Indian and Hong Kong customs collaborated to dismantle a money-laundering network involving synthetic diamond imports, as disclosed by the finance ministry on December 29. The illicit scheme, discovered by the Directorate of Revenue Intelligence (DRI), revolved around Indian traders falsely portraying synthetic diamonds as genuine, exporting overpriced jewelry to Hong Kong. This activity manipulated import values to facilitate the unauthorized remittance of currency abroad. Investigations exposed a lack of proportional funds returning from exports, indicating an intricate money laundering setup. Despite Indian arrests, cooperation from Hong Kong entities was elusive, prompting joint inquiries into suspected businesses and revealing the mastermind's location in Hong Kong.
The finance ministry's statement emphasized the significant case of trade-based money laundering unearthed through exemplary bilateral cooperation between Indian and Hong Kong customs. Earlier in the year, the DRI identified the import of inexpensive synthetic diamonds into India, overvalued by more than 100 times, allowing the remittance of foreign currency. The investigation also uncovered the exporting entity inflating the value of diamond-studded jewelry to Hong Kong and other countries. Notably, the declared inflated value of imports was largely remitted abroad through banking channels, while remittances received for exports were minimal, around 0.2%, suggesting a cover for money laundering.
Further scrutiny revealed that money inflows into the importer's bank account were facilitated by bank transactions through various dummy firms in India, with transfers originating from a single bank account to overseas suppliers in Hong Kong. The mastermind behind this trade-based money laundering operation was identified in Hong Kong. While four individuals were arrested in India, facing show-cause notices for seized goods, Hong Kong-based entities refrained from cooperation. In response, the DRI, leveraging bilateral international cooperation tools, engaged with Hong Kong customs to probe suspected firms based in Hong Kong.