Anticipating a rise in flow of black money ahead of upcoming Lok Sabha polls, financial intelligence agencies are keeping a strict watch on transactions in securities.
The Central Economic Intelligence Bureau (CEIB), lead agency under Finance Ministry to gather and disseminate intelligence related to financial crimes, has traced illegal flow of money through Private Placement Programme (PPP) which involves offering of securities to select individuals or groups, upto 50 in numbers, official sources said.
Besides, investment done through Participatory Notes or P-Notes, an instrument for overseas entities or individuals to invest in stock market here, is also being watched by the financial intelligence agency for any misuse, they said.
The PPP mode, which has emerged as a new method for converting black money into white, generally involves preferential allotment of securities contrary to Initial Public Offers (IPOs) for listing of firms, the sources said.
They said P-Notes are being misused to route black money for investment in stock market here.
A security is any stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease among others.
Sources said these means of securities and equity related investments can be misused by people to transfer black money which can then be used during polls to lure voters.
"Strict vigil is being maintained on all suspected financial deals to keep black money out of the system. It is an ongoing exercise. The efforts will be further strengthened keeping upcoming polls in mind," a senior CEIB official said.
The Bureau is coordinating with other agencies including Directorate of Revenue Intelligence (DRI), Enforcement Directorate (ED), Income Tax department and Financial Intelligence Unit (FIU) among others in this regard, the official said.
Last year, at least Rs 2,280 crore unaccounted income being allegedly routed through PPP was detected by economic intelligence sleuths.
The FIU, tasked with collecting, analysing and disseminating information related to dubious financial transactions, had last year detected at least 881 suspicious transaction reports (STRs) allegedly carrying black money being circulated through PPP.
An STR is a transaction of Rs 10 lakh and above believed to be proceeds of crimes including that from black money.
Investments into Indian shares through P-Notes has surged to the highest level at around Rs 1.73 lakh crore (about USD 28 billion) in February this year.
Meanwhile, market regulator Securities and Exchange Board of India (SEBI) has also enhanced its surveillance to thwart any attempts by listed companies and others to channelize illicit funds through capital markets or investment schemes for polls. It also tightened its anti-money laundering norms earlier this month.
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