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the monies to other entities which are also transactions by one individual or entity will
in the form of Shell companies. The chain of help create transaction histories of
activities in these companies keep looping individuals and entities.
up and payments are being layered up in
small proportions being scattered up in Once detected, action must be swift and act
various companies. Ejusdem Generis has as a deterrent to others. Entities with no
been laid in the Madhu Koda case, 2G commercial substance for, say, five years,
spectrum case and many others in the go. should be weeded out or frozen. Promoters
and gatekeepers like bankers, accountants,
Lets understand the crux of these auditors, valuers, etc, who facilitate shell
mishappenings and how could we operations, shall be trapped under the tough
contribute as Governance Professionals. Prevention of Money Laundering Act and
The Executors at the initial stage floats a under the stringent provisions of the
number of companies with the same Companies Act 2013.
registered office address and put in place
the anonymous directors or at times some We, as the Company Secretary are also
unrelated or untraceable directors. The start Corporate Governance professionals.
of this financial crime is by the incorporation Though, in the long run, this might not tend
of the Company for which we as to be onus on the governing professionals
professionals grant a declaration to be true involved however let’s just move a step
and lawful. The immediate counter would be ahead work from our ground level.
are we even responsible for these wrongful
and fictitious deeds of the Our role as the Company Secretary of the
promoters/directors. This question is Company should be to instigate any such
impounding and leaves a trail on our ambiguity on the business of the Company
diligence and vigilant about our profession. should be reported and taken action for a
derived conclusion. The practice of the
MCA21, the governing portal on which all Secretarial Audit by the Practicing Company
corporate filings reside ad feeded, is a Secretary for prescribed classes of
wonderful starting point for tracking and companies is an apt exercise for culling out
mining data for companies sharing the intentions of such Companies. The
characteristics like common directors, same Government has empowered us with this
registered address, little or no business, classic Audit and let us prove to be a
occasional large transaction, etc, to create Effective mediator in detecting such
early warnings against shell companies. A fraudulent motives and transactions.
central KYC registry to track multiple
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SIRC eNewsletter/January 2017
