More than 20 shell companies in Bengaluru were covered by the Enforcement Directorate (ED) as officials searched several premises across the city since Saturday morning, as part of nationwide crackdown on shell companies. Some of the companies are said to belong to an Andhra Pradesh-based politician.
The ED officials have prepared a list of the shell companies functioning in the city.
“We will be examining their bank accounts, transaction details and other documents to check if they are shell companies. It is a time consuming process,” sources said.
In Bengaluru, the ED officials are questioning one G. Dhananjay Reddy, who was earlier accused of money laundering, as part of the countrywide searches.
“He is suspected to have taken loans from government banks using the name of shell firms. We will be examining many others like him too,” said an ED source.
Shell companies are those that are set up under the Companies Act, but do not carry out any business.
They are used to launder money or avoiding tax, or to cover up other activities. Most often they are export-import firms or trading corporations and they do not involve in any business, sources said.
The searches are being carried out under the provisions of the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA) to check instances of money laundering and illegal foreign exchange transactions.
The search by ED officials across the nation spanned over 100 locations in about 16 States.
Over 300 shell firms were searched in places, including Bengaluru, Delhi, Kolkata, Chandigarh, Chennai and Patna among others, sources said, adding that the government will invoke the Benami Transactions (Prohibition) Amendment Act for harsh action against those involved.
