ED raids dummy online gaming entities: Alleges Rs 4,000 cr funneled out

Online gaming companies are in focus for the wrong reasons. The Enforcement Directorate (ED), an agency mandated with the investigation of money laundering and violation of laws related to foreign exchange, swooped down on as many as 25 locations in five states and UTs to investigate alleged violations of Foreign Exchange Management Act (FEMA) by online gaming companies and websites.

The entities are based in Cyprus, Malta and Curacao (South Caribbean Sea).
The search and seizure operations took place in Delhi, Maharashtra, Gujarat, Madhya Pradesh and Andhra Pradesh. The raids were carried out on May 22 and 23.

ED said on Wednesday that these entities were registered in small island countries and were operating from Indian soil. Moreover, the companies were floated by persons with no link to online gaming business. According to the investigative agency, these entities were collecting funds and funneling it out of the country under the pretext of importing goods and services.

So far, the agency has been able to detect Rs 4,000 crore that has been routed out of India in this manner.
ED suggested that the design of the culprits was to create an elaborate web of companies to deceive the law keepers.
“Hundreds of companies have been opened by the key persons in the name of their employees for layering and sending remittances to the tune of ₹4,000 crore approximately in the guise of payments for import of goods and services,” said the statement from the agency.

To avoid detection the accused persons used remote-based servers and computers through remote access apps like Anydesk, Team Viewer etc.

“These online gaming companies or websites are registered in small island countries like Curacao, Malta and Cyprus. However, all of them are linked to Indian bank accounts opened in the name of proxy persons who have no links with online gaming activity. The amount collected from the public through gaming websites is then routed through multiple bank accounts and finally remitted out of India by mis-declaring the purpose of remittances against import of services and goods,” ED said in a statement on Wednesday.

Among those searched by ED were hawala operators identified as Ashish Kakkar, Neeraj Bedi, Arjun Ashwinbhai Adhikari, Abhijeet Khot and persons/entities associated with them.

“Several PAN cards, Aadhar cards used for creating such firms, mobiles used for operating bank accounts of these firms and office stamps were also found and seized. Key persons were found using international virtual mobile numbers for instant messaging apps like WhatsApp, Telegram, Signal etc. and using pseudo-names such as Pablo, John, Watson etc. for masking their actual identity,” the agency stated.

ED also recovered documents and devices to secure foreign outward remittances of thousands of crores collected from public through gaming websites. The accounts of fake firms were used for this purpose.

As many as 55 bank accounts of firms being used for layering and remitting income generated from online gaming.
While carrying out the raids, the sleuths seized Rs 19.55 lakh in cash and $2,695.

ED also said that it appeared that proceeds from horse racing were also being routed out, which is not disallowed under the FEMA provisions.