He is a Certified Anti Money Laundering Expert. He also is the Certified Trade Based Money Laundering Expert and has witnessed the walk through of this course hands on. He recommends this course for AML professionals to have a deeper understanding on TBML subject.

Today, even an apple a day cannot keep the Doctor away. Everyone of us, time and again had the need to pay visit to a Doctor. Generously (?) shelling out bucks to get treated/cured, we have often mumbled,” these guys are making BIG money”. Yes, they are but its a charge for their services, noble indeed.

Money Laundering through Hospitals

Interestingly, just a few days back; Narayana Hrudayalaya IPO subscribed over 8 times, in a first of its kind. Apollo already has presence across continents and is listed; additionally whole new crop of hospitals are sprawling across the nation. Swasth Bharat…!

As a general thumb rule, when the going gets big it might also get murkier. I have often wondered could there be a gimmick to route money through these medical care institutions and come clean, may be not?

Wait! I stumbled across this case of Lilavati Hospital (Yes, the one catering the ultra rich in the posh suburbs of Mumbai). I thought this may be a one off case, but then Vasan Eye Care; their “visionary” people have also been entangled with black money trails & money laundering inquiries.

This draws us to the pertinent question; can hospitals be used to launder money? Well, medical care is after all a business and like every other, it may also be used as a “noble” vehicle for conversion of ill-gotten money into legitimate.

I am particularly intrigued of the “Charitable” Trusts form of hospitals attached with medical colleges. Primarily since “donations” are received while admission to medical schools and they may be easily routed without suspicion. The Medical Council of India (MCI) chief being caught in the scandal of approving medical colleges further corroborates the fact; medical care institutions need more attention.

Money Laundering through Hospitals- Risk Management

Risk professionals; let’s give food for our brains:

  • Promoter integrity: Doctors are mere instruments in the hands of non medical management. I am sure everyone is aware, the managements of such hospitals are “HIGH” risk category customers and many a times PEP’s. EDD measures have to be substantive and consistent at all times.
  • Cashless medical facility: “Medi-claims”, which can used to dwindle money. Misuse of populist Govt schemes of low cost health insurance wherein unrelated charges are levied by hospitals to collect higher amounts of claims; with a portion of kick-backs to the approving authorities have come to light. Insured patients are not even aware.
  • Doctor-Pharma nexus: Evidently, pharma companies incentivize the medical care sector. On fulfillment of targets, compensations for the same are routed through different accounts to make it appear genuine. Complex structures are created to hide the real transactions.
  • Donations & Charity received: The charity amounts received in cash defeats trails and whereabouts of donors are clandestine. The tax benefits some hospitals offer to donors, makes this arrangements plough back amounts to original donors misusing the benefits given.
  • Capacity Utilization: The number of beds x revenue per patient/bed x number of days can be used a general indicator of revenues along with other peripheral services provided. In some cases, the credit turnover in accounts doesn’t seem to match with this logic. Evading the risk of tipping off, closer scrutiny is required in such cases.
  • Staff & Consultant Accounts: Most of these hospitals credit salaries to their staff in the same bank for convenience. In some cases, the amounts are transferred to unrelated persons, who are merely used as a front to book expenses. The concept of “Ghost” employees/consultants is prevalent in medical care institutions.
  • CSR misuse: The new Companies Act has stipulated CSR activities for corporations. The likelihood of medical entities directly or indirectly controlled by corporations and misused for CSR purposes is grave.
  • Medical tourism: Cost effective for foreigners to get medical attention in India; medical tourism can be an area that would be explored by launderers. Medical tourism would be the perfect disguise to receive funds back to India legitimately by using patients and almost avoiding any attention at all.

The medical industry in India has been growing at a double digit CAGR annually, exciting most investors and fund managers. But I am skeptical, since I have had experiences of auditing financial statements of medical institutions, the structures and revenue streams grow clockwise avoiding suspicion. Just another red flag, may be for many.

Ultimately, upholding the sanctity of this industry depends on their professionals. But as risk professionals, we need to pay close attention to this industry. The noble services they provide can cause of trouble for the economy.

Note: These are the personal opinions of the author. He can be reached at He urges readers to add value to this article by any personal experiences, articles or reports.

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