Title: AML/CFT Regime The Indian Response
1AML/CFT RegimeThe Indian Response
FIU-IND Financial Intelligence Unit-India Ministry
of Finance, Government of India
2Presentation Summary
- Spotlight on Money Laundering Some facts
- Indian Response
- Legal Framework
- Institutional Framework
- Common Trends observed in STRs
- Key Issues emerging from Mutual Evaluation
FIU-IND Financial Intelligence Unit-India
3Spotlight on Money Laundering
FIU-IND Financial Intelligence Unit-India
4Spotlight Money Laundering
Tighter AML regulation in the US and Europe is
pushing money laundering activity into Asia
Pacific
Source Celent
FIU-IND Financial Intelligence Unit-India
5Spotlight Money Laundering
The perpetrators money laundering by criminal
sector
- Drugs, smuggling, organized crime?account for
over ¾ of all money laundering - Terrorist financing is a drop in the bucket in
real terms. Nevertheless it is driving todays
AML and KYC regulations - White collar crime, including embezzlement and
internal fraud, is a significant (and growing)
problem.
Source Celent
FIU-IND Financial Intelligence Unit-India
6Spotlight Money Laundering
The victims Money Laundering by industry sector
- The largest portion of laundered funds are
processed through banks. - Investment firmsincluding brokerages, mutual
fund companies, hedge fundsalso see a
significant amount of activity, attracting more
than 1/4 of money laundering. - Schemes targeting insurance companies are a
growth sector, now accounting for close to 10 of
activity.
Source Celent
FIU-IND Financial Intelligence Unit-India
7State of AML in Asia
Intensified AML policies of the US have produced
a ripple effect on the international regulatory
scene Asia still has very low technology
adoption most countries have only recently got
serious about AML Spending on anti-money
laundering solutions in Asia will grow faster
than in Europe or North America
FIU-IND Financial Intelligence Unit-India
Source Celent
8Money Laundering then and now
Continuity and Evolution
- Early 1990s
- Bank-centered techniques collection accounts,
loan back arrangements bank drafts, money orders
and cashiers cheques smurfing - Cash smuggling
- Accounts in relatives names, shell companies
- Hawala, hundi or other underground banking
systems
- 2010
- Wire transfers
- New electronic payment systems
- Remittance services and money exchange services
- Assistance from Gatekeepers
- Terrorist financing through non-profit
organizations - Insurance industry, particularly through
independent insurance agents - Politically Exposed Persons (PEPs)
FIU-IND Financial Intelligence Unit-India
Source Celent
9Indian Response
FIU-IND Financial Intelligence Unit-India
10Legal Framework
- AML regime
- NDPS Act 1985 (Section 8 A)
- PMLA 2002 (Section 3)
- CFT regime
- Unlawful Activities(Prevention) Act, 1967
FIU-IND Financial Intelligence Unit-India
11Anti-Money Laundering Legislation
- The Prevention of Money Laundering Act, 2002
(PMLA) enacted in 2003 to prevent money
laundering and to provide for confiscation of
property derived from, or involved in, money
laundering. - PMLA and rules notified thereunder came into
effect from 1st July, 2005. -
FIU-IND Financial Intelligence Unit-India
12The Legislative Journey
- The PML bill,1998 introduced in Lok Sabha - 4th
Aug,1998. - Referred to Standing committee on finance- 5th
Aug,1998. - The committee submitted report - 4th March,1999.
