Crackdown On Gaming Websites, Rs 4,000 Crore Remittances Under Scanner

Delhi Police’s Economic Offences Wing has filed an FIR and has commenced an investigation against online gaming websites suspected of engaging in illegal financial activities. It is alleged that these platforms utilized shell companies to unlawfully remit approximately Rs 4,000 crore abroad. This enforcement action stems from a formal complaint lodged by the Enforcement Directorate (ED), which has been diligently probing potential instances of money laundering and breaches of the Foreign Exchange Management Act (FEMA). The focal point of the investigation pertains to purported hawala operators, including individuals such as Ashish Kakkar, a resident of Greater Kailash II, Shiv Dagar from Saket, Keshav Sood from Anand Niketan, and others who have been specifically identified as accused parties in the First Information Report (FIR).

Grounds on which FIR is filed

The funds amassed from the public via gaming websites were purportedly channeled through numerous bank accounts and subsequently transferred out of India by means of “mis-declaring the purpose of remittances,” falsely categorized as imports of services and goods. It is crucial to note that remittances stemming from income derived from activities such as racing, riding, or any other hobby are expressly prohibited under the provisions outlined in the Foreign Exchange Management Act (FEMA).

As revealed in the course of the investigation

The investigation into the underlying offense has uncovered that the criminal syndicates were managing a total of 188 bank accounts associated with 167 domestic entities, alongside 110 accounts linked to 105 foreign entities. Notably, these bank accounts were typically operational for a duration of 4-6 months before being subsequently closed, followed by the opening of new accounts.

It was contended by the officer that of the foreign entities, 46 are domiciled in China, 30 in Singapore, 18 in Hong Kong, seven in the United Arab Emirates, two in Malaysia, and one each in Thailand and Mauritius. Additionally, it has been revealed that numerous suspects associated with these online portals obtained hundreds of SIM cards through the use of forged documents.

The investigative agency initiated an inquiry subsequent to receiving information indicating that multiple online gaming companies registered abroad were unlawfully granting access to their gaming platforms to Indian residents. This was achieved through the utilization of virtual private networks (VPNs) or by concealing their true identity as foreign-based online gaming websites.

While these gaming websites were formally registered in foreign jurisdictions, they were discovered to be interconnected with Indian bank accounts. Through this operational strategy, significant sums of money, amounting to hundreds of crores, were garnered from the general public via gaming websites. Subsequently, the obtained funds were illicitly transferred out of India employing unlawful methods, including foreign outward remittances categorized as imports of services/goods, despite the absence of genuine business operations. A senior officer remarked that the accused individuals were implicated in extensive money laundering activities, alongside facilitating international hawala transfers to diverse global destinations.

Action after investigation

In the previous year, the Enforcement Directorate (ED) executed search operations at the residences of the accused individual, Kakkar, and several others. During these searches, the ED successfully recovered compelling documents and additional evidence indicating Kakkar’s involvement in the establishment and operation of multiple shell trading enterprises and fraudulent companies.

Authors – Ketan Joshi, Senior Associate and Aditi Arora, Associate