SFIO arrests ‘mastermind’ of China-linked shell companies

  • September 12, 2022
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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SFIO arrests ‘mastermind’ of China-linked shell companies

Subject: Economy

  • The Serious Frauds Investigation Office (SFIO) has arrested one person named Dortse, the alleged mastermind of a widespread racket involving setting up of shell companies with Chinese links and supply of dummy directors.

Serious Frauds Investigation Office

  • SFIO is a multi-disciplinary organization under the Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, law, information technology, investigation, company law, capital market and taxation for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds.
  • Section 211 of the Companies Act, 2013, has accorded statutory status to the Serious Fraud Investigation Office (SFIO).
  • SFIO also has powers to arrest people for the violation of the Company law.

Structure

  • SFIO is headed by a Director as Head of Department in the rank of Joint Secretary to the Government of India.
  • The Director is assisted by Additional Directors, Joint Directors, Deputy Directors, Senior Assistant Directors, Assistant Directors Prosecutors and other secretarial staff.
  • The Headquarter of SFIO is at New Delhi, with five Regional Offices at Mumbai, New Delhi, Chennai, Hyderabad & Kolkata

Powers

  • The SFIO will normally take up for investigation only such cases, which are characterized by –
    • complexity and having inter-departmental and multi– disciplinary ramifications;
    • substantial involvement of public interest to be judged by size, either in terms of monetary
    • The possibility of investigation leading to or contributing towards a clear improvement in systems, laws or procedures.
    • The SFIO shall investigate serious cases of fraud received from Department of Company Affairs.
    • SFIO may also take up cases on its own,

What are shell companies?

  • Shell companies are typically corporate entities which do not have any active business operations or significant assets in their possession.
  • There is no definition of the term “Shell Company” in the Companies Act.
  • The government views them with suspicion as some of them could be used for money laundering, tax evasion and other illegal activities.
  • Some laws help in curbing illegal activities to target shell companies are
  • Benami Transaction (Prohibition) Amendment Act 2016
  • The Prevention of Money Laundering Act 2002
  • The Companies Act, 2013.
economy SFIO arrests ‘mastermind’ of China-linked shell companies