Directorate of Revenue Intelligence

Commercial Frauds

Trade Based Money Laundering

DRI is alert to the possibility of trade based money laundering (TBML) being resorted to by certain elements. Financial Action Task Force describes TBML as the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origins. In simpler terms, TBML is the process of transferring / moving money through trade transactions. In practice, this can be achieved through the misrepresentation of the price, quantity or quality of imports or exports. The basic techniques of trade-based money laundering includes Over and Under-Invoicing of Goods and Services, Multiple Invoicing of Goods and Services, Over and Under-Shipments of Goods and Services, Falsely Described Goods and Services.


Mis-declaration

Mis-declaration is resorted to in description, country of origin, end-use, etc., with the intent to avoid payment of Customs duties including CVD, Anti Dumping duty, etc. and also to circumvent non-tariff barriers.


Under invoicing

Undervaluation is primarily effected by way of presenting forged or false documents to the Customs authorities, showing and supporting suppressed values. Another modus is by way of non-inclusion of allied cost components in the assessable value by making partially correct declarations at the time of filing bills of entry. Several cases involving undervaluation of items like Plants and Machinery, Consumer goods, Computer Parts and Accessories, Motor vehicle parts and accessories and Artificial Leather cloth, have been detected.


Misuse of End Use and Other Notifications:

Exemption Notifications are used as a tool by the Policy makers to provide relief or boost to specific sectors or groups. Most of these exemption notifications come with certain pre-conditions. These conditions seek to either restrict the eligibility or could be in the nature of fulfilment of certain post import requirements. Customs authorities, as a trade facilitation measure, generally rely on the declarations made by the importers. Therefore such cases are susceptible to mis-declaration whether in declaration of the eligibility criteria, description of goods or end-use or post import conditions.


Misuse of Foreign /Preferential Trade Agreement (FTA/PTA)

In order to foster trade relations and expand its market, India has entered into many bilateral and multilateral trade agreements with other countries. Such agreements accord the exporting country certain tariff and/or non-tariff benefits and therefore are also fraught with the possibility of misuse.


Misuse of Importer Exporter Code

The Importer Exporter Code number (IEC) is a unique ten digit number allotted by the Directorate General of Foreign Trade (DGFT) and is linked with the PAN number. It is mandatory for every importer/exporter to obtain an IEC. It enables easy identification of the importers. However, to avoid punitive action, bogus IECs are used to carry out dubious transactions. These are either obtained by misrepresentation of facts or by using genuine IECs fraudulently by third parties without the knowledge or consent of the actual IEC holder or by “lending” out for use, by the actual IEC holder to a third party.