LIJDLR

Shell Companies

SHADOW BANKS AND DIRTY MONEY: INVESTIGATING THE USE OF NBFCS IN MONEY LAUNDERING AND FINANCIAL CRIMES

Volume III Issue III /

SHADOW BANKS AND DIRTY MONEY: INVESTIGATING THE USE OF NBFCS IN MONEY LAUNDERING AND FINANCIAL CRIMES Sudiksha Dhungel, B.Com. LL. B (Hons), Institute of Legal Studies and Research, GLA University (India). Suyash Upadhyay, B. Com (Hons), Shri Ram College of Commerce, University of Delhi (India). Download Manuscript doi.org/10.70183/lijdlr.2025.v03.96 This paper examines how, despite their role in providing access to financial services, Non-Banking Financial Companies (NBFCs) have emerged as significant facilitators of money laundering in India. This is brought on by legal loopholes, lax enforcement of anti-money laundering regulations, and a lack of systemic openness. Using a qualitative doctrinal approach, augmented by a small amount of quantitative data, and by looking at actual instances of high-profile financial crimes like the PMC-HDIL fraud and the Chinese lending app scam, the paper dissects money laundering techniques like shell companies, round-tripping, hawala operations, and fake loans. The regulatory frameworks of banks and NBFCs are thoroughly compared, compliance with RBI and PMLA standards is assessed, and potential regulatory adjustments are delineated. The findings demonstrate that the NBFC sector is now more exposed due to inadequate monitoring, uneven enforcement of KYC/AML regulations, and a lack of agency cooperation. The study is limited, though, in that it only uses secondary sources; field interviews, direct data collecting, and access to internal compliance records are not included. The study comes to the conclusion that until India moves toward centralized risk intelligence and predictive, technology-integrated regulation, NBFCs will remain high-risk facilitators of illicit funding.

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ROUND TRIPPING UNDER THE GRAB OF OVERSEAS DIRECT INVESTMENT (ODI): A LEGAL AND REGULATORY ANALYSIS

Volume III Issue I /

ROUND TRIPPING UNDER THE GRAB OF OVERSEAS DIRECT INVESTMENT (ODI): A LEGAL AND REGULATORY ANALYSIS Vidushi Dubey, 10th Semester, B.A.LL.B Student at Amity Law School, Amity University, Uttar Pradesh Dr. Rajeev Kumar Singh, Assistant Professor at Amity Law School, Amity University, Uttar Pradesh Download Manuscript doi.org/10.70183/lijdlr.2024.v03.22 This research paper examines the phenomenon of round tripping under the guise of Overseas Direct Investment (ODI) from India, analyzing its legal and regulatory implications. Round tripping involves the circular movement of domestic funds that exit India and return disguised as foreign investment to exploit regulatory arbitrage opportunities and preferential treatment accorded to foreign capital. The paper scrutinizes the evolving regulatory framework under the Foreign Exchange Management Act, 1999, and related notifications that govern ODI. It evaluates landmark enforcement actions by the Enforcement Directorate and dissects high-profile case studies involving corporate entities. Through comparative analysis of international regulatory approaches from jurisdictions including the United States, European Union, and China, the paper identifies best practices for addressing round tripping concerns. Despite significant regulatory enhancements, persistent challenges include beneficial ownership transparency, valuation manipulation, and emerging digital pathways for round tripping. The research proposes comprehensive reforms including a unified regulatory framework, enhanced beneficial ownership disclosure requirements, blockchain-based transaction monitoring, and strengthened international cooperation mechanisms. The paper concludes that effective regulation requires balancing legitimate business expansion needs with robust safeguards against regulatory circumvention through a substance-over-form approach to cross-border investment structures. Type Information Research Paper LawFoyer International Journal of Doctrinal Legal Research, Volume III, Issue I, Page 482-513. Creative Commons Copyright This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. © Authors, 2024

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