Multiple regulatory and enforcement agencies are investigating three leading brokers in the country for potential money laundering and fraudulent trading activities running into thousands of crores.

What Happened? Per a PTI report, several senior officials refused to disclose the names of the brokers due to ongoing investigations.

However, investigations, which have been in progress for 4-5 years, also involve scrutinizing the brokers’ connections with politically exposed persons (PEPs). Moreover, they are looking into the involvement of a family member of a high-profile political figure from a major industrial state.

The implicated brokers lead organizations operating across various capital market and financial service sectors, including brokerage, investment advisory services, portfolio management, asset management funds, and non-banking financial services.

The Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Enforcement Directorate (ED) are conducting the investigations. They’re considering involving the Central Bureau of Investigation (CBI) due to the potential involvement of PEPs.

Why it Matters? This case marks a significant instance of top-ranking brokerage and financial services sector players under suspicion of money laundering activities. The investigators are examining complex financial transactions, funds transfer to and from various tax havens, call data records, and social media conversations. They have also requested administrative assistance from foreign jurisdictions to trace fund transfers.

The brokers initially attracted attention due to their involvement in a case concerning a spot commodity exchange. Further investigation revealed extensive money laundering activities, leading to the broadening of the investigation scope, especially after the discovery of politically connected individuals’ involvement.

A senior official speaking to PTI stated that these brokers were market leaders until 2-3 years ago when online players emerged during the Covid-19 pandemic, pushing traditional players into forbidden areas in a highly regulated market.

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