Intel agencies, RBI plan to integrate ICEGATE into banking system
India’s intelligence agencies and the Reserve Bank of India (RBI) are considering a proposal to integrate Indian Customs Electronic Commerce and Electronic Data Interchange Gateway (ICEGATE) and the banking system to prevent illegal forex remittances and money laundering.
ICEGATE is the customs electronic repository of bills of entry, shipping bills and other import-export documents.
The move comes after the Central Bureau of Investigation (CBI) and the Enforcement Directorate have booked a series of cases involving illegal forex remittance by banks, the latest being the Rs 6,000 crore outward foreign remittance scam involving Bank of Baroda and a clutch of other banks.
According to officials privy to the development, the integration of ICEGATE and the banking system will help banks check the genuineness of bills produced by importers and exporters before remitting money.
“So far in most of the remittance frauds we have found that exporters claim duty drawback on fake import bills. Since ICEGATE has details of each and every import and export invoice, if it is integrated with the banking system, the banks can check the genuineness of the bills produced by the importers and exporters at the bank for outward remittances,” said an official who is aware of the developments.
Experts feel that integration of ICEGATE and the banking system is a positive development and will aid in addressing the risks involving export/import transactions.
“One should ensure that all relevant information from ICEGATE is made available to banks and bank personnel are trained to incorporate and use this information in their risk monitoring processes,” said Dhruv Phophalia, managing director, of consultancy firm Alvarez & Marsal. He heads the firm’s global forensic and dispute services practice in India.
Phophalia also said that to prevent remittance fraud and trade based money laundering, banks need to focus on developing data intelligence monitoring mechanisms and conducting adequate due diligence on significant counter parties to whom funds are being transferred.
The CBI and ED are currently investigating 59 current accounts, which were opened in Bank of Baroda’s Ashok Vihar branch in New Delhi between May 13, 2014, and June 20, 2015. These accounts were used for outward foreign remittance transactions aggregating to $576 million (Rs 3,672.30 crore) for the purpose as ‘Advance remittance for imports’ to overseas parties numbering about 418, mainly based in Hong Kong. Around 10 per cent (Rs 343 crore) of the amount involved had been deposited in these accounts by way of cash and balance 90 per cent amount through RTGS and NEFT from 51 different banks.
Apart from this, the ED in Mumbai is probing three separate cases of illegal foreign remittance of over $4.6 billion (Rs30,000 crore) involving UCO Bank , HDFC Bank, ICICI Bank, IndusInd Bank, ING Vysya, YES Bank, Kotak Mahindra Bank and Bank of India. In case of UCO Bank the ED is probing into suspected misuse of up to $3.2 billion in export advances paid out by the bank.