Top 3 brokers face investigation for money laundering, fraudulent trading: Report

Several regulatory and enforcement agencies are investigating India’s top three brokers for potential money laundering and fraudulent trading activities totaling several thousands of crores of rupees, news agency PTI reported.

The three brokers were also accused of establishing links with PEPs (politically exposed individuals),and the involvement of a significant family member of a top political leader in a key industrial state is also being examined, PTI quoted officials as saying. The name of the brokers could not be revealed due to the nature of ongoing investigations.

The investigations against the three top brokers have been going on for 4-5 years on multiple fronts. They lead organisations with businesses in multiple segments of the capital markets and financial services sector, including brokerage, investment advisory services, portfolio management, asset management funds, and non-banking financial services.

The agencies and regulators involved in the investigations till now include the Securities and Exchange Board of India (Sebi), the Reserve Bank of India (RBI), and the Enforcement Directorate (ED), with the three now referring to bringing in the CBI due to the suspected involvement of PEPs, PTI quoted officials as saying.

Although capital market brokers have long been in radar for aiding money laundering, this can be termed as the first important instance of some of the top players in the brokerage and financial services sectors being exposed for the intricate web of financial market transactions, they use to conceal their activities, they said.

Examining complex financial and banking activities, transferring money to and from other tax havens, call data records, and social media interactions were all part of the investigations.

Additionally, requests for administrative assistance in tracking down fund transfers totaling thousands of crores of rupees were addressed to a number of foreign governments.

The affected parties have also objected to any information exchange, citing confidentiality obligations, despite the fact that some of these jurisdictions, including Switzerland, have already replied.

The three brokers were initially investigated for their role in a spot commodity exchange case, but they were quickly discovered to be engaged in large-scale money laundering activities, including for their brokerage and fund management clients, PTI quoted officials as saying.

The scope of the probe was broadened after a few politically connected individuals were found to be engaged.

In the majority of cases, it was Sebi that identified a possible money laundering element in these brokers' actions, and the problem was forwarded to other agencies and departments for further examination.

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