This is the second crackdown on Full Fledged Money Changers (FFMCs) in recent times by the ED. The accused A Mohammed Farook, who runs M/s Zam Zam Associates, has contravened the provisions of Sections 7(4), 8(1) and 48 of the Foreign Exchange Regulation Act (FERA) 1973 to the extent of US $ 34,00,000, Section 8(1) of the FERA to the extent of US $ 2,00,000 and Section 9(1)(b) of the FERA to the extent of Rs 13,05,17,800.

The accused had been indulging in FERA violations by misusing the licence issued by the RBI. He had shifted the entire records pertaining to the business activities of Zam Zam Associates to another address in the premises of his office complex in Kodambakkam in Chennai.

The EDconducted a search of the building, and seized documents relating to issue of foreign exchange under BTQ, trust receipts regarding receipt of stock of Travellers Cheques, and Travellers Cheques Settlement details.

The accused was examined under Section 39 of the FERA, 1973, and his statement was recorded. His firm Zam Zam Associates had been engaged in foreign exchange transactions. Zam Zam Associates had an arrangement with Mashreq Bank, Mumbai, for stocking their travellers cheques.

During one of his visits to Mumbai, the accused happened to meet a certain official working at Mashreq Bank and on his advice Farook contacted one Mohammed Abubacker in Dubai for arranging collateral security on his behalf for obtaining travellers cheques from Mashreq Bank, Dubai. Later, Farook made arrangements to deliver US $ 2,00,000 at Mashreq Bank, Dubai, on behalf of Zam Zam Associates.

The accused also gave letter of authorisation in favour of Abubacker to receive travellers cheques from Mashreq Bank, Dubai, onbehalf of Zam Zam Associates. The travellers cheques collected by Abubacker were sent to one Jainulabdeen of Aramex Company, Singapore, who sold them.

The sale proceeds as per the existing bank rate, along with the commission of 30 paise per dollar were arranged to be sent to the accused by Jainulabdeen through some unknown persons periodically. The accused utilised these amounts for sending T.Ts in settlement of travellers cheques obtained from Mashreq Bank, Dubai.

By doing so, he had during October 1997 to January 1998 received a total amount of Rs 10,20,000 as commission. Though travellers cheque stocks released by Mashreq Bank did not come to India, he fabricated documents based on the copies of Trust receipts received by him to show that travellers cheques were sold in India to passengers under BTQ.