Wholesale Laundering

Wholesale laundering happens when seasoned chartered accountants and money market brokers bring together two kinds of people: one, with excess, unexplained cash and the other having a shortage of it.The latter  are small firms whose books show large `cash on hand’ but actually hold very little physical cash.These are companies which have spent their earnings and fund withdrawals from banks for personal uses, bribes, and commissions ­ expenses that are not reflected in their books of accounts.Though their books show `cash in hand’ they don’t really have the cash as it has been used in activities that is difficult to account for.They are the perfect match for people and businesses who are looking for avenues to salvage their hidden bills of  Rs500 and Rs1,000 these days. If the stakes are high, a few companies with sizeable ‘cash on hand’ in their balance-sheets, may even be acquired by those with large undeclared funds.Such deals would go on till December 31, ­ the dead line for exchanging and depositing Rs500 and Rs1,000 notes with banks.

Here’s how it works

STEP 1:

One looking to offload cash -let’s call it Firm A -gives the money to Firm B with cash-deficit. B deposits the money in its bank account. No questions are asked as it had earlier withdrawn cash from the bank or generated legitimate income.

STEP 2:

B issues a cheque in favour of A; in their books the fund transfer is shown as loan or may be advance against a property deal.

STEP 3:

Make no mistake ­ it’s a loan that has to be repaid. And the understanding is that it would be paid back after a decent interval.The repayment happens with A writing a cheque to B. The “loan principal” is “repaid” along with the charge on services that B provides.

STEP 4:

The transaction is complete when B simultaneously returns cash to A.