Watch out for multi-level marketing schemes luring investors with unusually high returns as it might just be just a ploy to launder money. As per a government report, use of bank accounts by multi-level marketing (MLM) companies inviting investors to deposit money promising abnormal returns is a major trend seen with regard to suspicious banking transactions in the last fiscal.
A number of such transaction records were received regarding huge deposits in certain accounts and the transfer of the same to other related accounts. Enquiries have revealed that these accounts were being used for MLM activity in the guise of direct selling of consumer goods and services.
Very high rates of return had been promised for the deposits, thus luring people to part with funds, it said. Interestingly, in some cases, a large number of cheque leaves had been obtained from the banks and post-dated cheques for interest and capital repayments had been issued to the investors to give them a false sense of security.
"Like all pyramid schemes, it was obvious that as the rate of fresh deposits would reduce, post-dated cheques tendered thereafter would bounce due to inadequate funds being available in the accounts," the report said.
As per the investigations, funds deposited in bank accounts of firms were being transferred to personal accounts of the persons operating the schemes or to current accounts of associate firms. Moreover, some of the individuals involved had resigned from directorship of companies but were still continuing to operate bank accounts and sign cheques.
As per information, 15 operators had formed more than 10 firms at various locations such as Kanpur, Mumbai, Chhattisgarh, Jaipur, Indore and Madurai.
More than 35 accounts had been opened in 11 different banks having branches at different parts of the country to make it difficult for law enforcement agencies to trace the movement of money between these accounts.
Over 16 months Rs 130 crore (Rs 1.3 billion) was transferred from one account of one of these MLM firms to the personal account of one of the operators.
The report said such accounts with deposits of over Rs 190 crore (Rs 1.9 billion) in different banks and states have been attached. A case of money laundering has also been registered.
