According to the media reports in India, Dhananjaya Reddy, an engineering graduate from Bengaluru, was arrested for floating shell companies and obtaining loans from banks. Reddy submitted forged documents of several immovable properties as third-party collateral to the banks and got loans sanctioned in the name of various shell companies.
Reddy has three money laundering cases registered against him. He routed the money to shell companies abroad and did “round tripping of funds” to evade taxes. However this is just the tip of the iceberg.
Round tripping is a huge problem before the Indian Economy. There are bigger organisations which are indulging into the round tripping. Typically this is similar phenomenon to Reverse Hawala, where the money sent out of the country due to the government policies, inflation or the currency devaluations starts flowing back to the country.
What is Round Tripping
There is a small difference between the reverse hawala and round tripping. Typically, round tripping is the return of the money flowing back through the business channels, whereas reverse hawala is sent out through the informal channels.