SUMMARY
The DGGI is said to have unearthed a network linked to Cyprus-based Parimatch, which has been accused of channelling INR 700 Cr outside India via the cryptocurrency route
The law enforcement agency has said that this was just one of the hundreds of networks operated by Parimatch in the country, as per a news report
In April this year, the DGGI issued notices to 38 offshore online betting and gaming platforms for allegedly laundering money and evading taxes
Indian enforcement agencies have busted a money laundering network that is said to have its roots connected to Parimatch, an overseas online gaming platform, which has allegedly syphoned off crores of rupees outside India.
Spanning multiple jurisdictions and close to 400 entities, the new investigation by government agencies seems to have shed light on the complex web of shell companies that overseas betting and gaming platforms could be using to launder money outside India in a bid to evade taxes.
As per a report by The Times of India, the Mumbai wing of the Directorate General of Good & Services Tax Intelligence (DGGI) recently unearthed a network linked to Cyprus-based Parimatch, which allegedly channelled INR 700 Cr worth of proceeds from Indian users overseas by converting the money into cryptocurrencies, thereby evading taxes.
The DGGI alleged that this was just one of the hundreds of networks operated by Parimatch in the country.
Since then, enforcement agencies are said to have scoured through as many as 50 entities in Delhi and 350 such networks in Kolkata to ascertain the modus operandi of the money laundering scheme.
A mail sent to Parimatch’s team did not elicit any response till the time of publishing this article. We will update the story as and when they respond.
The Modus Operandi
The report alleged that Parimatch coordinated with its contacts in India via phone or email. The Cyprus-based company also established communication with Indian conduits through unidentified persons whose identities were never established.
After the arrest of the director of an illegal payments aggregator by the DGGI, the agency found out that the payments platform allegedly helped move the money from the wallets of users to the bank accounts of Parimatch-linked shell entities.
The DGGI is also said to have frozen more than 400 bank accounts during the ensuing crackdown. However, by the time the agency acted on this information, a bulk of the funds had already moved out of the bank accounts and converted to cryptocurrencies.
Afterwards, the DGGI arrested a Mumbai-based crypto exchange operator, who is accused of handling a clutch of shell companies. During the interrogation, the accused revealed that he converted INR 96 Cr collected from Indian users of Parimatch into cryptocurrencies and transferred them to unknown entities, the report alleged.
The probe then hit a stonewall as authorities could not ascertain the identity of the owner of the crypto wallets to whom the payments were made. The crypto operator was reportedly in the dark about the identity of the intended party, and executed the entire operation based on instructions received over emails and phone calls from ‘an unknown person’.
Interrogation of the dummy directors of the shell entities revealed another surprise. A majority of these directors were drivers or roadside vendors who were allegedly paid a small amount of money to represent the shell companies, which were used to purchase cryptos and divert funds overseas.
Many of these blue-collar workers provided their details to a book-entry operator, who likely facilitated ‘hawala’ payments, in lieu of a few thousand rupees, which were received from the Parimatch apps into their bank accounts. Subsequently, the Mumbai-based crypto exchange operator used the ‘video KYC’ of the family members of these dummy directors to open accounts on the crypto exchange.
The dummy directors claimed to be unaware of the money credited into their crypto accounts and to whom these proceeds were transferred.
Tailing another lead, officials also landed in Kolkata to trace some funds linked to an entity listed in the city. Just before the DGGI could ascertain the identity of one of the persons linked to the entity, the accused is said to have fled the country. As per the report, officials suspect that the accused helped convert the liquid cash to crypto before sending it overseas.
The role of local TV networks in advertising the betting platform also came to light during the course of the investigation. The agency found that Parimatch broadcasts its ads and promotional materials during the live telecast of many matches of local sports leagues. Many of these ads also feature celebrities.
A senior TV network executive reportedly told the DGGI that it entered into an online agreement with Parimatch to broadcast the latter’s ads. Besides, many media management companies are also said to have received emails from Parimatch for hiring celebrities for its promotions. Many such overseas gaming and betting platforms are already under the scanner of the Enforcement Directorate (ED).
The Home Ministry has also been roped into the matter. Sources told TOI that the officials have apprised the ministry of a series of similar cases and have even suggested keeping such platforms at bay in the interest of national security.
Meanwhile, efforts to trace the cryptocurrencies in question may not have yielded many results. Enforcement agencies reportedly tried to deploy tools developed by Israeli companies to follow the trail of these cryptocurrencies but to no avail.
Not The First Instance?
While Parimatch’s modus operandi may seem very elaborate, such instances have emerged in the past too. These overseas betting and gaming apps are largely registered in international tax havens.
Many shell networks, including companies and similar entities, have earlier been accused of creating multiple layers of transactions spanning multiple countries to avoid paying taxes. The communication is strictly kept virtual and payments to conduits are largely made online without any formal agreement to stay off the radar. Owing to the interoperability of cryptocurrencies and their anonymous nature, it gets hard to track such parties.
In April this year, the DGGI issued notices to 38 offshore online betting and gaming platforms for allegedly laundering money and evading taxes. The agency estimated the quantum of goods and services tax (GST) evasion at around INR 12,000 Cr between April 2019 and November 2022.
Meanwhile, the union government has undertaken multiple steps to tighten its noose around offshore online gaming platforms. To formulate a concrete taxation policy, the Centre recently brought overseas online betting companies under the ambit of 28% GST.
In December last year, the Centre directed Google to stop displaying ads from overseas online betting companies. Afterwards, the Ministry of Information and Broadcasting (MIB) also issued separate advisories to broadcasters, streaming platforms and digital news publishers, warning them against airing online betting ads.
Despite the central government’s stern actions, many illegal online betting platforms have been flouting local laws by employing surrogate advertising practices.
