The government's decision to scrap ₹500 and ₹1,000 notes in 2016 has led to the creation of a space for police acting as complainants in multiple cases of ‘cheating.’ The cash haul in Uttar Pradesh last week, where 16 people were arrested for allegedly storing scrapped ₹500 and ₹1,000 notes worth ₹96 crore is a case in point.
The tip-off was provided by the National Investigation Agency (NIA) and the accused were booked for cheating with the police as the complainant.
As per the Specified Bank Notes (Cessation of Liabilities) Act, 2017, a person can only be fined for storing old currency notes and it’s a non-cognisable offence.
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On November 8, 2016 Prime Minister Narendra Modi in a televised address to the nation had announced that the ₹500 and ₹1000 notes were no longer valid. He described the move as a measure to address black money hoarding and to curb terrorist activities.
Officials say they have identified a well-oiled ring that was offering to change the old currency notes for new ones for a hefty commission.
With no one to complain in such cases, the police are registering the case on their own.
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Anurag Arya, Superintendent of Police, Kanpur (East) where the arrests were made said one of the accused, Anand Khatri, a sari shop owner had stored the notes at his house and had been collecting them for the past six months. The money belonged to Khatri, Santosh Yadav and Mohit.
Asked who they were cheating as the money belonged to them, Mr. Arya said, “It is cheating because they were making people believe that they would get the notes exchanged when there was no way of doing it. They were basically fooling people that they could do it after charging a commission of 30-40% of the value of the old notes. The RBI doesn’t provide any such window.”
Provision for penalty
As per Section 7 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017, “whoever contravenes the provisions of section 5 shall be punishable with fine which may extend to ten thousand rupees or five times the amount of the face value of the bank notes involved in the contravention.”
Security agencies have picked up phone conversations of money launderers who were using terminologies like “receipt and revert, second channel, VP Slot and U-Turn” as various methods to launder money through the banking system.
“These code words are a mystery to us as well. The exchange of old currency notes through fraudulent means stopped in March 2017. The recent recoveries have all been cases of cheating,” said the official.
The Income Tax Department and State police officials said they had identified several such agents in Delhi, Haryana, Gujarat, Maharashtra, West Bengal, Andhra Pradesh and Karnataka who were contacting people who had hoarded cash.
Another official said these agents claimed to have a contact in the RBI who would assist them in getting new notes.
“There are several syndicates of cheats who are taking advantage of all those who had stored old currency notes. For a commission, they offer to change the old notes for new ones through some source they claim to have in RBI,” said an official.
He said that several cash hoarders had retained their stock in the hope that the government would allow a short window some day to exchange the old notes.
Another official said attempts were also being made through Temple Trusts for this purpose.
Terror link
On November 7 last year, the NIA arrested 10 people and recovered over ₹36 crore in old notes.
It claimed the seizures were made in connection with an ongoing probe in the J&K terror funding case where several second-rung separatists were arrested. A senior NIA official said they are yet to link the demonetised currency to the J&K terror funding case.
Explaining the money laundering method, an official said, “VP Slot probably means that two VPs of two banks will sit on their systems at the same half hour slot and then large sums of 100 cr etc will be transferred without being recorded on the database.”