Anti Money Laundering – Indian Perspective

Introduction:
The Guidelines as outlined beneath gives a trendy historical past on the topics of Laundering cash and terrorist financing summarizes the principle provisions of the applicable laundering cash and anti-terrorist financing rules India and gives guidance on the practical implications of the Act. The Guidelines also sets out the stairs that a registered middleman and any of its representatives, need to put in force to discourage and discover any cash laundering terrorist financing sports. These Guidelines are intended to be used often by intermediaries registered under Section 12 of the SEBI Act, 1992. While it is identified that a “one-size-fits-all” method won’t be suitable for the securities industry in Country, each registered intermediary should do not forget the unique nature of its business, organizational shape, sort of customers and transactions, and so on. Whilst enforcing the advised measures and methods to ensure that they may be efficiently applied. The overriding precept is they ought to be capable of satisfy them that the measures taken by way of them are ok, suitable and comply with the spirit of these measures and the necessities as enshrined in Prevention of Money laundering Act Act, 2002

Back Ground:
The Prevention of Money laundering Act, 2002 has come into impact from 1stJuly 2005. Necessary Notifications / Rules under the said Act have been published in the Gazette of India on 1stJuly 2005 via the Department of Revenue, Ministry of Finance, Government of India.

As in keeping with the provisions of the Act, every banking employer, monetary group (which includes chit fund organisation, a co-operative financial institution, a housing finance institution and a non-banking financial corporation) and intermediary (which includes a stock-broker, sub-broker, percentage transfer agent, banker to an problem, trustee to a agree with deed, registrar to an difficulty, merchant banker, underwriter, portfolio manager, investment adviser and another intermediary related to securities marketplace and registered underneath section 12 of the Securities and Exchange Board of India Act, 1992) shall need to hold a record of all the transactions; the nature and cost of which has been prescribed within the Rules underneath the PMLA. Such transactions encompass:

All coins transactions of the cost of greater than Rs 10 Lacs or its equivalent in foreign currency. All collection of cash transactions integrally connected to every different which have been valued below Rs 10 lakhs or its equivalent in overseas forex where such series of transactions take place inside one calendar month.

All suspicious transactions whether or not or now not made in coins and along with, inter-alia credit or debits into from any non financial account consisting of d-mat account, protection account maintained by using the registered middleman.

It may, however, be clarified that for the purpose of suspicious transactions reporting, apart from ‘transactions integrally linked’, ‘transactions remotely connected or associated’ have to additionally be taken into consideration.

What is cash laundering?

Money laundering involves disguising monetary belongings so they may be used with out detection of the illegal interest that produced them. Through money laundering, the launderer transforms the economic proceeds derived from criminal interest into price range with an apparently prison supply.

Policies and Procedures to Combat Money Laundering and Terrorist
Financing:

These Guidelines have taken into consideration the requirements of the Prevention of the Money laundering Act, 2002 as relevant to the intermediaries registered under Section 12 of the SEBI Act. The unique hints have outlined applicable measures & laundering techniques to manual the registered intermediaries in preventing money and terrorist financing. Some of those advised measures and methods might not be relevant in every situation. Each intermediary need to bear in mind carefully the precise nature of its business, organizational structure, kind of purchaser and transaction and so forth. To fulfill itself that the measures taken by means of them are good enough and appropriate to observe the spirit of the counseled measures and the requirements as laid down in the PML Act, 2002.

Obligation to set up regulations and processes:

International tasks taken to combat drug trafficking, terrorism and other organized and severe crimes have concluded that financial establishments which include securities marketplace intermediaries must establish procedures of inner control aimed toward preventing and impeding money laundering and terrorist financing. The stated duty on intermediaries has additionally been obligated underneath the Prevention of Money laundering Act, 2002. In order to satisfy these necessities, there’s additionally a need for registered intermediaries to have a machine in area for figuring out, monitoring and reporting suspected laundering or terrorist financing transactions to the regulation enforcement government.

Procedures for Anti Money Laundering:

Each registered middleman ought to undertake written procedures to put in force the Anti Money Laundering provisions as envisaged underneath the Prevention of Money laundering Act, 2002. Such methods have to include inter alia, the following three unique parameters which are related to the overall ‘Client Due Diligence Process:
a. Policy for recognition of clients
b. Procedure for figuring out the clients
c. Transaction monitoring and reporting specially Suspicious
Transactions Reporting (STR)

What is a Money Laundering offence?

Whosoever directly or indirectly tries to indulge or knowingly assists or knowingly is a celebration or is honestly worried in any procedure or hobby related with the proceeds of crime and projecting it as untainted assets will be guilty of offence of cash laundering.

Person consists of:

(i) tax evasion
(ii) a Hindu undivided circle of relatives,
(iii) a business enterprise,
(iv) firm,
(v) an affiliation of individuals or a frame of people whether incorporated or now not,
(vi) each artificial juridical man or woman no longer falling inside any of the preceding sub-clauses, and
(vii) any organisation, office or branch owned or managed by using any of the above men and women cited inside the previous sub-clauses;

Laws concerning anti money laundering methods
o The Prevention of Money Laundering Act 2002 (PMLA 2002)
it forms the core of the legal framework put in location by India to combat cash laundering. PMLA 2002 got here into force with effect from July 1, 2005. It imposes an obligation on banking organizations, financial establishments and intermediaries to affirm the identity of customers hold information and grant facts to FIU-IND.
O Foreign Exchange Management Act, 1999 it prescribes exams and obstacles on positive forex remittances.
O Benami Transactions (Prohibition) Act, 1988 it prohibits transactions wherein assets is transferred to one individual for attention paid or provided through any other character.
O The Narcotics Drugs and Psychotropic Substances Act, 1985 it affords for confiscating sale proceeds received with regards to any narcotic drug or psychotropic substance and any items used to conceal such capsules. It presents for forfeiture of any illegally received property.
O The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988 it authorizes detaining folks to prevent illicit traffic in narcotic tablets and psychotropic substances.
O Know-Your-Customer Guidelines it was brought by means of The Reserve Bank of India to banks in India to lessen monetary frauds and become aware of cash-laundering transactions. The duties imposed by means of these recommendations had been reduced in October 2007 to permit foreigners and non-resident Indians to obtain cash bills of up to $3,000 from money changers. Acceptable identification documentation become additionally elevated to permit cash changers to simply accept a much wider magnificence of documents as evidence of a enterprise courting.
O Guidelines for anti-cash laundering measures The Securities and Exchange Board of India (SEBI) has published hints for capital marketplace intermediaries underneath the PMLA 2002. The hints issue all intermediaries registered with SEBI – a grouping that consists of institutional traders, brokers and portfolio managers.
“In November 2006, India’s Insurance Regulatory and Development Authority issued anti-money laundering recommendations that exempt wellknown insurance businesses from the want to conform with positive entry-stage assessments on customers.”
On 17 April 2008, India finalized amendments to increase the reach of its AML laws. The amendments will make bigger those laws to convey international credit card transactions, cash transfers, and offences with “pass border implications” inside their ambit. The amendments permit for “single criminality”, wherein a transaction best needs to be illegal in India, and no longer inside the different nation involved, with a purpose to hazard prosecution for money laundering offenses. The amendments may also increase the reach of the anti-cash laundering legal guidelines to consist of casinos, credit card businesses, and money changes. It has been mentioned that India’s Union Cabinet has accredited the amendments for advent to parliament.
Under what circumstances is a lawyer under responsibility to document?

Currently, there may be no particular law obliging a lawyer to file a money laundering offense