The murky business of illegal chit funds means big money and there are many beneficiaries, including the police.

It is more lucrative to turn the other way when everybody gains.

As for the depositors who have lost their money, many are chary of revealing the source of their money and so prefer to keep quiet.

Adugodi case

The Adugodi police had arrested a couple and their son on the charge of cheating investors of around Rs. 50 lakh by operating an unregistered chit fund scheme. Nagaraj and Anusuyamma lured hundreds with their luxurious lifestyle but when the time came to make good their promise, they and their son Vikram Reddy vanished.

Many investors cursed their ill luck but decided against approaching the police fearing ‘unwanted’ attention. But, one subscriber, Ravindra, filed a complaint against the three alleging that they had duped him of Rs. 15 lakh.

The police arrested the family on the charge of cheating and criminal breach of trust but the three came out on bail soon. This was because neither the complainant nor the other victims came forward to give evidence, the police said.

“Investors fear that they would also be accused of money-laundering. We are sending notices to the complainant but he himself is missing,” a police official said.

“After the accused are arrested, they come out on bail in no time. And in vengeance, they refuse to return the investors’ money and decide to battle it out in court. The cases drag on for years, and the investors lose interest and fail to appear before the court,” he said.

Laborious procedures

A senior police officer from the Economic Offences wing explained why illegal chit funds thrive.

“Investigating economic offences is laborious as the police need to establish that the firm deals with illegal finances. Since illegal chit fund operators run their business primarily on trust, it is very difficult to get the documents to corroborate the offence,” he said.

He also pointed out that such business mushroom everywhere without advertising themselves and so it’s difficult to keep track of them.

Another senior police officer said that though the local police may be aware of illegal chit fund operators, many unfortunately “use” them to make a quick buck themselves.

“The police are empowered to take preventive measures with the local intelligence report, but they [condone] the business as it is a source of good income for them,” he added.

Though illegal chit fund operators can be booked under Chit Funds Act and other financial laws, the police usually slap cheating cases against them under the Indian Penal Code as filing the charge-sheet under financial laws involves ‘complicated’ procedures.

Admitting the menace, Joint Commissioner of Police S. Murugan said that the police personnel should keep tabs on such activities in their jurisdictions.

“We had proposed a financial intelligence unit in each division akin to local intelligence unit. It is pending before the State government,” he said.

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