These Kolkata companies exist only to turn black money into white - Sources
17.02.2017 : With the Prime Minister’s Office *setting up* a *task force* late last week to *monitor action against deviant shell companies* after the February 1 Budget *tightened rules* against such entities, *Kolkata* may well *bear the brunt* of the *clampdown* The *city tops* the *search for most companies registered* at the *same address* This is the *location* that *heads* the list — _9/12, Lal Bazar Street_ with *315 companies* It just happens to be the *address* of the *city’s police headquarters as well* Registered Companies, an *analytics firm* specialising in corporate due diligence, *crunched* through *data* from the *Ministry of Corporate Affairs* and *found* that *1,410 companies* are *registered* in *different blocks* of the 9/12 Lal Bazar Street area *with 84 of them based in Room No. 10 in one block* The *area* is a *warren of chartered accountants’ offices* with *most of the companies* being *private limited* ones *engaged* in *wholesale trading* and *real estate* A little over *11,281 firms* are *registered at 148 addresses* an *average* of *76 each* *_Seven of the top 10 most common addresses are in Kolkata_* Apart from the one above, these are *52* Weston Street; 5, Gorky Terrace; *266* Dakshindari Road; *91* Shakespeare Sarani, and 4/A, Palit Street.
To be sure, there is *no limit on companies* that can be *registered at the same address* Consultants typically house the *registered offices of companies* for which they *handle compliances* a practice *common in Singapore* and *Mauritius* as well. A *company secretary firm* in *Singapore* will be *home* to the *registered offices of hundreds of companies* typically *called ‘letter box companies’* But a *corporate affairs ministry* official said many of them *exist only to turn black into white*
*_“Some of these are surely shell companies — created for laundering of unaccounted cash_* the person said. *Some* may also be *incorporated* for the *purpose* of *selling off* at a later stage to parties who *want to acquire up-and-running firms rather than incorporate* new ones. The *ministry, Serious Fraud Investigation Office* and *income-tax department* are *aware* of these practices and *action* is *being taken* Most of these *companies* typically have *small paid-up capital* and *high general reserves* The *system* involves *seasoned accountants* and *money market brokers* bringing *together two sets* of people — those with *unaccounted cash* and those *needing it* The *shell companies belong* to the *latter group* and have *big amounts as ‘cash on hand’* but actually *hold little* of it as it’s been *used in ways* that *can’t be accounted* for. They have *mostly spent* their *earnings and fund withdrawals* from banks for *personal use, bribes and commissions*
*Kolkata* has been *very notorious for shell companies* being *used for money laundering* especially *penny stocks* being *used to create long-term capital gains* that are *exempt from tax* a *loophole* that was *plugged in this year’s Budget* As a natural corollary, *email IDs* are *also common* for many companies. For instance, “investor@srsr.in" is the *corporate email ID for 213 companies* This address, “group.dsc.group@gmail.com", is the *director’s email ID* at *206 companies* Of about *1.5 million registered companies, only 600,000 file annual returns* the PMO said. Among the *non-Kolkata addresses* a *Connaught Place* address is the *third most common with 311 companies* A *Jubilee Hills* Road address in *Hyderabad* is the *sixth most common address with 244* (largely agro) companies registered. Such *proliferation* makes it *hard* to *trace ownership* This could all be *easily tackled* through a *mandatory requirement* of *declaration of natural persons* And, of course, if a *company wrongly declares* a natural person, the *benami law* is there to *tackle* such wrong declarations.
There is a *global trend* to *find* the *natural persons* behind a corporate. This is the concept of *‘ultimate beneficial owner’* which is *behind Prevention of Money Laundering Act regulations* as well as *US Foreign Account Tax Compliance Act regulations* It is important, *no matter what regulation ensures* this, to ensure that the *identity of natural persons* behind a company be established. The PMO said *harsh penalties* will *meted out to deviant shell companies* including *freezing of bank accounts, striking off the names of dormant companies* and *invocation of Benami Transactions (Prohibition) Amendment Act, 2016*