- The bill presented in Rajya Sabha - 8th
March,1999. - The PML, Bill 1999 presented in Lok Sabha -29th
Oct,1999 passed on 2nd Dec,1999. - Rajya Sabha referred the bill to Select
committee finalised report on 24th July, 2000. - The present Act received the assent of the
President of India on 17th January, 2003. - The PML Act comes into operation w.e.f 1st July,
2005 - PML(Amendment) Act 2009 comes into operation
w.e.f 6th March,2009 -
FIU-IND Financial Intelligence Unit-India
13Changes in Subordinate Legislation
- Definition of NPO
- Changes in the definition of Suspicious
Transaction attempted transaction regardless
of the value involved - Meaning of transaction involving financing of
the activities relating to terrorism explained - Reporting entity to maintain records of all
transaction which contain all necessary
information to permit reconstruction of
individual transaction - Record of receipt by NPOs of value more than Rs
10 lakh to be maintained and reported - Record of cash transaction to be maintained where
forged or counterfeit currency notes tendered - No specific mode of maintaining the information
- Period of ten years for retention of records -
from the date of transaction and not from the
date of cessation of the transaction
FIU-IND Financial Intelligence Unit-India
14Changes in Subordinate Legislation
- Confidentiality clause added for STR
- Rule 9 regarding KYC of client underwent a
complete overhaul - Account based relationship and other cases
- procedure for identity of Beneficial Owner
more stringent meaning of BO clarified - On going due diligence to ensure that
transaction is consistent with the knowledge of
client, his business , risk profile and source
of funds- - No anonymous account or account in fictitious
names - Review CDD measures/KYC in case of doubts of ML
and FT - Verification of identity of person acting on
behalf of juridical person - Copy of CIP not to be forwarded to Director
FIU-IND - For purpose of Rule 10, clarification inserted as
to - what would include as record of identity of
client - what would mean cessation of transaction
FIU-IND Financial Intelligence Unit-India
15Compliance Status
- Collection of Information
- More than 18 million Cash Transaction Reports
(CTRs) received - More than 18000 Suspicious Transaction Reports
(STRs) received - Analysis and Dissemination of Information
- More than 10000 STRs disseminated
- Collaboration with domestic Law Enforcement and
Intelligence Agencies - Regular interaction and exchange of information
-
- Regional and global AML/CFT efforts
- Exchanged information with 65 foreign FIUs
- 8 MOUs signed with foreign FIUs
FIU-IND Financial Intelligence Unit-India
16Compliance Status
- Increasing awareness about money laundering and
terrorist financing - More than 300 seminars and training workshops
covering more than 15000 participants - Train the trainer programme for AML/CFT capacity
building - Improving compliance to the PMLA
- More than 50 review meetings with Principal
officers
FIU-IND Financial Intelligence Unit-India
17Common Trends Observed in STRs
FIU-IND Financial Intelligence Unit-India
18Common Trends
- Large Scale fund transfer through RTGS in current
accounts followed with cash withdrawal - Cash withdrawals/ deposits just below threshold
limit of Rs 10 lacs - Multiple concerns registered on same address and
share common PAN - Payment of insurance premium in cash or by
multiple demand drafts - Rotation of funds in large number of bank
accounts controlled by a group of individuals - Business concerns having large number of accounts
in the names of employees - Muti-level marketing schemes mobilizing large
amounts from investors promising high returns and
siphoning off the money - Use of internet for lottery and employment fraud.
- Sale of shares through off market transfers
FIU-IND Financial Intelligence Unit-India
19Key Issues Emerging from Mutual Evaluation
FIU-IND Financial Intelligence Unit-India
20Concerns
- Inadequate number of STRs compared with the
volume of transaction and market size - Effectiveness concern due to absence of ML
conviction - Threshold condition for domestic predicate
offence - Risk of TF through foreign NPOs
- Detection of FICN
- Few sanctions that supervisors have applied for
non-compliance - DNFBP sector not subjected to PMLA (except
Casino) - Risk based CDD obligations
- Improve reliability of identification document
- PEPs/non face to face customers and businesses
- India-Post
FIU-IND Financial Intelligence Unit-India
21- Address
- Financial Intelligence Unit - India
- 6th Floor, Hotel Samrat
- Kautilya Marg, Chanakyapuri
- New Delhi -110021, India
- Telephone
- 91-11-26874365 (For Queries)
- FAX
- 91-11-26874459
- Website
- http//fiuindia.gov.in
- Email
- feedbk_at_fiuindia.gov.in (For feedback)
- query_at_fiuindia.gov.in (For general queries)
- ctrcell_at_fiuindia.gov.in (For CTR related queries)
THANK YOU amitav_at_fiuindia.gov.i
n