Fraudulent letters of credit (L/Cs) in the name of shell companies feature in a major money laundering case brought by India's Enforcement Directorate (ED).

The directorate has arrested the person it describes as the "prime accused" - managing director of telecom equipment manufacturing company VMCSL, V Hima Bindu - under the provisions of India's prevention of money laundering act.

Forensic audit

The money laundering case is linked to an alleged fraud that cost a consortium of public sector banks the equivalent of around US$498 million.

"Forensic audit found VMCSL had opened various L/Cs worth the equivalent of US$104 million in the name of fake or dummy entities, which were subsequently devolved," according to an ED statement.

The audit also revealed that VMCSL circulated loans to various related entities to inflate its accounts and that it paid related entity PISL three-per cent commission on certain deals despite it playing no role in any transaction.

Family affair

The ED claims that Bindu, "with the active assistance of her brother", created false and exaggerated operational revenues by generating fake sales and purchase invoices through firms controlled by her and family members.

Bindu "siphoned off" part of the proceeds of crime by remitting it to overseas entities controlled by her or family members the directorate alleges.

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