FIU-IND’s 6-Step Battle Against Financial Crimes

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Mayur Joshi
Mayur Joshi
Mayur Joshi is a forensic accounting evangelist based out of Pune. He regularly contributes to the Regtechtimes. He is the forensic accounting and financial crimes evangelist in India who is instrumental in designing india's first certification program in Anti Money Laundering. He is the author of 7 books on the financial crimes and compliance subjects.

Financial Intelligence Unit India (FIU-IND) is a national agency established by the Central Government on 18th November 2004. Its main goal is to closely monitor and analyze suspected financial transactions in order to combat money laundering and related offenses under the Prevention of Money Laundering Act 2022.

FIU-IND plays a crucial role in strengthening cooperation between national and international bodies to combat money laundering activities. It collaborates with different financial institutions and foreign financial intelligence units to develop effective methods to tackle money laundering.

As an independent and autonomous agency, FIU-IND operates under the Ministry of Finance and directly reports to the Economic Intelligence Council (EIC) headed by the Finance Minister of India.

Functions of Financial Intelligence Unit India

Financial Intelligence Unit India is one of the premier central government organizations. It has 7 important functions.

Collection of Information

This agency receives various reports from reporting entities, including cash transaction reports, reports on financial transactions by non-profit organizations, international wire transfers, and reports on the purchase of properties in India.

Analysis of Information

The Financial Intelligence Unit carefully analyzes transactions occurring in India to identify suspected money laundering cases.

Sharing Information

The collected information is shared with other regulatory agencies, national intelligence/law enforcement agencies, and foreign financial intelligence units.

Acts as a Central Repository

FIU-IND serves as a central repository for all financial transactions and accounting reports in India, especially those from RBI, banks, and other institutions.

Coordinating with Other Agencies

The unit collaborates with institutes at regional, national, and international levels to improve the detection and handling of suspected financial activities.

Research and Development

The unit also conducts research on money laundering, terrorist financing, and other relevant areas. They also publish important research papers for the consumption of the professionals at large.

Punitive Actions

When someone breaks the rules set by the Prevention of Money Laundering Act (PMLA), the agency takes strict action against them. In December 2020, it fined PayPal, a big online payment company, Rs. 96 lakh for not following its directions properly. (In 2023 Paypal won the battle against FIU)

Meaning of Reporting Entity under Financial Intelligence Unit India

A reporting entity is any company engaged in banking activities or involved in the financial activities of a company engaged in Chit Funds. Reporting entities are required to register with FIU-IND and perform Customer Due Diligence (CDD) to verify their clients’ identities.

Types of Reporting Entities under FIU-IND

Reporting entities include banking companies, financial institutions, intermediaries, chit fund companies, co-operative banks, housing finance institutions, and Non-Banking Financial Companies (NBFCs).

Suspicious Transaction under FIU-IND

A suspicious transaction refers to any cash or non-cash transaction that raises reasonable suspicions of being an offense under money laundering schedules, leading to an unsafe environment, or involving financing of terrorism.

Maintenance of Records under FIU-IND

Reporting entities are required to maintain records of transactions for five years from the date of the transaction. These records include cash transactions over Rs. 10 lakhs, cross border wire transfers over Rs. 5 lakhs, and transactions involving non-profit organizations receiving Rs. 10 lakhs or more.

Reports to be submitted under Financial Intelligence Unit India

Reporting entities must submit different reports, such as Cash Transaction Reports (CTR), Suspicious Transaction Reports (STR), Counterfeit Currency Reports (CCR), Cross-Border Wire Transfer Reports (CBWTR), and reports on sale/purchase of immovable property.

Documents Required for Registering as an Entity 

The documents required for registration include identity and address details, relevant identification documents, certificates of incorporation, partnership deeds, trust deeds, and other related documents.

The Procedure of Registration

Entities need to register with FIU-IND by submitting applications and necessary documents for scrutiny. The registration process includes registering the reporting entity and the principal officer separately.

By adhering to the guidelines and procedures set by FIU-IND, reporting entities can contribute to a safer and more transparent financial system, helping prevent and combat money laundering activities in India.

Riskpro Learning offers various certification courses on the subject of AML and KYC which highlight the procedures of reporting information to Agency

Importance of FIU-Ind in Safeguarding the Financial System

Financial crimes like money laundering and terrorism financing pose significant threats to the stability and integrity of the financial system. FIU-IND plays a crucial role in detecting and preventing such activities, ensuring that India’s financial system remains safe and secure for its citizens and investors.

Safeguarding Against Money Laundering

Money laundering involves disguising the origins of illegally obtained funds to make them appear legitimate. By collecting and analyzing suspicious transaction reports, FIU-IND can identify and investigate potential money laundering activities. This helps stop criminals from using the financial system to launder their ill-gotten gains.

Combating Terrorism Financing

Terrorists often rely on the financial system to fund their illegal activities. Unit’s close collaboration with national and international agencies helps trace and prevent the flow of funds to terrorist organizations, thereby weakening their operations and ensuring national security.

Enhancing International Cooperation

Financial crimes often transcend national borders, making international cooperation vital in combating them. Intelligence Unit collaborates with other intelligence units globally, exchanging information and best practices to stay ahead of evolving financial crime trends.

Strengthening Regulatory Compliance

As a central repository of financial information, FIU-IND ensures that reporting entities follow regulatory guidelines and reporting requirements. This helps maintain the integrity of the financial system and ensures that businesses and individuals adhere to the law.

Promoting Transparency

By scrutinizing financial transactions and enforcing transparency measures, FIU-IND contributes to a more transparent and accountable financial system. This fosters trust among investors, businesses, and the public, leading to a healthier economic environment.

Supporting Law Enforcement Agencies

FIU-IND’s analysis and dissemination of financial information play a critical role in supporting law enforcement agencies’ investigations. By providing actionable intelligence, the agency aids in prosecuting financial criminals effectively.

Conclusion

The Financial Intelligence Unit India (FIU-IND) serves as a key pillar in safeguarding India’s financial system from money laundering, terrorism financing, and other financial crimes. Through its comprehensive role in collecting, analyzing, and sharing financial information, FIU-IND strengthens national efforts to combat financial offenses.

By maintaining close collaboration with national and international agencies, FIU-IND remains at the forefront of the fight against financial crimes. Its work enhances regulatory compliance, promotes transparency, and supports law enforcement in its mission to maintain the financial security and stability of the country.

As the financial landscape continues to evolve, the role of FIU-IND becomes increasingly vital. By adapting to emerging threats and leveraging advanced technologies, FIU-IND remains a crucial ally in protecting India’s financial system and maintaining its reputation as a responsible and secure financial hub.

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