ED probes scam linked to embezzlement fraud in Brazil

ED probes scam linked to embezzlement fraud in Brazil

The Enforcement Directorate (ED) last month launched an investigation against several Indian businessmen and companies for alleged money laundering linked to a provincial governor in Brazil, who is accused of embezzling funds worth $ 161 million, officials familiar with the development said.

Based on a request from Brazil, the central anti-money laundering agency last month froze 67 bank accounts belonging to Indian businessmen and companies, the officials added, asking not to be named.

In a letter by Enforcement Directorate to State Bank of India’s 11, Sansad Marg branch on July 13, the bank was asked to freeze the accounts of J K Tyre, Hamilton Housewares Pvt Ltd, K P Sanghvi & Sons and six more companies as “ED is investigating a case under the prevention of money laundering act (PMLA)”. It asked the bank not to allow any withdrawal from the accounts without its permission. HT has reviewed the ED’s letter to SBI. Similar letters were sent to other banks across India for freezing accounts of 58 more companies last month, officials cited above said.

Responding to a plea by advocate Vijay Aggarwal on behalf of Hamilton Housewares challenging the freezing of the account, ED counsel Amit Mahajan informed the Delhi high court on Thursday that the agency has acted on Brazil’s request as there is a mutual legal agreement between the countries. Enforcement Directorate, without sharing the name of Brazil’s provincial governor or investigation details from the South American nation, informed the high court the probe involves 53 countries and a sum of $161 million.

Aggarwal argued the company’s business has been affected by ED’s action and it is not able to perform day-to-day business. He argued the action has been taken when it is not even known whether a scheduled offence has been registered or not and that ED has not supplied to the company “reasons to believe” to freeze the bank account.

Aggarwal said there have been single payment of Rs 12.27 lakh in Hamilton about seven years ago for international transportation of goods and was reported to the Reserve Bank of India, which is said to be under investigation but the primary account, which has over Rs 45 crores, has been frozen. He pointed out that “due to the freezing of account, Hamilton has defaulted in payment of interest on its loans to the tune of Rs 14.73 lakh”. The company pleaded before the court that it be allowed to access its account so that business is not adversely affected.

“Company has received a letter from the office of ED. We are ascertaining the relevant details from them,” said Neha Tiwary, chief manager, corporate communications at J K Tyre in an email reply. KP Sanghvi & Sons didn’t respond to email queries.

Brazil has been plagued by corruption scandals since 2014 including the famous “Operation Car Wash” in which hundreds of politicians and businessmen are being investigated for money laundering and receiving kickbacks. Operation Car Wash began in 2014 as an investigation into allegations that executives at the state oil company Petrobras accepted bribes from construction firms in lieu of contracts.

India and Brazil signed a mutual legal agreement treaty (MLAT) in January this year for cooperation in criminal matters.

Sherbir Panag, an international legal expert on white-collar crimes, said: “It’s a welcome step that India is honouring its MLATs with other countries. It helps set a precedent that through such steps, India’s requests will also be reciprocated expeditiously. All of this notwithstanding, it’s time that guidelines are framed for freezing of accounts by investigating agencies. The freeze quantum should be on the basis of the proceed of crime amount and appropriate buffer, so that genuine business activity is not affected pending investigation. Blanket freezing, especially at a time when companies are struggling to get back to business due to the pandemic is unsustainable and unjustified”.