How Cobrapost carried out its money laundering sting

Corbrapost's second sting operation today alleged that irregularities in India's financial institutions is a systemic problem as 23 institutions, including private and public banks and insurance companies have been accused of money laundering.

"Operation Red Spider 2 establishes beyond doubt that money laundering is not confined to private banks, and is not an aberration, as is being made out in certain quarters in the wake of the first expose on March 14 in which HDFC Bank, ICICI Bank and Axis Bank were shown involved in money laundering; it is rather endemic overarching the entire banking system and insurance sector, without exception, however shocking it might be," the Cobrapost release said.

Here is how Corbrapost carried out its sting operation:

Taking an alias, Cobrapost Associate Editor Syed Masroor Hasan, posed as a relative of a fictitious politician. He made cold calls at dozens of bank branches and insurance companies. And the proposition was the same: A politician of stature wants to convert black money into white. Could the officials help?

"It didn't take much effort to pull the lid off the murky world of money laundering as the officials of these companies rolled out a red carpet for our Masroor Hasan who visited dozens and dozens of branches across the length and breadth of the country, including many major cities and state capitals, across all five zones," said Aniruddha Bahal, editor of digital magazine Cobrapost.

Aniruddha Bahal, editor Cobrapost. Pic: Arlene Chang/Firstpost

Aniruddha Bahal, editor Cobrapost. Pic: Arlene Chang/Firstpost

According to the press release, Hasan was never disappointed as no bank turned him down and almost every banker and insurer he met with was willing to help launder huge unaccounted cash the fictitious politician Masroor Hasan was representing.

How they help launder money

Cobrapost lists seven suggestions by all the banks and insurance companies to help launder black money.

• Accept huge amounts of unaccounted cash to invest it in insurance products, and sometimes in gold as well.

• Open an account to route the cash into various investment schemes of the bank or insurance arms.

• Do it even without the mandatory PAN card or adhering to KYC norms.

• Arrange forged PAN cards to facilitate investment of huge unaccounted cash.

• Split the money into tranches, below the reporting threshold, to get it into the banking system without being detected.

• Open multiple accounts in the names of any individuals, not necessarily drawn from family, and become joint account holders, to monitor the accounts and keep all the details and cheque books with ourselves.

• Insurance has emerged, whether with private or public sector insurers, as the most favorite tool to launder money, undetected.

"One interesting fact that emerged in our investigations is that some bankers and insurers suggested us to buy insurance products in whomsoever names we wanted and assign those instruments in our name, that is, our imagined minister, so that at the time of maturity we could harvest the returns. This is akin to holding a benami property where the owner of the property is not the one in whose name the property has been bought," said Bahal at the press conference.

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Updated Date: Dec 20, 2014 19:49:24 IST

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