The Enforcement Directorate (ED) has launched an extensive investigation into a multi-state financial fraud involving a web of partnership firms allegedly used to route illicit funds, fabricate invoices, and launder money across various industries. The probe, which spans at least five states, is being conducted under the provisions of the Prevention of Money Laundering Act (PMLA), 2002.

According to sources familiar with the matter, the partnership firms under scrutiny were operating in sectors including textiles, metals, pharmaceuticals, and real estate. Preliminary findings indicate that the accused entities used a network of interlinked partnership firms with shared ownership and overlapping financials to cycle funds and create the appearance of legitimate business transactions.

The investigation was triggered by suspicious transaction alerts generated by banks and inputs from the Income Tax Department during recent raids. Officials say that some of the firms were set up using forged KYC documents and unverifiable addresses, while others functioned as shell entities with no real business activity.

“These firms were used to issue fake purchase orders and bills, claim unlawful input tax credits, and move large sums through layered accounts in multiple states,” an ED official said. “We are also probing links to politically exposed persons and front operators.”

The ED has already frozen several bank accounts and seized documents, electronic devices, and transaction records from premises across Delhi, Gujarat, Maharashtra, and West Bengal. Arrests and custodial interrogations are likely in the coming weeks as forensic audits progress.

Legal experts say the case highlights the vulnerabilities of partnership structures, which remain less regulated than companies or LLPs, and are frequently exploited due to weaker disclosure and reporting standards.

The ED is expected to file formal charges under PMLA and related sections of the Indian Penal Code once evidence is consolidated. If proven, the fraud could rank among the largest partnership-based money laundering networks uncovered in recent years.