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I-T to rope in Sebi for probing Hassan Ali hawala scam
March, 10th 2007

The income-tax department which has unravelled a hawala racket running into thousands of crore, will rope in the capital market regulator, Securities Exchange Board of India (Sebi), to further probe the matter. The I-T department has informed Sebi about the case. But Sebi sources said that they are yet to receive any communication from the department.

The I-T authorities suspect that a part of the money siphoned out of India may have come back as investment into the stock market. The I-T sleuths have stumbled upon this racket during a search carried out in Pune on stud farm owner Hassan Ali Khan Hassan Ali Khan who it suspects have played a pivotal role in transferring the funds.

The departments investigation into fund transfers through illegal channels in and out of India had led them to some Swiss bank accounts. Official sources said the investigation had also revealed that the hawala operations were done through multiple bank accounts under different names. The Enforcement Directorate will probe further into the matter alongwith IB. It is a multi agency probe and we have also informed Sebi, said an I-T department official.

According to him, Sebi will have a role to play if further investigation establishes the fact that the unaccounted funds were routed into India as FII investments. This, in turn, would hinge on the details that the Enforcement Directorate obtains on the Swiss bank accounts of the stud farm owner.

The I-T department conducted raids at Khans residence in Pune in early January this year. The director general investigation Mumbai SSN Murthy was then holding additional charge as DG Inv Pune. However, the department gathered evidence on Khans Swiss Bank accounts during their searches in Mumbai. The Swiss government reportedly froze the accounts after Indian investigating agencies submitted evidence about the transfer of Indian funds through hawala for investments in the stock market.

Top officials in the Central Board of Direct Taxes were in touch with the DG Investigation, Pune on Friday, seeking a detailed report on the probe. However, I-T officials here were tight-lipped.

The I-T department has already requested the Swiss bank authorities to freeze the account and according to reports the Swiss Bank has already frozen the account temporarily. Further action will be taken by the Swiss authorities after examining the merits of the Indian authorities requests. An offence in India may not be always construed an offence in Switzerland. But if the Indian authorities could prove that the money deposited in this account is part of an international money laundering syndicate, there is a very good chance that the Swiss Bank would co-operate with the Indian authorities. It is a long drawn out process which also involve issuing a Letter Rogatory to the Swiss authorities.

The I-T authorities suspect that the money siphoned off abroad has come back to India. They also suspect that money must have travelled through Dubai, Mauritius and the Swiss bank. At present the department is keeping a mum on the parties involved in the racket. The punter who owns a number of race horses could be a front man for big players who run the racket, the I-T sleuths suspect.

The I-T authorities have referred the matter to Fema authorities who are better placed to investigate cross-border economic offences. Official sources said the investigation had also revealed that the hawala operations were done through multiple bank accounts under different names.

The Enforcement Directorate will probe further into the matter alongwith IB. It is a multi agency probe and we have also informed Sebi, said an I-T department official.

According to him, Sebi will have a role to play if further investigation establishes the fact that the unaccounted funds were routed into India as FII investments. This, in turn, would hinge on the details that the Enforcement Directorate obtains on the Swiss bank accounts of the stud farm owner.

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