Three top brokers face multiple probes including for money laundering, fraudulent trades

Three top brokers of the country have come under the scanner of multiple regulatory and enforcement agencies, including for suspected money laundering and fraudulent trading activities amounting to several thousands of crores of rupees, senior officials said on Sunday.

The officials also said that the three brokers, whom they refused to identify citing the ongoing nature of the investigations, have also been found to have been connected to PEPs (politically exposed persons) and the role of a key family member of a senior political leader in a key industrial state is also being investigated.

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The investigations have been underway for 4-5 years on multiple fronts against the three top brokers, who head organisations with businesses spread across multiple segments of the capital markets and the financial services sector including brokerage, investment advisory services, portfolio management, asset management fund and non-banking financial services.

The agencies and regulators involved in the investigations so far include the Securities and Exchange Board of India (Sebi), the Reserve Bank of India (RBI) and the Enforcement Directorate (ED), while these three have now made references for bringing in the CBI into the picture due to the suspected involvement of PEPs, the officials said.

While suspected money laundering activities facilitated by the capital market brokers have always been under the scanner, this could be the first major case of some top-ranking brokerage and financial services sector players being caught for the web of complex financial market transactions they weave to hide their money laundering activities, they added.

The investigations have involved scrutiny of multi-layered financial and banking transactions, transfer of funds to and from several tax havens, call data records and also social media conversations.

Requests were also sent to several foreign jurisdictions for administrative assistance on identifying the trail of fund transfers amounting to thousands of crores of rupees.

While some such jurisdictions, including Switzerland, have already responded, the affected parties have challenged any information sharing citing confidentiality clauses.

As per the laws prevailing in various countries, the concerned banking or financial institutions give an opportunity to their respective clients before sharing the information with any foreign country.

The officials said the three brokers first came under the scanner for their role in a case involving a spot commodity exchange but soon they were found to be engaged in large-scale money laundering activities, including for their brokerage and fund management clients.

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The scope of the investigation was expanded after some politically connected persons were found to be involved, they added.

In most cases, it was Sebi that suspected a possible money laundering angle in the activities of these brokers and accordingly, the matter was flagged to other agencies and departments for further investigations.

Without identifying the brokers, a senior official said these were among the top players in the market till 2-3 years ago when the market saw the emergence of some online players on the top during the Covid-19 pandemic and that actually further pushed those traditional players into areas that were supposed to be forbidden in a highly-regulated market.