A collaborative effort between Indian and Hong Kong customs successfully disrupted a money-laundering network connected to synthetic diamond imports, the finance ministry revealed on December 29. The illicit operation, unearthed by the Directorate of Revenue Intelligence (DRI), centered on Indian traders falsely presenting synthetic diamonds as authentic, exporting overpriced jewelry to Hong Kong. This deceptive practice manipulated import values, enabling the unauthorized transfer of currency overseas. Investigations exposed a discrepancy in the funds returning from exports, indicating a sophisticated money laundering setup. Despite arrests in India, cooperation from Hong Kong entities was limited, leading to joint inquiries into suspected businesses and the identification of the mastermind’s location in Hong Kong.
The finance ministry underscored the significance of this case of trade-based money laundering, highlighting the commendable bilateral cooperation between Indian and Hong Kong customs. Earlier in the year, the DRI detected the import of low-cost synthetic diamonds into India, vastly overvalued, facilitating the outflow of foreign currency. The investigation further revealed that the exporting entity inflated the value of diamond-studded jewelry destined for Hong Kong and other nations. Notably, the inflated import values were predominantly remitted abroad through banking channels, while remittances received for exports were minimal, at approximately 0.2%, signaling a cover-up for money laundering activities.
Upon closer examination, it was found that funds entering the importer’s bank account were channeled through transactions involving various fictitious firms in India. These transfers originated from a singular bank account and were directed to overseas suppliers in Hong Kong. The orchestrator of this trade-based money laundering operation was traced to Hong Kong. While four individuals faced arrests in India and received show-cause notices for seized goods, cooperation from entities based in Hong Kong was limited. In response, the DRI, utilizing bilateral international cooperation mechanisms, engaged with Hong Kong customs to investigate suspected firms operating in Hong Kong.
