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FinCEN Files — Flagged in each offshore tax probe, Rosy Blue is now on US radar

One key SAR puts the total number of “suspicious” transactions related to Rosy Blue and its affiliates –between 2014-2016 – at a staggering 6,265. Their worth: $4.98 billion.

Written by Ritu Sarin | New Delhi | September 26, 2020 4:31:44 am
FinCEN Files, FinCEN Files expose, India firms, Offshore Leaks, money laundering FinCEN Files, India firms on US radar, Indian express investigation110 media organisations in 88 countries teamed up with ICIJ and BuzzFeed News to trace the Indian entities and banks named in these SARs filed with FinCEN between 1999 and 2017.

NAMED in Liechtenstein List, Swiss Leaks, Panama Papers and Paradise Papers, the Indian-born owners of diamond conglomerate Rosy Blue are back. This time, with one of the largest set of transactions red-flagged by banks to US financial watchdog FinCEN.

Members of the Rosy Blue clan, led by founder Harshad Mehta; his son Rihen Mehta and brother Dilip Mehta and their firms are subjects of several SARs (Suspicious Activity Reports) filed by Standard Chartered Bank, New York, according to records investigated by The Indian Express.

Behind these red flags, the is now on US radar bank has said, are their huge volumes of intra-company (“circular”) transactions that, the SARs say, may include “utilising” loans at one bank to pay off other loans; “unusual flow of funds” between group companies; and adverse media reports.

Incidentally, the latter include The Indian Express coverage of their offshore transactions and their operations in “high-risk” jurisdictions like India, Bahrain and the United Arab Emirates (UAE).

One key SAR puts the total number of “suspicious” transactions related to Rosy Blue and its affiliates –between 2014-2016 – at a staggering 6,265. Their worth: $4.98 billion.

As many as 893 transactions totaling $603.64 million were conducted by Rosy Blue and 7Cs (the diamond and jewellery group founded by Harshad Mehta in Dubai) just in 2016.

And 746 of these were either remitted or received by Rosy Blue of which Dilip Mehta is the CEO.

Read | FinCEN Files: Before bankruptcy and probe, Bhushan Steel hit US radar for flows from Latvia, Dubai

For this scrutiny, the SARs show, the bank factored in transactions linked to the eight most active Rosy Blue accounts — in USA, Brazil, Dubai, Hong Kong and Bahrain along with their correspondent banks.

The bank noted that internal Rosy Blue payments, which companies carried out “amongst themselves,” amounted to $392.56 million almost 65 per cent of the total value under scrutiny.

One transaction mentioned by the bank – the amount isn’t specified – is flagged as “paid towards Commission…to Sheikh Faisal Bin Qassimal Thani.”

Al Thani has been described as a Qatari Sheikh and owner of Al Faisal Holdings, an entity that “operates 50 businesses in nine industries, none of which have any apparent ties to the diamond and jewellery industry…”

Also Read | FinCEN Files — Agusta, Maxis, Essar: probed at home, Indian firms on US radar as well

Along with the list of bank accounts maintained by the diamond firms, the bank has listed affiliate companies in USA, India, Dubai, Netherlands and Belgium flagging multiple entities with the name Rosy Blue and the fact that they were “direct clients” of the bank for providing “trade finance and loan services” to some of the firms.

FinCEN has also flagged operations of the company reported in the media: their setting up a string of offshore companies with Mossack Fonseca, exposed during the 2016 ICIJ-The Indian Express investigation into the Panama Papers; allegations of tax fraud and forgery in Belgium and a transaction trail that links Rosy Blue to an alleged corruption case in Brazil.

On Panama Papers, the US financial watchdog has linked to reports in The Indian Express that members of the Rosy Blue family were associated with at least 24 offshore companies incorporated in the British Virgin Islands, Seychelles, British Anguilla and Mauritius.

The Belgian trail relates to allegations of tax evasion against over 100 Antwerp-based diamantaires, including Dilip Mehta. The case, the FinCEN noted, first began in 2005, when seizures of cash were made from a courier and subsequent seizures in Switzerland revealed documents linked to Rosy Blue, all indicating alleged tax fraud. It is noted in the SAR that Rosy Blue was among the defendants in the trial. Dilip Mehta has previously denied any role in the scam.

Read | FinCEN Files: Wanted at home, Mumbai luxury car king flagged to US watchdog too

In connection with the Brazilian scandal, the SAR cites a judicial document in the public domain that referenced a payment involving Rosy Blue. The case is part of a larger investigation in Brazil which uncovered corruption at the state-owned oil behemoth, Petrobras.

Significantly, members of the Mehta family had first figured on the Liechtenstein list of 18 account holders, in which they were found to have made deposits in two trusts in the LGT Bank.

This is also mentioned by Standard Chartered Bank along with the fact that the Indian Government launched prosecution proceedings against the account holders for possible tax evasion and that the Supreme Court had in 2014 made public the names of the 18 account holders.

On the HSBC Geneva list (“Swiss Leaks” 2015), they were among 77 businessmen linked to the diamond industry — six members of the Rosy Blue clan collectively had deposits totaling $53.63 million for the year 2006-2007, with Dilip Mehta’s account showing a balance of $8.77 million.

Also Read | FinCEN Files: 44 Indian banks, transactions of $1 billion, flagged to US regulator

While Harshad Mehta did not respond to questions mailed to him, when asked about the SARs, Dilip Mehta, CEO Rosy Blue, told The Indian Express that Rosy Blue was regularly audited by third party auditors for financial, labour and environmental compliance.
“Rosy Blue is one of the very few companies in the Diamond Industry that files its CSR report to UN Global Compact…FinCen has neither queried nor brought any charges against any Rosy Blue entity, myself or my family members.For your information over 80% of Rosy Blue’s revenues were derived from third parties consistently, for several years.

“During the relevant period, several banks have exited from financing diamond business, hence there may be transactions where funding has shifted from withdrawing banks to continuing banks. Please note that Rosy Blue has brought down its bank debts considerably during that period, and over the past several years.

“For the record, promoters of Rosy Blue group of companies outside of India are neither Indian citizens nor Indian residents and are all foreign companies from Indian perspective. Most importantly, we echo what you said in your questions — that information contained in suspicious activity reports is not necessarily evidence of any wrongdoing or criminality.”

Updated with new response received on October 2, 2020.

Response from Rihen Mehta: “We are surprised to note that in the article you carried about FinCen disclosures in the Indian Express published on September 26, 2020 you have stated that Harshad Mehta, my father, did not respond to the questions emailed to him. Though he has been unwell for a few days, he has been tracking his account and has informed that he has not received any mail from you.
I wish to state that we separated from the Rosy Blue group at the end of 2013 and do not have any economic interest in the Rosy Blue Group of companies and vice versa since 2013.

As you are aware that SAR filling does not mean any illegality and on the contrary, not having any query raised by the FinCen after more than four years since receiving the SAR reports indicates prima facie presumption that the transactions were in normal course of business.

Having said that, I would like to clarify the one transaction that particularly refers to the 7CS group – The payment to HH Sheikh Thani: HH Sheikh Thani was a “local sponsor” for our business in Qatar. The payments from 7Cs to him were sponsorship fees and a single payment from him was for purchase of a diamond for his personal use.

Lastly, please note that both me and my father have been nonresidents for over 15 years.”

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