Pvt insurance firms ‘launder’black money

I-T dept says these companies are getting involved in murky transactions in a bid to capture market share

Source: Bangalore Mirror

Two days ago, when the Lokayukta sleuths raided a few officials, they found Bescom assistant executive engineer B N Rajanna paying insurance premiums worth Rs 15 lakh.

 This, however, did not tally with his salary. But the taxmen see a pattern. According to them, private insurance is emerging as a conduit for diverting black money.

“Private insurance companies are big-time into the business of pushing black money into the market, all because of cut-throat competition. In a bid to grab a sizeable chunk of the market share, these firms are entering into murky transactions,” said an I-T department official.

The official said such transactions do not happen with government-backed insurance companies as they insist on ‘know your customer’ kind of information, in which a potential customer is expected to provide all details about himself before he can buy an insurance policy.

He said a recent audit of the accounts of
two reputed companies had found a revenue-investment mismatch to the tune of crores of rupees.

Taxmen say a majority of such insurance transactions do not find a mention in the I-T returns, which amounts to tax evasion. “We have detected tax evasion worth Rs 50 crore in just two cases,” said the official.

The recent Lokayukta raid is a clear example. The Bescom AEE paid premiums worth Rs 15 lakh, which is disproportionate to his official income and the policies were not declared in the I-T returns.

As per the guidelines issued by Insurance Regulatory Development Authority (IRDA), the insurance watchdog, any remittance beyond Rs 50,000 should be done in cheque/DD. Any cheque/DD remittances become official.

THE MODUS OPERANDI

For example, a trader has Rs five lakh in black and wants to make it legal. He approaches a private insurance firm agent to invest in a three-year unit-linked policy.

Since the trader cannot issue a cheque/DD, the agent asks him to remit the amount in cash multiples of Rs 50,000 each. Yet, the trader gets a single policy for Rs five lakh. At the end of the term, he withdraws his deposit with interest, which is considered white.