Legitimate administration for AML (Hostile to Tax evasion) in India

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Government evasion is the procedure by which unlawful assets and resources are changed over into ... Hostile to Money Laundering Legislation in India. The Prevention of Money Laundering Act, 2002 ...

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Legitimate administration for AML (Anti Money Laundering) in India Dr. K.P. Krishnan, Joint Secretary, Department of Economic Affairs, Ministry of Finance, Govt. of India

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What is Money Laundering ? Government evasion is the procedure by which illicit assets and resources are changed over into authentic assets and resources. Ventures Purchases Placement: Illegal assets or resources are first brought into the money related framework Layering: Use of different records, banks, middle people, enterprises, trusts, nations to mask the cause. Incorporation: Laundered assets are made accessible as evidently true blue assets. Essential: All tax evasion exchanges require not experience this three-arrange prepare.

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Issues for Discussion Anti Money Laundering Legislation in India Implications of AML/CFT Measures on the Financial Sector International Scenario Key Issues

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Anti-Money Laundering Legislation in India The Prevention of Money Laundering Act, 2002 (PMLA) ordered to counteract IRS evasion and accommodate reallocation of property got from, or included in, government evasion Enacted on 17 th Jan, 2003 Brought into drive from 1 st July, 2005 Administered by: Financial Intelligence Unit for check of personality of customers, upkeep of records and reporting Enforcement Directorate for examination of and arraignment for tax evasion offenses

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Subordinate enactments: Rules under PMLA Various Rules happened from July 2005 Rules specifying Powers of Director FIU & ED Rules itemizing the strategy for connection of property, time of maintenance and so on. Rules specifying the receipt & administration of reallocated resources Rules identifying with legitimate commitments of reporting substances

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Subordinate enactments: Rules under PMLA Rules itemizing the lawful commitments of reporting elements: Prevention of Money Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005

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Legal Obligation under PMLA and the Rules force commitments on managing an account organizations budgetary establishments middle people of the securities market to keep up records outfit data check character of customers Section 12

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Reporting elements under PMLA "Saving money Company" under PMLA incorporates: All nationalized banks, private Indian banks and private outside banks All co-agent banks viz. essential co-agent banks, state co-agent banks and focal (area level) co-agent banks State Bank of India and its partners and backups Regional Rural Banks

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Reporting elements under PMLA "Budgetary Institution" under PMLA incorporates: Financial Institutions as characterized in Section 45-I of the RBI Act to be specific EXIM Bank, NABARD, NHB, SIDBI, IFCI Ltd., IDFC Ltd., IIBI Ltd. what's more, TFCI Ltd. Insurance agencies Hire Purchase organizations Chit support organizations as characterized in the Chit Funds Act.

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Reporting substances under PMLA Co-agent banks. Lodging account establishments as characterized in the National Housing Bank Act, for example, HDFC. Non-keeping money monetary organizations as characterized in area 45-I of the RBI Act, for example, private back organizations - engine and general fund organizations, renting organizations, venture organizations and so on

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Reporting elements under PMLA "Mediator" under PMLA incorporates people enlisted under Section 12 of the Securities and Exchange Board of India (SEBI) Act, 1992: Stock specialists Sub-representatives Share exchange operators Bankers to an issue Trustees to trust deed Registrars to issue Merchant financiers Underwriters Portfolio Managers Investment counsels Depositories Custodian of securities Foreign institutional speculators Credit rating offices Venture capital assets Collective speculation plans including common assets

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Obligations of reporting substances Appointment of Principal Officer : Every reporting element might impart the name, assignment and address of the Principal Officer to the Director, FIU-IND Furnishing of data by the Principal Officer: outfit the data alluded to in the Rules to the powers hold duplicate of such data for the motivations behind authority record

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Reporting of Cash Transactions: Reporting commitments "All money exchanges of the estimation of more than rupees ten lakhs or its comparable in remote coin All arrangement of money exchanges essentially associated with each other which have been esteemed underneath rupees ten lakhs or its proportional in outside money where such arrangement of exchanges have occurred inside a month" CTR ought to be documented by the 15 th day of the succeeding month Rule 3

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Reporting commitments Reporting of Suspicious Transactions: All suspicious exchanges regardless of whether made in real money STR ought to be documented with FIU inside seven working days of foundation of doubt at the level of Principal Officer.

