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Sankhla & Associates Law Firm - Blogs Blog Archive ANTI MONEY LAUNDERING: INDIAN PERSPECTIVE
5/21/13
Sankhla & Associates Law Firm - Blogs Blog Archive ANTI MONEY LAUNDERING: INDIAN PERSPECTIVE
appropriate to follow the spirit of the suggested measures and the requirements as laid down in the PML Act, 2002. Obligation to establish policies and procedures: International initiatives taken to combat drug trafficking, terrorism and other organized and serious crimes have concluded that financial institutions including securities market intermediaries must establish procedures of 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. In order to fulfill these requirements, there is also a need for registered intermediaries to have a system in place for identifying, monitoring and reporting suspected laundering or terrorist financing transactions to the law enforcement authorities. Procedures for Anti Money Laundering: Each registered intermediary should adopt written procedures to implement the Anti Money Laundering provisions as envisaged under the Prevention of Money laundering Act, 2002. Such procedures should include inter alia, the following three specific parameters which are related to the overall Client Due Diligence Process: a. Policy for acceptance of clients b. Procedure for identifying the clients c. Transaction monitoring and reporting especially Suspicious Transactions Reporting (STR) What is a Money Laundering offence? Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence 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 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 owned or controlled by any of the above persons mentioned in the preceding sub-clauses; Laws regarding anti money laundering procedures The Prevention of Money Laundering Act 2002 (PMLA 2002) it forms the core of the legal framework put in place by India 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 identity of clients maintain records and furnish information to FIU-IND. Foreign Exchange Management Act, 1999 it prescribes checks and limitations on certain foreign exchange remittances. Benami Transactions (Prohibition) Act, 1988 it prohibits transactions in which property is transferred to one person for consideration paid or provided by another person. The Narcotics Drugs and Psychotropic Substances Act, 1985 it provides for confiscating sale proceeds acquired in relation to any narcotic drug or psychotropic substance and any goods used to conceal such drugs. It provides for forfeiture of any illegally acquired property.
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5/21/13
Sankhla & Associates Law Firm - Blogs Blog Archive ANTI MONEY LAUNDERING: INDIAN PERSPECTIVE
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. Know-Your-Customer Guidelines it was introduced by The Reserve Bank of India to banks in India to reduce financial frauds 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 money changers to accept a wider class of documents as evidence of a business relationship. 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 concern all intermediaries registered with SEBI a grouping that includes institutional investors, brokers and portfolio managers. In November 2006, Indias Insurance Regulatory and Development Authority issued anti-money laundering guidelines that exempt general insurance companies from the need to comply with certain entry-level checks on customers. On 17 April 2008, India finalized amendments to broaden the reach of its AML laws. The amendments will extend these laws to bring international credit card transactions, money transfers, and offences with cross border implications within their ambit. The amendments allow for single criminality, whereby a transaction only needs to be illegal in India, and not in the other state involved, in order to risk prosecution for money laundering offenses. The amendments will also expand the reach of the anti-money laundering laws to include casinos, credit card companies, and money changes. It has been reported that Indias Union Cabinet has approved the 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 offence Lawyers responsibility? No current obligations for client identification and verification Clients identification and verification Indian lawyers normally do so, but not because there is any obligation. Section 12 of the PMLA 2002, requires every banking company, financial institution and intermediary to verify and maintain the records of the identity 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 a comprehensive legislation for preventing Money Laundering and has placed India on equal footing to its international counterparts. Another best part is that it has also included the banks and financial institutions, which channelize Money Laundering activities, within its ambit, by imposing certain obligations upon them. The genesis of a transaction pertaining to Money Laundering may be India, however, it may spread to other territorial boundaries. Hence international cooperation is necessary to fight against it. Keeping in mind this vital aspect, the provisions relating to the reciprocal arrangements with other countries to enforce the provisions of this Act, exchange of any information or assistance for the transfer of accused person for the prevention of the offence under this Act, have been clearly provided for in the Act itself. All this ensures a regime under which Money Laundering shall construe to be a serious crime and its practice shall lead to serious consequences. AUTHOR Swadha Kharbanda Advocate Sankhla & Associates Commercial and Corporate Law Firm Tags: 1992, 2002, ANTI MONEY LAUNDERING, epartment of Revenue, Government of India, Ministry of Finance, SEBI Act, The Prevention of Money laundering Act
This entry was posted on Thursday, May 21st, 2009 at 2:38 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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5/21/13
Sankhla & Associates Law Firm - Blogs Blog Archive ANTI MONEY LAUNDERING: INDIAN PERSPECTIVE
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