MONEY LAUNDERING IN INDIA

  • Recently, several prominent Indian names have been included in the Pandora Papers leak.
  • There are over 300 Indian names in the leak, including over 60 prominent ones.

Important points:

  • Pandora Papers are 11.9 million leaked files from 14 global corporate services firms which set up about 29,000 off-the-shelf companies and private trusts.
  • A trust can be described as a fiduciary arrangement where a third party, referred to as the trustee, holds assets on behalf of individuals or organisations that are to benefit from it.
  • A trust is not a separate legal entity, but its legal nature comes from the ‘trustee’. At times, the ‘settlor’ appoints a ‘protector’, who has the powers to supervise the trustee, and even remove the trustee and appoint a new one.
  • The Indian Trusts Act, 1882, gives legal basis to the concept of trusts. Indian laws recognise the trust as an obligation of the trustee to manage and use the assets settled in the trust for the benefit of ‘beneficiaries’. India also recognises offshore trusts.
  • An ‘off-the-shelf’ company or ready-made company is a pre-registered limited company, however, it has never been traded. An ‘off-the-shelf’ company is ready for immediate use and can be purchased after paying a certain cost for it.
  • The Pandora Papers reveal how trusts are used as a vehicle in conjunction with offshore companies set up for the sole purpose of holding investments and other assets by business families and ultra-rich individuals.
  • The trusts can be set up in known tax havens which offer relative tax advantages.
  • For Example: Samoa, Belize, Panama, and the British Virgin Islands.
  • They reveal how the rich set up complex multi-layered trust structures for estate planning, in jurisdictions which are loosely regulated for tax purposes, but characterised by air-tight secrecy laws.
  • Businesses have created a new normal after countries have been forced to tighten the laws on such offshore entities with rising concerns of money laundering, terrorism funding, and tax evasion.
  • The Panama and Paradise Papers dealt largely with offshore entities set up by individuals and corporations respectively.

SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT

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