Shell companies in Indian government's line of sight

Author: Karry Lai | Published: 26 Jun 2018

The Narendra Modi government has been cracking down on shell companies as the issue of money laundering and tax evasion has been prevalent in India.

The Securities and Exchange Board of India (Sebi) has released a detailed framework to identify and verify beneficial owners specifically for foreign portfolio investments (FPIs). Beneficial owners need to be identified based on controlling ownership interest and control basis. Sebi requires FPIs with non-compliant structures need to make changes before October 10 2018. The move signals a move by SEBI to strengthen anti-money laundering/know your customer (AML/KYC) requirements.

Moin Ladha, partner at Khaitan & Co, said that due to additional restrictions placed on the ability of NRIs to invest in India through the FPI route, genuine investments by NRIs will suffer. Additionally, since the new framework mandates additional requirements with regard to KYC review of FPIs,...