No- Money Laundering – Indian Viewpoint

The Guidelines as outlined below offers a general background on the subjects associated with Laundering money and terrorist funding summarizes the main provisions of the applicable laundering money and anti-terrorist funding legislation India and provides guidance on the particular practical implications of the Act. The rules also sets out the steps that the registered intermediary and any of the representatives, should implement to discourage and identify any money laundering terrorist financing activities. These Guidelines are intended for use primarily by intermediaries signed up under Section 12 of the SEBI Act, 1992. While it is identified that a “one-size-fits-all” approach may not be appropriate for the securities industry in Nation, each registered intermediary should consider the specific nature of its business, organizational construction, type of customers and transactions, etc . when implementing the suggested procedures and procedures to ensure that they are successfully applied. The overriding principle is they should be able to satisfy them that the measures taken by them are adequate, appropriate and follow the spirit of these measures as well as the requirements as enshrined in Prevention of Money laundering Act, 2002

Back Ground:
The Prevention of Money laundering Take action, 2002 has come into effect through 1stJuly 2005. Necessary Notifications and Rules under the said Act have been published in the Gazette of India on 1stJuly 2005 by the Department of Revenue, Ministry of Fund, Government of India.

As per the provisions of the Act, every financial company, financial institution (which includes chit fund company, a co-operative bank, a housing finance institution and also a non-banking financial company) and intermediary (which includes a stock-broker, sub-broker, discuss transfer agent, banker to an concern, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary associated with securities marketplace and registered under section twelve of the Securities and Exchange Board of India Act, 1992) will have to maintain a record of all the dealings; the nature and value of which has been prescribed in the Rules under the PMLA. This kind of transactions include:

All cash dealings of the value of more than Rs ten Lacs or its equivalent within foreign currency. All series of cash dealings integrally connected to each other which have been appreciated below Rs 10 lakhs or its equivalent in foreign currency exactly where such series of transactions take place within one calendar month.

All suspicious dealings whether or not made in cash and which includes, inter-alia credits or debits straight into from any non monetary account such as d-mat account, security accounts maintained by the registered intermediary.

It may, however , be clarified that for the purpose of suspicious transactions reporting, apart from ‘transactions integrally connected’, ‘transactions remotely connected or related’ should also be considered.

What exactly is money laundering?

Money laundering involves disguising financial assets so that they can be taken without detection of the illegal exercise that produced them. Through money laundering, the launderer transforms the particular monetary proceeds derived from criminal exercise into funds with an apparently lawful source.

Policies and Procedures to Combat Money Laundering and Terrorist

These Guidelines have taken into consideration the requirements of the Prevention of the Cash laundering Act, 2002 as relevant to the intermediaries registered under Area 12 of the SEBI Act. The particular detailed guidelines have outlined appropriate measures & laundering procedures to guide the registered intermediaries in avoiding money and terrorist financing. A few of these suggested measures and procedures might not be applicable in every circumstance. Each intermediary should consider carefully the specific nature from the business, organizational structure, type of customer and transaction etc . to satisfy alone that the measures taken by them are adequate and appropriate to follow the nature of the suggested measures and the requirements as laid down in the PML Act, 2002.

Obligation to establish guidelines and procedures:

International initiatives delivered to combat drug trafficking, terrorism along with other organized and serious crimes have got concluded that financial institutions including securities marketplace intermediaries must establish procedures associated with internal control aimed at preventing and impeding money laundering and terrorist financing. The said obligation on intermediaries has also been obligated under the Prevention of Money laundering Act, 2002. To be able to fulfill these requirements, there is also a need for registered intermediaries to have a system in place for identifying, monitoring and confirming suspected laundering or terrorist funding transactions to the law enforcement authorities.

Techniques for Anti Money Laundering:

Every registered intermediary should adopt created procedures to implement the No- Money Laundering provisions as envisaged under the Prevention of Money laundering Take action, 2002. Such procedures should include inter alia, the following three specific guidelines which are related to the overall ‘Client Research Process:
a. Policy for approval of clients
b. Procedure for determining the clients
c. Transaction supervising and reporting especially Suspicious
Dealings Reporting (STR)

What is a Money Laundering offence?

Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a celebration or is actually involved in any procedure or activity connected with the profits of crime and projecting it as untainted property shall be guilty of offence of money laundering.

Person contains:

(i) an individual
(ii) a Hindu undivided family,
(iii) a company,
(iv) firm,
(v) an association of individuals or a body of individuals whether incorporated or not,
(vi) every artificial juridical person not falling within any of the preceding sub-clauses, and
(vii) any agency, office or branch possessed or controlled by any of the over persons mentioned in the preceding sub-clauses;

Laws regarding anti money washing procedures
o The Prevention of Money Washing Act 2002 (PMLA 2002)
it forms the core of the lawful framework put in place by India in order to combat money laundering. PMLA 2002 came into force with effect from July 1, 2005. It imposes an obligation on banking companies, financial institutions and intermediaries to verify the particular identity of clients maintain records and furnish information to FIU-IND.
o Foreign Exchange Management Act, 1999 it prescribes checks and restrictions on certain foreign exchange remittances.
um Benami Transactions (Prohibition) Act, 1988 it prohibits transactions in which real estate is transferred to one person for concern paid or provided by another person.
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o The Narcotics Drugs and Psychotropic Substances Act, 1985 it provides intended for confiscating sale proceeds acquired in relation to any narcotic drug or psychotropic substance and any goods utilized to conceal such drugs. It provides for forfeiture of any illegally acquired property.
o The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988 it authorizes detaining persons to prevent illicit traffic in narcotic drugs and psychotropic substances.
o Know-Your-Customer Guidelines it had been introduced by The Reserve Bank associated with India to banks in Indian to reduce financial frauds and determine money-laundering transactions. The obligations imposed by these guidelines were decreased in October 2007 to allow foreigners and non-resident Indians to receive cash payments of up to $3, 000 from money changers. Acceptable identity documents was also expanded to allow money changers to accept a wider class of documents as evidence of a business connection.
o Guidelines for anti-money washing measures The Securities and Swap Board of India (SEBI) offers published guidelines for capital market intermediaries under the PMLA 2002. The rules concern all intermediaries registered with SEBI – a grouping that includes institutional investors, brokers and portfolio managers.
“In November 2006, India’s Insurance Regulatory and Development Authority issued anti-money laundering guidelines that will exempt general insurance companies from the have to comply with certain entry-level checks upon customers. ”
On 17 April 2008, India finalized amendments to broaden the reach of its AML laws. The amendments will expand these laws to bring international bank card transactions, money transfers, and accidents with “cross border implications” inside their ambit. The amendments allow for “single criminality”, whereby a transaction only needs to be illegal in India, and never in the other state involved, to be able to risk prosecution for money laundering offenses. The amendments will also expand the reach of the anti-money laundering laws and regulations to include casinos, credit card companies, and cash changes. It has been reported that India’s Union Cabinet has approved the particular amendments for introduction to parliament.
Under what circumstances is a lawyer under obligation to report?

Currently, there is no specific law obliging a lawyer to report a money laundering criminal offense

Lawyer’s responsibility?
No current responsibilities for client identification and confirmation

Client’s identification and verification
Indian lawyers normally do so, but not because there is any obligation. Section 12 from the PMLA 2002, requires every financial company, financial institution and intermediary in order to verify and maintain the records from the identity of all its clients, since prescribed by Rule 9 from the Rules notified by Notification No . 9/2005

The Act is really a first step towards a comprehensive legislation for preventing Money Laundering and has placed India on equal footing to its international counterparts. An additional best part is that it has also included the particular banks and financial institutions, which channelize Money Laundering activities, within the ambit, by imposing certain responsibilities upon them.
The genesis of a transaction pertaining to Money Laundering might be India, however , it may spread to territorial boundaries. Hence international cooperation is necessary to fight against it. Keeping in mind this vital aspect, the procedures relating to the reciprocal arrangements with other countries to enforce the procedures of this Act, exchange of any information or assistance for the transfer of accused person for the prevention of the offence under this Act, happen to be clearly provided for in the Work itself. All this ensures a regime under which Money Laundering will construe to be a serious crime and its practice shall lead to serious outcomes.

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