The Prevention of Money Laundering Act, 2002rmaca.co.in/development/images/pdf/PMLA... · on...

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The Prevention of Money Laundering

Act, 2002

CA Rajiv Mehrotra, Kanpur DISA (ICAI)

The recent spurt in usage of PMLA by the

Government

� Case of 2007 now ED has taken the same under PMLA in

case of Karti Chidambram- Issue taking of bribe and also

conduting illegally fund overseas through illegal means.

� Misa Bharti- acquisition of property in Delhi through

unexplained sources. The shell companies had purchased

equity shares at high premium and properties

purchased.(Property Value 1.20 cr)

� Veerbhadra Singh (Ex-CM HP)- Rs 10 cr property

acquired disproportionate asset case.


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The recent spurt in usage of PMLA by the

Government

� Nirav Modi- Fraudulently using the bank mechanism for

sourcing and parking funds out of India. LOC

� Jagan Mohan Reddy – FIR of 2004- ED attachment and

continuation in 2018 for taking bribes in from of huge

equity premiums and acquiring properties from that.

� All resulted in attachment of properties.


The BOB Case- Facts as available online

� BOB’s Ashok Vihar, Delhi Branch is an authorised Forex Branch.

� It is alleged that:

there have been illegal remittances of approx. Rs.6172 Crore to Hong

Kong from this Branch between Aug 14 to Aug 15.

Some 59 current accounts were opened with the branch, through which

outbound fund transfers have been made for importing dry fruits, rice,

pulses etc.

The remittances were made as advance against imports and were kept

below $100000 to avoid suspicion. No confirmation of import was

obtained by the Branch inspite of specific guidelines.


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The BOB Case- Facts as available online

� It is alleged that:

There have been cash deposits in these current accounts, which were

also not reported.

No Exceptional Transaction Reports (ETR) and Suspicious Transaction

Reports (STR) were filed with the RBI.

� The services of the Concurrent Auditor have been terminated.

� Several persons and premises have been raided and several arrests have

been made.

� The bank, in its quarterly results has provided for a loss of Rs.11 crores

on account unreconciled entries arising from the above transactions.


Latest statics as given by the Government in

Lok Sabha

� In last 3 years (till Feb 2018) in 605cases the assets

attached have been 27982 cr.

� Frauds reported by banks in the years 2014-15 to 2016-17

i.e last three years are more than 12000.

� RBI has given a direction regarding direction and

classification of frauds.


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RBI Direction on classification as fraud

� Misappropriation and criminal breach of trust.

� Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property.

� Unauthorised credit facilities extended for reward or for illegal gratification.

� Cash shortages.

� Cheating and forgery.

� Fraudulent transactions involving foreign exchange

� Any other type of fraud not coming under the specific heads as above.


The What & Why of

Money Laundering?


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Money Laundering- Objective

(a) To avoid detection and possible confiscation of money

acquired through illegal means, criminals need to provide a

clock of legitimacy to such proceeds.

(b) Moreso in view of the tightening regulation for usage

movement and investment of money by most Countries.


Money Laundering- The Concept

• Money laundering is

– the process by which

– the proceeds of the crime,

– and the true ownership of those proceeds,

– are concealed or made opaque so that the proceeds

appear to come from a legitimate source.


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Steps in Money Laundering


PLACEMENT

LAYERING

INTEGERATION

A/c 3 A/c 4

A/c 5

A/c 6

A/c 7 A/c 8

A/c 1

A/c 2

A/c 9

Investment

Techniques In Money Laundering

PLACEMENT Layering Integration

- Shipping Money

Abroad

- Placement

through Banks

- Electronic Wire

Transfers

- Insurance

Products

- Investment

Related

Transactions

NBFCs

- Tax Havens &

Offshore Banks

- Bank Secrecy Law as

a layering Tool

- Corporations & Shell

Companies as a

layering tool

- Use of trusts

- Use of walk-in

accounts

- Use of Intermediaries

- Use of haven bank credit Cards

- Receiving as consulting or

directors fee

- Arrangement of corporate loans

- Proceeds of gambling

- Real estate transactions

- Stock Purchase

- Use in business

- International importing and

exporting

- Use of free trade zones


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Certain Money laundering techniques

Structuring: Often known as “smurfing”, is a method of

placement by which cash is broken into smaller deposits

of money, used to defeat suspicion of money laundering

and to avoid anti-money laundering reporting

requirements. A sub-component of this is to use smaller

amounts of cash to purchase bearer instruments, such as

money orders, and then ultimately deposit those, again in

small amounts.



