Under New System, CA Forms Will Be Linked to Banks; UDIN Checks to Become Mandatory
Mumbai: The government is set to close a loophole exploited by unscrupulous companies to illegally transfer significant amounts of foreign exchange overseas. Scammers have been manipulating certificates issued by chartered accountants with simple tools like PDF editors to deceive banks that handle cross-border transfers. Bankers who fall for these scams are either negligent or complicit. Tax authorities are taking measures to rectify this issue, as confirmed by a spokesperson from the Central Board of Direct Taxes (CBDT).
With the new system, it will be impossible for companies to forge a CA’s certificate, and banks can no longer claim ignorance. This gap, long believed to be misused by fraudsters and unreliable entities, came to light in a recent case where companies, connected to a single mastermind, used a large private sector bank to remit ₹700 crore to businesses in Singapore and Hong Kong.
The Process and the Gaps
The primary remittance document is Form 15CB, where the CA enters details, applies a digital signature, and generates a unique document identification number (UDIN)—an 18-digit alphanumeric code issued by the Institute of Chartered Accountants of India (ICAI). Once the CA files Form 15CB online with the Income Tax department, an acknowledgment number is generated. The CA then shares the PDF with the client, who logs into the tax portal to file Form 15CA by quoting the acknowledgment. This form is largely auto-filled, drawing data from Form 15CB. Finally, the PDFs are submitted to the bank to process the remittance.
The loophole lies in crude forgery: fraudsters falsify the Form 15CB PDF using editing software, create multiple certificates with the same or fake UDINs, and submit them to banks. This fraud can be discovered immediately if bankers verify the UDIN against the details on the ICAI portal. However, if they choose to be willfully ignorant or negligent, hundreds of millions can escape under the façade of legitimate import payments.
Scam Playbook
- Most forex remittances require a CA certificate.
- A CA fills a form and files it online with the Income Tax Department.
- The CA shares a PDF with the client.
- The client uses a PDF editor to falsify forms.
- The system can be abused if bankers are complicit.
The Income Tax Department is introducing changes to address this issue. The CBDT spokesperson confirmed that banks will soon be mandated to verify the validity of UDINs and check the amounts and other details on the ICAI’s portal against the PDFs submitted by clients. The Indian Banks’ Association (IBA) had urged banks to adopt this practice back in 2019, but many ignored the advice.
The Need for Accountability
Such remittance fraud is not just a fiction; it highlights a failure of verification and accountability,” said Ashish Karundia, founder of CA firm Ashish Karundia & Co. “When forged Form 15CBs and fabricated UDINs can bypass controls, it demonstrates weaknesses in compliance. Banks and regulators must transition from a box-ticking mentality to active verification. Real-time UDIN checks and source validation must be non-negotiable in the digital age; documents must be verified, not assumed.
Karundia emphasized that CAs should only issue Form 15CB after thorough due diligence, which includes checking the Tax Residency Certificate, Form 10F, and supporting documents. “Banks must not process remittances purely based on a certificate. They must authenticate the UDIN, confirm the client’s identity, and verify the documentation.
