ED records statements of accommodation-entry providers in FEMA probe

MUMBAI: The Enforcement Directorate (ED) has recorded the statements of several accommodation-entry providers from Kolkata, who were allegedly part of suspicious transactions being investigated in the Foreign Exchange Management Act (FEMA) case against a former fund manager at Axis Mutual Fund.

Accommodation entry refers to any financial transaction between two parties, where one party enters the financial transaction in its books to accommodate the other party in lieu of cash of equal amount and commission.

ED initiated the probe following an interim order by markets regulator, the Securities and Exchange Board of India (SEBI), accusing the former manager, Viresh Joshi, and others, of indulging in ‘front running’ activities, and earning ₹30.56 crore as wrongful gains.

The agency had earlier recorded Joshi’s statement in its FEMA probe, in which he denied all allegations against him as baseless and false. Front running occurs when a broker or trader uses prior knowledge of pending customer orders to make trades for their own account.

The agency recorded the statements of the accommodation-entry providers, who are accused of channeling cash, illicitly gained from the dubious trades, into bank accounts of various shell entities, which then provided unsecured loans to several individuals and their related firms that are under the probe’s scanner.

The agency had in September this year seized foreign currency worth around ₹12.96 lakh during searches conducted against Joshi and a few brokers, who are accused of FEMA contraventions, at various locations in Mumbai and Kolkata.