Cash-intensive businesses: A business typically involved in

receiving cash will use its accounts to deposit both

legitimate and criminally derived cash, claiming all of it as

legitimate earnings. Best suited is a service business. As

such business has no variable costs, it is hard to detect

revenues-costs discrepancies. Examples are parking

buildings, strip clubs, a casino, ponzi or chit fund schemes,

donations in trusts etc.


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� Non import or non submission of import documents or

submission of fake documents in cases where advance

remittances for imports have been made.

Involves contravention of Section 3(b) and 10 (6) read with

RBI instructions on Import of Goods and Services issued vide

� Over invoicing/under invoicing of exports – involves

contravention of Section 7 (1) (a) read with Foreign Exchange

Management (Export of Goods and Services) Regulations and

Foreign Exchange Management (Realisation, Repatriation, and

Surrender of Foreign Exchange) Regulations, 2000 and RBI.


Certain Money laundering techniques- held

� Round-tripping: Money is deposited in a controlled

foreign corporation offshore, preferably in a tax haven

where minimal records are kept, and then shipped back as

a Foreign Direct Investment, exempt from taxation.

� Bank capture: Money launderers or criminals buy a

controlling interest in a bank, preferably in a jurisdiction

with weak money laundering controls, and then move

money through the bank without scrutiny.


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� Real estate: Real estate may be purchased with illegal proceeds, then sold. The proceeds from the sale appear to outsiders to be legitimate income. Alternatively, the price of the property is manipulated; the seller will agree to a contract that under-represents the value of the property, and will receive criminal proceeds to make up the difference.

� Black salaries: Companies might have unregistered employees without a written contract who are given cash salaries. Black cash might be used to pay them.

� Fictional Loans.



� Money-Laundering is E-money-Laundering

� It is no longer money laundering- it is e-money laundering..

� Faster to transfer and circulte from one geographical location to

another;

� Easier to hide from law enforcement agencies;

� Easier to invest in legitimate businesses;

� Easier to invest in illegitimate businesses;

� This e-monetisation is facilitating the money laundering activities like

never before. There is a new breed of e-money launderers converting

money into e-money by click of a mouse.


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� Trade-based laundering: Under or over-valuing invoices

in order to disguise the movement of money.

� Shell companies and trusts: Trusts and shell companies

disguise the true owner of money. Trusts and corporate

vehicles, depending on the jurisdiction, need not disclose

their true, beneficial, owner.


RED FLAGS

� Export of goods without any corresponding purchase of

raw materials or finished goods.

��Sudden increase in volume of exports by a new

exporter.

� Advance inward remittance against exports without

justifiable reasons.

� Export documents which are not duly authenticated by

export regulating agency were accepted by the bank.


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RED FLAGS

SPECIAL FOCUS ON TRADE IN FREE TRADING ZONES

��FTZs are designated areas in which incentives are offered to support the development of exports, FDI, and local employment.

� relaxed oversight

� lack of transparency

� absence of trade data

� Systems not in place


RED FLAGS

JURISDICTIONS AS TO OR FROM WHERE GOODS ARE SHIPPED.

� Commodities are shipped from ‘high risk jurisdictions’ or sensitive / non co-operative jurisdictions.

� Presence of Free Trade Zones / Special Economic Zones

� Circuitous route of shipment

� Circuitous route of financial transaction

� Shipment of goods inconsistent with normal geographic trade patterns


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RED FLAGS

GOODS BEING SHIPPED � Significant discrepancies between description, quality and

quantity of the goods on the documents and the actual goods shipped

� Significant discrepancies between the value of the commodity reported on the invoice and the commodity’s fair market value

� Consignment size or type of commodity being shipped appears inconsistent with the scale or capacity of the exporter or importer.

� Shipment does not make economic sense


RED FLAGS

TRADE FINANCING

� �Use of letters of credit • A Letter of credit is generally resorted to so as to accord more legitimacy to the transaction in order to conceal the real facts.

� The method of payment requested by the client appears inconsistent with the risk characteristics of the transaction.

� The transaction involves the receipt of cash (or by other payment methods) from third party entities.

