Anti Money Laundering – Indian Perspective
Introduction:
The Guidelines, as described below, provide general information on money laundering and terrorist financing issues, summarize the main provisions of the applicable money laundering and terrorist financing legislation in India and provide guidance on the practical implications of the Act. The Guidelines also set out the steps that a registered intermediary and any of its representatives must implement to deter and identify any money laundering terrorist financing activity. These Guidelines are primarily intended for intermediaries registered under Section 12 of the SEBI Act 1992. While it is recognized that a “one size fits all” approach may not be appropriate for the securities industry in the country, each registered intermediary must consider the specific nature of its business, organizational structure, type of clients and transactions, etc. by implementing the suggested measures and procedures to ensure that they are applied effectively. The overriding principle is that they must be able to convince them that the measures taken by them are adequate, appropriate and follow the spirit of these measures and the requirements enshrined in the Money Laundering Prevention Act 2002.
Background:
The Prevention of Money Laundering Act, 2002 came into force on July 1, 2005. The Department of Revenue, Ministry of Finance, Government of India published the Notices/Rules required under the said Act in the Gazette of India on July 1, 2005.
In accordance with the provisions of the Act, every banking company, financial institution (including a chit fund company, a cooperative bank, a housing finance institution and a non-bank finance company) and intermediary (including a stockbroker, sub – broker, stock transfer agent, issue banker, trustee of a deed of trust, registrar of an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary related to the securities market and registered under section 12 of the Securities and Exchange Board of India Act, 1992) shall keep a record of all transactions; whose nature and value have been prescribed in the PMLA Rules. Such transactions include:
All cash transactions worth more than Rs 10 Lacs or its equivalent in foreign currency. All series of cash transactions connected integrally with each other that have been valued below Rs 10 lakhs or its equivalent in foreign currency when said series of transactions is carried out within a calendar month.
All suspicious transactions, whether or not made in cash and including, among other things, credits or debits in any non-cash account, such as the d-mat account, security account maintained by the registered intermediary.
However, it can be clarified that for the purposes of reporting suspicious transactions, in addition to “integrally connected transactions”, “remote connected or related transactions” should also be considered.
What is money laundering?
Money laundering consists of disguising financial assets so that they can be used without the illegal activity that produced them being detected. Through money laundering, the launderer transforms the monetary proceeds derived from criminal activity into funds with an apparently legal source.
Policies and Procedures to Combat Money Laundering and Terrorism
Money:
These Guidelines have taken into account the requirements of the Prevention of Money Laundering Law of 2002 applicable to intermediaries registered under article 12 of the SEBI Law. The detailed guidelines have outlined relevant laundering measures and procedures to guide registered intermediaries in preventing the money and financing of terrorism. Some of these suggested measures and procedures may not be applicable in all circumstances. Each intermediary must carefully consider the specific nature of its business, organizational structure, type of customer and transaction, etc. to ensure that the measures taken by them are adequate and appropriate to follow the spirit of the measures suggested and the requirements set out in the PML Act 2002.
Obligation to establish policies and procedures:
The international initiatives adopted to combat drug trafficking, terrorism and other serious and organized crimes have concluded that financial institutions, including stock market intermediaries, must establish internal control procedures aimed at preventing and impeding money laundering and financing of terrorism. Such an obligation on intermediaries has also been imposed under the Prevention of Money Laundering Act 2002. To meet these requirements, it is also necessary for registered intermediaries to have a system to identify, monitor and report suspected money laundering or activity. terrorists. financing operations to law enforcement authorities.
Money Laundering Prevention Procedures:
Each registered intermediary must adopt written procedures to implement the anti-money laundering provisions as provided in the Prevention of Money Laundering Act 2002. Such procedures must include, among others, the following three specific parameters that are related to the ‘ General Customer Due Diligence Process:
has. Customer Acceptance Policy
b. Procedure to identify customers
against Monitoring particularly suspicious transactions and reports
Transaction Reports (STR)
What is a crime of money laundering?
