New Delhi: Somewhere at a zonal office of the Enforcement Directorate (ED), a trained officer’s eyes lights up on spotting posts promoting gambling on social media. The officer discusses the posts with his superiors, goes on to create an online ID, and bets a small amount of money.
For the uninitiated, a ‘skin in the game’ approach was adopted by investigators to reach the bottom of the route of fund diversion used to launder syphoned off money of unsuspecting subscribers.
The tactic is mentioned in the India-specific mutual evaluation report released by the Financial Action Task Force (FATF) highlighting New Delhi’s improved performance in tackling money laundering and terrorist financing over the past five years.
Although neither the FATF nor the ED mentions how many cases were probed using this tactic, hard numbers suggest that nearly 50 percent of money laundering cases were identified in India after skimming publicly-available information such as in the above- mentioned case, in the past five years.
Apart from social media posts, news reports and other open sources have also contributed massively to the ED’s attempt to curb rerouting of illicit money in the country over the last five years.
In the 368-page Mutual Evaluation Report, the FATF documented that the particular case yielded results as the investigators found that money—transferred by the ED officer through payment gateways—was eventually routed through companies with non-existent businesses.
These companies were instead part of a larger syndicate of 56 companies controlled by common directors and executives to launder money, according to the FATF..
In its report, the global watchdog says India has largely complied with a set of recommendations to deal with money laundering and terror financing.
On the basis of compliance with its recommendations, the FATF categorises countries into four categories with ‘regular follow-up’ being the highest level followed by ‘enhanced follow-up’, ‘grey list’, and ‘black list’.
India is placed in the ‘regular follow up’ category, the fourth from G20 alongside France, Italy, and the UK. The ‘regular follow up’ categorisation means New Delhi has to submit a report on progress in dealing with shortcomings highlighted in September 2024 only after three years.
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Six-fold jump in cases, info from public dominant source
The FATF evaluation report states that the ED initiated investigation into 195 money laundering cases in the financial year 2018-19. Such cases shot up to 1,245 between 2022 and October 2023, a near six-fold jump in the number of cases.
Of these 195 cases, 84 emerged from open source information like the above mentioned case in 2018-19. This category again grew exponentially to 605 in the 2022-October 2023 period.
A near three-fold jump was observed in 2019-2, when it accounted for 249 out of the total 562 cases initiated by the ED in that period.
In the next financial year, such cases accounted for 447 of the total 981 cases. The theme continued the next year with open source information accounting for 548 out of 1,180 cases registered under the Prevention of Money Laundering Act (PMLA).
The FATF explained the process of initiating investigation based on information from open sources such as information from the general public, media reportage and information available on social media platforms.
Once a tip-off is received, ED officers deployed across 30 zonal and 18 sub-zonal branches verify the inputs with the Crime and Criminal Tracking Network and Systems (CCTNS) database and money laundering reports maintained by local enforcement agencies such as the police to take a call on cases that require initiation of investigation under the PMLA.
After open source information, referrals by the nodal officers appointed by various law enforcement agencies to coordinate with the ED contributed significantly to the number of money laundering cases initiated by the federal agency.
These nodal officers are involved in day-to-day operations within their agencies and inform the ED on the predicate offences, which can be taken up for PMLA investigation. They alert the ED of various aspects of these cases, including involvement of persons, location, magnitude of proceeds of crime involved, to streamline money laundering investigation.
The growing importance of these nodal officers is reflected in the number of proceedings initiated on their inputs in the last five years.
Such cases shot up from 78 in 2018-1 to 448 in 2021-22 and 396 from 2022 to October last year, an indicator of the improvement in coordination and information sharing among the local enforcement agencies through their nodal officers and the ED.
The number of cases registered after CCTNS direct monitoring has also improved. Consider these numbers: 182 cases between 2022 and October 2023, 18 in 2018-19, 65 in 2019-20, 38 in 2020-21, and 146 in 2021-22.
Noting the improvement in the ED’s functioning, the FATF says the Indian agency’s resources have increased by 50 percent since the start of review period in 2018, This, it adds, is expected to rise three times over the next five years to meet the requirements of expected volume and complexity of money laundering investigations and prosecutions.
‘Unique strategy, skin in the game’
Giving more details of the above-mentioned case, the FATF mentions how ED investigating officers themselves put in money through the routes suggested by gambling websites and platforms on social media.
Although the ED did not reveal the exact case in which the tactic was used, several officers suggested it to be a “unique” strategy to get to the “bottom of the pyramid” of scam.
The FATF report documents that after an ED zonal office received information about circulation of information related to gambling websites, its officer created the ID to deposit a small amount of money through the deposit link provided on promotional posts put up on social media.
Investigators through their engagement with others on social media found several others falling for the fraudulent advertisement. In the next step, they found the deposited money syphoned off to a company account. Probe revealed that the company used for diversion of funds had no active business.
An ED officer said that this investigation approach gives a “comprehensive picture” of the flow of money from payment gateway channels to different accounts.
“Analysis of KYC of those bank accounts lead the investigators to their individual owners and further scrutiny of documents by the Ministry of Corporate Affairs give investigators a full picture of how many companies they are directors of. This is a bit like having ‘skin in the game’,” an ED officer explained.
“In some cases, several individuals were found to be common directors and executives of multiple companies, more or less confirming the tactic of ‘rotating’ illegal money to launder it.”
However, a second officer asserted that not all gambling cases are dealt with this approach as the fraudsters increasingly have knowhow to avoid tracing done through a chain of documentary evidence.
“It’s a unique approach which is not a regular strategy to investigate gambling and illegal betting cases. Every case is analysed on the basis of facts that emerge in preliminary assessment before launching any special approach such as putting our own money into it,” the second ED officer asserted.
(Edited by Tony Rai)