� The transaction involves the use of repeatedly amended or frequently extended letters of credit without reasonable justification.

� Unusual deposits i.e. use of cash or negotiable instruments in round denominations to fund bank accounts and to pay for goods and services.

� �Inward remittances in multiple accounts and payments made from multiple accounts.


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RED FLAGS

� CORPORATE STRUCTURES

� The transaction involving the use of front or shell companies.

� Numerous sole proprietorship businesses/private limited companies set up by seemingly unrelated people found to be controlled by the same group of people

� Related party transactions

� Transfer pricing


The International Legal Framework

1989: FATF to ensure global action to combat money

laundering.

- 59 recommendations-complete set of counter measures

against money laundering.

- special recommendations on Terrorist Financing.

- 36 members. India also became a member on 25th June

2010.


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Using Banks & Financial Institutions for

Information Exchange

� FATCA- Foreign Accounts Tax Compliance Act-

Inter Governmental Agreement (IGA) Signed between India and USA

on 9th July 2015 to implement FATCA.

The purpose of FATCA is to prevent US persons from using banks and

other financial institutions outside the USA to park their wealth outside

US to avoid US taxation on income generated from such wealth.

FATCA obliges such banks and financial institutions to report

information about US persons having accounts with them.


Using Banks & Financial Institutions for

Information Exchange

� Common Reporting Standard (CRS):

formally known as “Standard for Automatic Exchange of Financial

Account Information”.

Approved by the OECD on 15th July 2014

Calls on jurisdictions to obtain information from their financial

institutions and automatically exchange the same with other

jurisdictions on an annual basis.

COUNTRY BY COUNTRY REPORTING- a result of the same.

BEPS part of the same including avoidance of tax.


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The Indian Scenario

The Prevention of Money Laundering Act, 2002:

� Enacted on 17th Jan 2003.

� Brought into force from 01.07.2005.

� Rules notified in July 2005 and amended from time to

time- Maintenance of record rules- Mainly KYC etc.

� PMLA Amendment Act, 2009 w.e.f 01.06.09

� PMLA Amendment Act, 2012 w.e.f 15.02.2013 and

subsequent amendments.


The Indian Scenario

Adjudicating Authority (Procedure) Regulations, 2013,

The Prevention of Money- laundering (Restoration of

Confiscated Property) Rules, 2016.

11 different types of Rules for administration.

Administered by:

•Financial Intelligence Unit (FIU)- collection of

information etc.

•Enforcement Directorate and subsequent authorities for

adjudication.


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FIU- Financial Intelligence Unit

� A central, national agency responsible for receiving, (and

as permitted, requesting) analyzing and disseminating to

the competent authorities, disclosures of financial

information:

i. Concerning suspected proceeds of crime.

ii. Required by national legislation or regulation

In order to combat money laundering


PMLA

� Two parts

a) Reporting- including upkeep of documents,

maintenance of records etc. by Reporting entities.

b) Adjudication and cases- Litigation


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The Framework


FIU

Reporting Agencies:

Banks, Financial

Institutions, Intermediaries

Regulatory Agencies:

RBI, SEBI, IRDA etc.

Intelligence/Enforceme

nt Agencies

IB, RAW

CBDT, CBEC

ED/NCB

EOW of Police/CBI

Foreign FIUs

Regulatory Agencies:

SEBI, IRDA, RBI

Intelligence/Enforceme

nt Agencies

CBDT,

CBEC

REIC

Foreign FIUs

Enforcement Directorate

� A Govt.Agency established in 1956.

� Entrusted with the investigation and prosecution of

money laundering offences and attachment/

confiscation of proceeds of crime under the PMLA

� Also enforces provisions of FEMA


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Enforcement Directorate- Organisation Set Up


ENFORCEMENT DIRECTOR

Special

Director-

HO

Special

Director-

WR

Special

Director-

NR

Special

Director-

SR

Special

Director-

CR

Special

Director-

ER

Mumbai

Ahd.

Panaji

Chandigarh

Srinagar

Jalandhar

Jaipur

Chennai

Hyadrabad

Kochi

Bangaluru

Delhi

Patna

Lucknow

Kolkata

Guwahati

Intelligence

Investigation

Admin.

Bird’s Eye view of the Act

� 75 sections

� One Schedule

� Rules under the PMLA, 2002, for inter alia:

Provisional Attachment of property

Receipt & management of confiscated property.