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Reporting commitments Suspicious exchange implies an exchange regardless of whether made in real money which, to a man acting in accordance with some basic honesty – offers ascend to a sensible ground of doubt that it might include the returns of wrongdoing; or has all the earmarks of being made in conditions of bizarre or unjustified many-sided quality; or seems to have no monetary method of reasoning or bonafide reason; Rule 2(g)

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Related commitments Records containing data for reporting purposes: Nature of exchange Amount & cash of exchange Date of exchange Parties to exchange Manner as recommended by the controllers (RBI/SEBI/IRDA) Maintain & hold reported records for a long time from end of exchange between customer & reporting elements (Rule 6)

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Client personality Verify character of customers : Identity of customers Current and perpetual address Nature of business Financial status Maintain records of the personality of customers for a time of 10 years from the date of discontinuance of the exchanges with the customer. (Manage 10)

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Know Your Customer (KYC) Guidelines Customer Acceptance - Ensure that exclusive genuine and true blue clients are acknowledged. Client Identification-Ensure that clients are legitimately distinguished to comprehend the dangers they may posture. Exchanges Monitoring-Monitor clients records and exchanges to counteract or identify illicit exercises. Chance Management-Implement procedures to adequately deal with the dangers postured by clients attempting to abuse offices. Rules issued by RBI, SEBI & IRDA

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Implications of AML/CFT measures on Financial Sector

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Legal commitments & rules suggest Customer Acceptance - . Guarantee acknowledgment of just genuine and real clients Issue of component to check ID Issue of Multiple IDs Issue of rundown of suspects/offenders/undesirable components Awareness and preparing of staff Customer Identification-Ensure that the clients are appropriately distinguished to comprehend the dangers they may posture. Individual verification of new client Background check of existing customers Issue of List of suspects/culprits/undesirable components Awareness and preparing of staff KYC & CDD

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Legal commitments & rules infer Transactions Monitoring-Monitor clients records and exchanges to avert or recognize unlawful exercises. Issue of Mechanism to confirm money related points of interest Transactions conflicting with clients profile (business) Unexplained exchanges between different records with no method of reasoning Sudden movement in lethargic records Risk Management-Implement procedures to adequately deal with the dangers postured by clients attempting to abuse offices. Classification of clients: high/medium/generally safe : a dynamic idea Constant cooperation between front work area and the consistence group required Awareness and preparing of staff KYC & CDD

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Legal commitments & rules suggest Set up procedures and innovation to recognize and report suspicious exchanges Capture client points of interest Generate alarms Collect and investigate extra data Decide whether exchanges are suspicious Ensuring reporting of value information electronically Alignment of individuals, process and innovation Confidentiality and Privacy

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CTR Statistics As on 31 December 2006

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Analysis and Dissemination As on 31 December 2006 Dissemination

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Categories of STRs got As on 31 December 2006

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"Explanations behind Suspicion" for saving money organizations Activity in records Unusual action contrasted and past exchanges Sudden action in torpid records Activity conflicting with what might be normal from pronounced business Identity of customer False ID archives Identification archives which couldn't be confirmed inside sensible time Accounts opened with names near other set up business substances Background of customer Suspicious foundation or connections with known hoodlums Multiple records Large number of records having a typical record holder, introducer or approved signatory with no method of reasoning Unexplained exchanges between numerous records with no justification

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" Reasons for Suspicion" for managing an account organizations Nature of exchanges Unusual or unjustified unpredictability No monetary basis or real reason Frequent buys of drafts or other debatable instruments with money Nature of exchanges conflicting with what might be normal from announced business Value of exchanges Value simply under the reporting edge sum in a clear endeavor to abstain from reporting Value conflicting with the customer's obvious budgetary standing

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Examples of Suspicious Transactions False Identification Documents Welcome pack gave back No individual discovered/address discovered t