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 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 discourage and identify any money laundering terrorist financing activity. These Guidelines are primarily intended for intermediaries registered under Section 12 of the SEBI Act of 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. when implementing the suggested measures and procedures to ensure that they are effectively applied. The overriding principle is that you 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 Prevention of Money Laundering Act 2002.
Background:
The Prevention of Money Laundering Act, 2002 came into effect on 1 July 2005. The Revenue Department, Ministry of Finance, Government of India published the Notices/Rules required under the said Act in the Gazette of India. on July 1, 2005.
According to the provisions of the Law, every banking company, financial institution (including chit fund company, cooperative bank, housing finance institution and non-bank finance company) and intermediary (including stockbroker, sub – broker, stock transfer agent, banker of an issue, trustee of a deed of trust, registrar of an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary relating to the stock 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 has been prescribed in the PMLA Rules. Such transactions include:
All cash transactions worth more than Rs 10 Lacs or its foreign currency equivalent. All series of cash transactions integrally connected to each other that have been valued below Rs 10 lakhs or its foreign currency equivalent when such series of transactions takes place within one calendar month.
All suspicious transactions, whether or not made in cash and including, among other things, credits or debits to any non-monetary account, such as the d-mat account, a security account maintained by the registered intermediary.
However, it can be clarified that for the purposes of suspicious transaction reporting, in addition to “integrally connected transactions”, “remotely 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 detection of the illegal activity that produced them. Through money laundering, the launderer transforms the monetary income 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 Act 2002 applicable to intermediaries registered under section 12 of the SEBI Act. The detailed guidelines have outlined relevant laundering measures and procedures to guide registered intermediaries in preventing money and terrorist financing. 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 client and transaction, etc. to ensure that the measures taken by them are adequate and appropriate to follow the spirit of the suggested measures 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 preventing asset laundering and financing. of terrorism. Such an obligation on intermediaries has also been imposed under the Money Laundering Prevention Act 2002. In order to comply with these requirements, it is also necessary for registered intermediaries to have a system to identify, monitor and report suspected 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 for in the Prevention of Money Laundering Act 2002. Such procedures must include, but are not limited to, the following three specific parameters that are related to the ‘ General Client Due Diligence Process:
A. Customer Acceptance Policy
b. Procedure to identify customers
against Monitoring especially suspicious transactions and reporting
Transaction Reports (STR)
What is a Money Laundering crime?
The crime of money laundering will be committed by 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.
person includes:
(I) an individual
(ii) an undivided Hindu family,
(iii) a company,
(iv) firm,
(v) an association of persons or a group of individuals, whether constituted or not,
(vi) any artificial legal person 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 regarding procedures against money laundering
o The Prevention of Money Laundering Act of 2002 (PMLA 2002)
it forms the core of the legal framework established by India to combat money laundering. PMLA 2002 entered 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 The Benami Transaction (Prohibition) Act, 1988, prohibits transactions in which property is transferred to a person in exchange for consideration paid or provided by another person.
o The Narcotic Drugs and Psychotropic Substances Act 1985 provides for the forfeiture of proceeds of sale acquired in connection with any narcotic or psychotropic substance and any proceeds used to conceal such drugs. Provides for the forfeiture 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: The Reserve Bank of India introduced these to banks in India 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 has also been expanded to allow exchangers 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 pertain 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 that exempt general insurance companies from the need to comply with certain entry-level controls 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 need only be illegal in India, and not in the other state involved, to risk prosecution 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. The Union Cabinet of India has reportedly approved the amendments for submission to parliament.
In what circumstances does a lawyer have the obligation to inform?
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, 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 customers, 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 this vital aspect into account, the provisions relating 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. 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.
