7 Ways in Which Black Money Hoarders Got Their Cash Into Banks

The various ways adopted by black money hoarders to convert old notes into new, post demonetisation.

There are several illegal ways which were adopted by people to convert their black money in old notes to new notes. The Quint spoke to several experts including chartered accountants, bank managers, and money brokers to find out how it happened.

1. Businessmen Showing Huge Amount of Cash in Hand

This method of converting old notes into new was primarily used by big black money hoarders. People who held cash in old notes handed it over to company owners who held false cash-in-hand ledgers.

Now, the company owners, to absorb these old notes, showed a reasonable rise in profits in their dummy revenue books. With the help of these fake ledgers, company owners deposited old notes in the bank and turned black money into white temporarily. In return, the owners earned commission ranging between 10-40 percent from the black money holders. According to the sources, this was the fastest means to convert huge sum of old notes into new.

Weeks or months later, the company owner would withdraw the amount from the bank in new notes, in lieu of company expenses, and return it to the original owner of the money after deducting their commission.

But there is risk involved for the black money hoarders, according to the sources. There are instances where the company owners refuse to return money on time. As a result, several forgery cases are being reported.

2. Black Money Routed Through Sikkim

The state of Sikkim in India is exempted from Income Tax. Hence, many black money hoarders used the bank accounts of Sikkim locals to convert old notes into white.

Since they are exempted from Income Tax, a local can deposit a reasonable amount in her bank account without coming under the government’s radar. She can take old notes from black money hoarders and deposit it in their bank accounts.

The bank account holder can return the amount in new notes to the hoarder if the amount is small. If it is a huge sum, then she can return the amount through cheques – showing the expense as business transactions, consultancy fees, service fees and so on. A lot of Sikkim locals earned money through commission in this way.

3. Bank Staff Turn Money Agents

According to some money brokers and chartered accountants, bank managers in most private banks became commission agents for converting old notes into new. When the average Indian struggled to exchange their old notes at the bank counters, the bank managers earned commissions by routing them out the back door to black money hoarders.

Interestingly, not just the managers, the entire bank staff was involved in the scams. The bank staff, instead of directly dealing with black money hoarders, enlisted family members and friends, who acted as touts. These touts instantly changed old notes into new notes with the help of bank staff. In return, every person involved in conversion got a commission.

The bank managers deposit these old notes into bogus or dormant accounts.

Also Read: How I Illegally Convert Old Notes Into New: An Insider Explains

4. Boom In Gold Price

The price of gold had boomed post demonetisation. Reason? Black money hoarders rushed to purchase gold. Jewellers showed sale of gold on a backdated invoice, which is before 8 November, with the market price on that date.

On the basis of these fudged invoices, jewellers sent cash in old notes to the bank. The bank staff, in connivance with the jewellers, would deposit huge number of old notes in the current accounts of the jewellers. In some cases, they also fudged backdated bank payslips.

The black money hoarders got either gold or new notes after the jeweller deducted the commission.

As a result, the demand for gold increased in the market. The price was bound to go up.

5. Backdated Sale Generation

After demonetisation, many businessmen fudged documents to show a rise in sale of stock in their go-downs or shops on a back-date, which is before 8 November. This is done to account for the old notes in hand, the sources of which are dubious.

Most businessmen, big and small, adopted this method to convert old notes into new. By showing the fudged ledger, they could easily deposit the old notes in company bank accounts without scrutiny.

6. Fake Boom In Harvest

Many zamindars or land owners do not grow crops on their land. However, this year, after demonetisation, they showed sale of crops at a higher rate and purchase of agricultural products. However, these existed only in books.

In this way, the land owners managed to deposit their black money, without coming under Income Tax’s radar.

7. Pradhan Mantri Jan Dhan Yojana

There was a sudden surge in Jan Dhan accounts post demonetisation, prompting the government to warn account holders from parking ill-gotten money. According to the Jan Dhan Yojana website, out of over 26 crore accounts, over 69 lakh were opened between 9 November and 28 December.

The website also reveals that until 28 December, there was over 71,000 crore balance in all the accounts, out of which an astonishing 26,000 crore was deposited post 9 November, clearly hinting that Jan Dhan accounts were used by black money hoarders to park old notes.