Anyone who, directly or indirectly, tries to please or knowingly helps or knowingly is part of or effectively participates in any process or activity related to the proceeds of crime and projects it as immaculate property will incur the crime of money laundering.
person includes:
(I) an individual
(ii) a Hindu undivided family,
(iii) a company,
(iv) firm,
(v) an association of persons or a group of individuals, whether constituted or not,
(vi) any artificial legal entity that is not included in any of the previous sub-clauses, and
(vii) any agency, office or branch owned or controlled by any of the persons mentioned in the preceding sub-clauses;
Laws on procedures against money laundering
o The Prevention of Money Laundering Act 2002 (PMLA 2002)
forms the core of the legal framework established by India to combat money laundering. PMLA 2002 came into force as of July 1, 2005. It imposes the obligation on banking companies, financial institutions and intermediaries to verify the identity of clients, keep records and provide information to the FIU-IND.
o Foreign Exchange Management Act, 1999 prescribes controls and limitations on certain foreign exchange remittances.
o Benami Transactions (Prohibition) Act, 1988, prohibits transactions in which property is transferred to one person for consideration paid or provided by another person.
o The Narcotic Drugs and Psychotropic Substances Act of 1985 provides for the confiscation of proceeds of sale acquired in connection with any narcotic drug or psychotropic substance and any product used to conceal such drugs. It provides for the confiscation of any illegally acquired property.
o The Law for the Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988 authorizes the detention of persons to prevent the illicit traffic in narcotic drugs and psychotropic substances.
o Know Your Customer Guidelines: Introduced by the Reserve Bank of India to Indian banks to reduce financial fraud and identify money laundering transactions. The obligations imposed by these guidelines were reduced in October 2007 to allow foreigners and non-resident Indians to receive cash payments of up to $3,000 from money changers. Acceptable identity documentation was also expanded to allow moneychangers to accept a broader class of documents as evidence of a business relationship.
o Guidelines for Anti-Money Laundering Measures The Securities and Exchange Board of India (SEBI) has published guidelines for capital market intermediaries under the PMLA 2002. The guidelines refer to all intermediaries registered with SEBI, a group which includes institutional investors, brokers and portfolio managers. .
“In November 2006, the Insurance Regulatory and Development Authority of India issued anti-money laundering guidelines exempting general insurance companies from the need to comply with certain entry-level checks on customers.”
On April 17, 2008, India finalized amendments to broaden the scope of its AML laws. The amendments will expand these laws to include international credit card transactions, money transfers and crimes with “cross-border implications” within their scope. The amendments allow for “single offence”, whereby a transaction only needs to be illegal in India, and not in the other state involved, to risk being prosecuted for money laundering offences. The amendments will also expand the scope of anti-money laundering laws to include casinos, credit card companies and money exchanges. It is reported that the Union Cabinet of India has approved the amendments for submission to parliament.
Under what circumstances is a lawyer required to report?
Currently, there is no specific law that requires a lawyer to report a money laundering crime
Liability of the lawyer?
There are no current obligations for customer identification and verification.
Customer identification and verification
Indian lawyers usually do it, but not because there is an obligation. Section 12 of the PMLA 2002, requires each banking company, financial institution and intermediary to verify and maintain the identity records of all its clients, as prescribed by Rule 9 of the Rules notified by Notification No.9/2005
conclusion
The Act is a first step towards comprehensive legislation to prevent money laundering and has placed India on an equal footing with its international counterparts. Another good part is that it has also included banks and financial institutions, which channel Money Laundering activities, within its scope, imposing certain obligations on them.
The genesis of a money laundering related transaction may be India, however it may extend to other territorial borders. Hence, international cooperation is necessary to fight against it. Taking into account this vital aspect, the provisions related to reciprocal arrangements with other countries have been established to enforce the provisions of this Law, exchange of any information or assistance for the transfer of the accused person for the prevention of the crime provided for in this Law. Law. clearly provided for in the Law itself. All this ensures a regime under which Money Laundering will be understood as a serious crime and its practice will have serious consequences.
