Imports - Exports related issues

Under Invoicing / Over Invoicing

The latest scam has brought to light some of the issues the bankers are facing from some 'fraudulent' customers.

Strictly speaking, the material to be imported / exported should be correctly invoiced and should be declared in Bill of Entry / Shipping Bill accordingly.   However some clients do indulge in over / under invoicing based on their 'requirement' to either bring in excess money stashed abroad OR to send excess money abroad for storing OR to claim duty drawbacks wherever applicable.    Ultimately it will result in either Money Laundering or cheating the Government or fudging accounts in case of capitalisation of exports, etc.

It becomes difficult for bankers and customs authorities alike to keep a check on those, as nowadays many transactions take place on 'declarations' and such declarations are also accepted on 'face value' or 'as given'.

It may not be possible for customs authorities to check each and every item to determine value, unless there is suspicion.  So random checking is the only solution.

Unless the clients are genuine and compliant to regulations, it will be difficult to arrest such defaulters.

Care: 

Bankers should check the invoice with Shipping Bill / Bill of Entry and any difference should be questioned.  Whenever there is doubt for aberration, bankers can discreetly check with the industry associations.

Advance Remittance for Imports 

How Bankers can protect themselves?

The recent issue in certain banks and its aftermath has created a panic across bankers to deal with advance remittances.

But a clear understanding of the procedure is suffice to avoid such costly errors where bankers' ignorance or reduced compliance is exploited by a few 'clients'.   

Protection to bankers are available when they follow:

1. KYC - when they open account

Verification process when opening account should be effective.    Verification of PAN, visit to place of residence, company premises, market enquiry, cross-checking with referenced entity, checking for Benami accounts, etc. should be done meticulously.    Many frauds can be avoided at this entry point.

Care: Greed to add more current accounts, get quick CASA deposits, etc. will invite trouble; instead genuineness of the customer should be established beyond doubt.

2. Due Diligence - when they handle transactions

High value transactions in newly opened accounts should be avoided or scrutinised at multiple levels.   Such entities should be asked to route their transactions through their existing bankers at least for six months.   Or such transactions can be discussed with the previous banker to know the modus operandi. 

Care: Over-ambitiousness to earn more non-interest income / fee based income should be discouraged; instead genuineness and necessity of the transaction should be evaluated.

3. Follow up - post remittance

FEMA clearly specifies certain guidelines for sending remittances and the follow up for Bill of Entry as evidence of imports.  Waiver of Bill of Entry follow up, up to an equivalent of USD 100,000 is subject to conditions.    Post-remittance follow up cannot be compromised and it should be monitored by the controlling offices also.  

Care: Some times lack of clear segregation of follow up work between Authorised Dealer and Non-AD branches also contribute to negligence: instead both have to follow up the submission of evidence.

4. Report - in case of non-compliance

Escalation to controlling office / regulator should be done if the clients fail to comply with the guidelines.    This is possible only if the follow up is effective.

Care: In the name of retaining the clients, bankers compromise on compliance giving long rope to clients to fulfil their commitments; instead financial and performance discipline of the customers should be given more importance over retaining 'such' clients.

postscript

Competition among banks, competition among the same bank branches and pressure to perform - are all contributing to the mad rush to give in to the unjust 'demands' of customers, old or new.

Will it be possible to do banking on Banks' terms?

On a winning spree

It is amazing to note that the duo Martina Hingis and Sania Mirza are making it a habit to win all tournaments in which they participate.

Though both had a lean patch a few years ago, now they are unstoppable.   It is great to watch the game.

Consistency, perseverance and team work has paid off.     Let the winning spree continue for a few more years.

God Bless!

Remembering Roots

The picture shows a Thailand beauty queen, recently crowned, went straight to her 'rubbish collector' mom to take her blessings.    She didn't forget the sacrifices made by her mom to raise her.

Nowadays it is becoming rare to even recognise the relationship, though for various reasons, leave alone supporting them.    May be we are becoming too selfish or the circumstances force us to do so.

Anyway, the trees still remember the roots....

Unity

Today we remember Sardar Vallabhbhai Patel and Indra Gandhi.    Both of them have done their best for the nation.    Some decisions may be controversial but overall their contribution to the image of India is immense.

Such a strong, stubborn leaders are rare nowadays.   we wilt under pressure.  Let the younger generation take a few leaf out of these leaders' experiences.

Improving Economy

It is heartening to note that the economy is improving albeit slowly.    Though there are multiple favourable factors to contribute, say crude prices, increase in demand in developed countries, etc., the ultimate result is favourable.    As far as investor confidence is concerned, India has made great strides.   Hope the confidence turns in to investment, sooner.

This shows that the country has at last realised the need of sustained development irrespective of the parties that ascend to power.    

Let us welcome the realisation. 

Today I had been to a meeting organised by SNEHA, a suicide prevention organisation, to celebrate its 25th anniversary. A great service to the depressed and suicidal, Sneha's volunteers are a cut above the rest.

Proud to have been associated with them for some time. Hail Thee!