Maintenance of records and furnishing of information.

Receiving records authenticated outside India

Search and Seizure, Order of Arrest

Adjudicating Authorities- members’ appointment & conditions of service.

Appeal

Appellate Tribunal members and salaries, allowances etc.

Adjudicating Authority (Procedure) Regulations, 2013


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Some Provisions of the Act and Rules

made thereunder.


Applicability

Section 1(2) of the Act provides that it extends to the whole of India.

However the term ‘Property’ defined u/s 2(1)(v) of the Act reads as

under:

“v) "property" means any property or assets of every description,

whether corporeal or incorporeal, movable or immovable, tangible or

intangible and includes deeds and instruments evidencing title to, or

interest in, such property or assets, wherever located;”

Explanation.—For the removal of doubts, it is hereby clarified

that the term “property” includes property of any kind used in the

commission of an offence under this Act or any of the scheduled

offences.

The Act has effect notwithstanding anything contained in any other law.


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Offence of Money Laundering

� Section 2(1)(p) read with Section 3 of the Act: defines the

offence of money laundering as under:

“Whosoever directly or indirectly, attempts to indulge or

knowingly is a party or is actually involved in any

process or activity connected with the proceeds of crime

including its concealment, possession, acquisition or

use and projecting or claiming it as untainted property,

shall be guilty of offence of Money Laundering.”


The Definition- in Break-down Condition

Whosoever

� directly or indirectly,

� attempts to indulge

� or knowingly is a party

� or is actually involved

� in any process or activity connected with

� the proceeds of crime

� including its concealment, possession, acquisition or use and

� projecting or claiming it as untainted property,

shall be guilty of offence of Money Laundering


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.... Contd.

� The definition has been amended by the 2012 Amendment Act

to include “concealment, possession, acquisition or use”

� The Coverage is extremely vast.

� However, ‘Mens Rea’ is an essential ingredient of offence


Proceeds of Crime- Section 2(u)

“means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country

The Act becomes operational only when the ‘proceeds of crime’ are projected or attempted to be projected as untainted money.


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Scheduled Offence- Section 2(1)(y)

“Scheduled Offence” means—

� (i) the offences specified under Part A of the Schedule; or

� (ii) the offences specified under Part B of the Schedule if

the total value involved in such offences is one crore

rupees or more; or

� (iii) the offences specified under Part C of the Schedule.


Part A of the Schedule Covers

Offences under the following Acts:

1) The Indian Penal Code

2) The Narcotic Drugs & Psychotropic Substances

Act, 1985 (PARA 2).

3) The Explosive Substances Act, 1908

4) The Unlawful Activities (Prevention) Act, 1967

5) The Arms Act, 1959

6) The Wild Life (Protection) Act, 1972

7) The Immoral Traffic (Prevention) Act, 1956

8) The Prevention of Corruption Act, 1988

9) The Explosives Act, 1884

10) Protection of Farm Varieties & Famers’ Rights

Act, 2001.


11) The Antiquities and Arts Treasures

Act, 1972

12) The Transplantation of Human

Organs Act, 1994

13) The Juvenile Justice (Care &

Protection of Children) Act, 2000

14) The Emigration Act, 1983

15) The Passport Act, 1967

16) The Foreigners Act, 1946

17) The Biological Diversity Act, 2002

18) The Suppression of Unlawful Acts

Against Safety of Maritime

Navigation & Fixed Platforms of

Continental Shelf Act, 2002

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.....Contd.

� The Securities and Exchange Board of India Act, 1992:

Section 12A- Prohibition of manipulative and deceptive devices,

insider trading and substantial acquisition of Securities or Control

� The Customs Act, 1962:

Section 135- Evasion of Duty or prohibitions

� The Bonded Labour System (Abolition) Act, 1976

� The Child Labour (Prohibition and Regulation) Act, 1986:

� Section 14: Punishment for employment of any Child to work in

contravention of the provisions of section 3.


.....Contd.

� The Copyright Act, 1957

Section 63, 63-A, 63B, 68A (Section 63-B is for ‘Knowing Use of

infringing copy of computer programme)

� Offences Under the Trade Marks Act, 1999:

Penalty for applying false trade marks, trade descriptions, etc. and

selling goods or providing services thereunder, falsely representing a

trade mark as registered.

