Offshore betting firms listed selling groceries as biz activity to open bank accounts: FIU to Parliament Standing Committee

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The Financial Intelligence Unit (FIU) has informed the Parliamentary Standing Committee on Finance that reporting entities have flagged suspicious transactions linked to several offshore gaming entities.

The FIU informed the committee that majority of these companies are registered in Curaco, Malta, and Cyprus but use Indian Bank accounts. Majority of KYC documents of the offshore gaming firm bank accounts have listed the business activity as trading groceries. Groceries (Vegetables) are exempt from GST taxation and this may be the reason for the betting firms to choose groceries trading.

On trends in cybercrime, the Department of Revenue, Ministry of Finance identified four typologies which included use of crypto for money laundering, use of mule accounts, use of betting sites for money laundering, use of lending apps. While mule accounts were used mostly by domestic fraudsters in the remaining three instances offshore betting firms were involved.

The report noted that majority of mule accounts were opened through video KYC and when frauds were identified by banks the customers became unreachable. In instances where account holders could be identified they were not aware of the transactions using their name.

Betting and gambling transactions are not permitted under the Indian exchange control regime and the offshore gaming firms resort to shady transactions to route money from account to account and from India to outside the country.

Indian firms including industry body AIGF have often represented to the government  to control the menace of offshore gaming firms which flout laws and compete with legal compliant gaming entities.

In the related news, the Finance Ministry is proposing to bring offshore gaming firms to mandatorily register under the country’s GST Law. The GST Law amendments are in the backdrop of the GST Council’s approval to impose 28% tax rate uniformly across online gaming, casinos, and horse racing.

GST Council is meeting tomorrow to approve the proposed amendments and provide clarification on the implementation aspects of 28% tax rate.