ED Sends Notices to 50 NRIs for Suspicious Activity in Bank Accounts: Report

As many as 50 Non-Resident Indians (NRIs) have been sent notices by the Enforcement Directorate (ED) in the last three months over suspicious overseas remittances, according to reports. They have been sent notices under the Prevention of Money Laundering Act.

The ED is investigating all suspicious overseas remittances and irregular fund movements by NRIs, who have also been told to explain the source of money, and the origin or point of remittance. In some cases, the agency has even ordered them to appear in person.

“There are cases where source of earning is unknown, more than permissible amount has been remitted, money has gone into trading of land, while round tripping is suspected in some transactions,” the Economic Times reported, citing an ED official.

“Some of the persons who moved money from NRO account to NRE account and subsequently transferred outside India have been called for questioning. Some NRIs have received substantial amounts as ‘gifts’ in their NRO accounts. These inflows have been red-flagged because the maximum a resident can transfer to a non-resident is $250,000 a year,” the report quoted a senior chartered accountant as saying.

An NRO or Non-Resident Ordinary account is meant for interest, stock gains, dividends and property sale proceeds. At most, $1 million can be repatriated through an NRO account in a financial year but there are no restrictions on Non-Resident External (NRE) accounts.

If money is sent to an NRO account based on fraudulent property or security documents or the NRE account is used to bring money to India that was sent through hawala, it will be considered a violation. A tax practitioner advising 15 NRIs who received the ED notices told the Economic Times that a tax official can only say if taxes were paid on such an amount but not verify the veracity of those. That onus lies with the bank.

With multi-million dollar scams emerging in India recently, the government has tried to become stricter about corruption in the banking system. After Kingfisher Airlines’ owner Vijay Mallya, and jewelers Nirav Modi and Mehul Choksi fled India, the finance ministry is also seeking passport details of those who want more than Rs 50 crore in loans.

Diamond trader Nirav Modi, accused in a Rs 11,400 crore scam involving the Punjab National Bank, had changed his status to NRI before the matter surfaced.