� Offences under the Information Technology Act, 2000: Sections 72 &

75-Penalty for breach of confidentiality & privacy and offences/

contraventions committed outside India


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....Contd.

� The Environment Protection Act, 1986

� The Water (Prevention & Control of Pollution) Act,

1974: Section 41(2) &43- Penalty for pollution of stream

or well.

� The Air (Prevention & Control of Pollution) Act, 1981:

section 37 of the Act- Failure to comply with the

provisions for operating industrial plant.


....Amendment proposed in 2018

� Corporate frauds included as Scheduled offence: Section 447 of Companies Act is being included as scheduled offence under PMLA so that Registrar of Companies in suitable cases would be able to report such cases for action by Enforcement Directorate under the PMLA provisions. This provision shall strengthen the PMLA with respect to Corporate frauds.

� Certain other amendments proposed regarding monetary limit for ease of bail and also enhancing scope of attachment of property.


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PART-B SCHEDULED OFFENCE

OFFENCE UNDER THE CUSTOMS ACT, 1962

S-132. False declaration, false documents, etc.—Whoever

makes, signs or uses, or causes to be made, signed or

used, any declaration, statement or document in the

transaction of any business relating to the customs

knowing or having reason to believe that such declaration,

statement or document is false in any material

particular….. (MENS REA).


PART-C SCHEDULED OFFENCE

� An offence which is the offence of cross border

implications and is specified in,—

(1) Part A; or

(3) the offences against property under Chapter XVII

of the Indian Penal Code (45 of 1860).]

(4) The offence of wilful attempt to evade any tax,

penalty or interest referred to in section 51 of the

Black Money (Undisclosed Foreign Income and

Assets) and Imposition of Tax Act, 2015 (22 of 2015).


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General Observations

� Several commercial laws have been included by the

2009 Act.

� There are no monetary limits in the PMLA Act.

However there are monetary limits and other

conditions under the referred sections of the Acts.

� There are no time limits under the PMLA.

� The Act is applicable since inception.


Some General Observations

� Does not include violation of provisions of the following Commercial Laws: Income Tax Act 1961

Companies Act, 2013/1956 (unless where it coincides with SEBI Act)

GST

Central Excise Act

Central Sales Tax Act

State VAT Acts

FEMA


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Some Common Occurrences

� M/s Ultimate Textile Mills has employed contractual labour through

a contractor. The contractor’s supervisor is always present at the site

and completes the attendance, payment processing etc. in respect of

the contractual staff. M/s Ultimate Textile Mills

Obtains ESIC/EPF compliance challans from the contractor.

But never checks whether any children (below the age of 14) are

employed by the contractor.


Why Is it Damaging?

� In the first instance, the prosecution has reason to

believe that an accused is concerned in any way

with the proceeds of crime.

� Thereafter the burden shifts onto the accused.

� Section 24 provides that the burden of proving that

proceeds of crime are untainted money shall be on

the accused.


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Consequences if Found Guilty

� Section 4 of the Act provides for punishment of the offence of money

laundering:

Rigorous imprisonment for atleast 3 yrs and may be extended to 7

years (10 years in case of certain offences forming part of Part A);

and

Fine

� Section 8 and 9: Confiscation and Attachment of property so

acquired. Such attachment shall be to the prejudice to any

encumbrance on the property or lease hold interest in certain

circumstances.


Procedure for a valid attachment

� The order provisionally attaching such property should be

passed either by Director or an officer authorised by him not

below the rank of Deputy Director.

� The concerned authority should have reason to believe that any

person is in possession of any proceeds of crime which proceeds

are likely to be concealed, transferred or dealt with to frustrate

proceedings relating to confiscation under Chapter III.

� The reasons for such belief should be reduced in writing.


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� The provisional attachment of such property by such authority

should not be for a period exceeding 180 days from the date of

order; and

� The order provisionally attaching such property should be passed in

the manner prescribed; and

� Before the order is passed a report should have been forwarded to a

Magistrate under section 173 of the Code of Criminal Procedure,

1973 in relation to the scheduled offence, or a complaint has been

filed before the Magistrate by the person authorised to investigate

the offence pertaining to the scheduled offence, as the case may be

or a similar report for complaint has been made or filed under

corresponding law of any other country;



� Even otherwise any property of any person may be provisionally

attached if the Director or any other officer not below the rank of

Deputy Director authorised by him has reason to believe (the

reasons for such belief to be recorded in writing), on the basis of

material in his possession, that if such property involved in money-

laundering is not attached immediately under this Chapter, the non-

attachment of the property is likely to frustrate any proceeding

under this Act.

