Days after the government’s crackdown on shell companies and money-laundering, banks are learnt to have initiated the process of scanning account details of directors disqualified by the government to check for possible links to shell companies and fund diversion.
According to a Mint report, citing senior executives of four public sector banks, the exercise has begun and will take at least three weeks to conclude as the list runs into several hundred pages.
“After shortlisting the names, we will prepare a report on the transactions conducted and submit to the government,” Mint quoted one of the four officials, a banker with a large Mumbai-based bank, as saying.
Shell companies, though not defined under the Companies Act, are those that adhere to basic company laws and are used to avoid taxes and launder black money.
The development follows the Finance Ministry’s move on September 5, restricting directors of around 200,000 dormant companies struck off official records from accessing their companies’ bank accounts
The move, part of the government’s crackdown on black money, was followed by the Department of Financial Services advising banks to immediately place restrictions on the bank accounts of such struck-off companies.
A week later, in a statement on September 12, the Ministry of Corporate Affairs said it had identified 106,000 directors of companies that did not file their financial statements or annual returns for three straight years, violating provisions of the Companies Act, 2013.
In a first-of-its-kind measure, the government went on to make the names of these directors public.
According to bankers, the list of disqualified directors will be matched with the records of the banks to check if they also have links to accounts of companies other than shell companies.
“Since these are defunct companies, most of them have only a few transactions. So whatever transactions that took place with the related party will be studied,” said the second of the four unnamed bankers.
In cases of active accounts linked to the shell companies or disqualified directors, there will be stepped-up vigilance to ensure that loan exposure, if any, is not risk for default, said the second person.