� (Thus with this addition of proviso reference to the Magistrate is not

essential as this proviso starts with “Notwithstanding”)


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� A copy of the attachment order along with the material shall be

send immediately to Adjudicating Authority in a sealed envelope

in prescribed manner; and

� A complaint stating the facts of such provisional attachment

shall be filed before Adjudicating Authority within 30 days from

such attachment.


Procedure for a valid survey

� Conditions Requisites Before Entering any Place for Survey

� The following conditions should be fulfilled before the authority

enters any place for survey under this section 16.

� There is some cogent and convincing material in possession of

authority, and

� On the basis of said material the authority has reasons to believe

that an offence under section 3 has been committed.

� The reason of such belief is required to be recorded in writing

by the authority.


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Procedure for a valid survey

� The place where the authority intends to enter for survey should

be within the limits of the area assigned to said authority; or

� The said place (where the authority wants to enter for survey) is

assigned to some other authority who has authorized the former

authority to act under section 16.

� The place to be surveyed is suspected to be used for doing any

act constituting commission of an offence under section 3.

� POWERS IN SURVEY AND SEARCH LIKE INCOME TAX

ACT- SATISFACTION NOTE TO BE PREPARED NOT

MERELY BASED ON SUSPICION. THERE SHOULD BE A

REASON TO BELIEVE.


Procedures/presumptions etc. for enquiry

� Just like Income Tax Act.

� Regarding seizure of records.

� Presumption of 132(4A) and 292C.

� Special Audit as per 142(2A) etc.

� Finding out the proceeds of crime.


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Power to arrest- Section 19

� If the Prescribed authorities, has on the basis of material in his

possession, reason to believe (to be recorded in writing) that any

person has been guilty of an offence punishable under this Act,

he may arrest such person and shall, as soon as may be, inform

him of the grounds for such arrest.

� The officer immediately after arrest forward a copy of the order

along with the material in his possession, to the Adjudicating

Authority in a sealed envelope in a prescribed manner

� Such arrested person shall, within twenty-four hours, be taken to

a Judicial Magistrate or a Metropolitan Magistrate, as the case

may be, having jurisdiction:


Recent supreme court decision – section 45 un

constitutional

� S. 45 Offences to be cognizable and non-bailable.—(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),—

� (i) the Public Prosecutor has been given a opportunity to oppose the application for such release; and

� (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail

� Held Bail is a Rule, Jail is an exception.


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Procedure


ADJUDICATING AUTHORITY

- Record reason to believe.

- Issue show cause notice of atleast 30

days to the accused to:

- explain and evidence source of

income/property

- show cause how not involved in ML and

why the same may not be confiscated.

- Personal hearing

- Pass order

- If satisfied that there is a ML offence,

confirm attachment/ retention of

property until disposal of trial by the

Court.

- Pass order for confiscation upon

completion of trial if ML offence is

proved.

Provisional

Attachment of

property u/s 5

Search & Seizure u/s

17 or Section 18 File Application

File Complaint

30

Days

Further Appeals


- The Appellate Tribunal

established u/s 25 of the

Act.

- Within 45 days from the

date on which order was

received, along with appeal

filing fees

- Disposal of the appeal

within 6 months from filing

date.

- Before the High Court u/s

42 of the Act.

- Within 60 days from the

date on which order was

received.

- Appeal may be against

any question of law or fact

arising from an order

passed by the AT

- Condonation of delay in

late filing of appeal is

possible.

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Reporting Requirements Under PMLA,

2002


Reporting Entities

Section 2(1)(wa) “reporting entity” means

� Banking company,- a banking company or a cooperative bank to

which the Banking Regulation Act, 1949 applies

� Financial institution-as defined in section 45I(c) of the RBI, Act

1934

� Intermediary – Defines u/s 2(1)(n) of the Act and

� or a person carrying on a designated business or profession.

� NBFC’s


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Section 2(1)(n) “intermediary” means

a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee

to a trust deed, registrar to an issue, merchant banker, underwriter,

portfolio manager, investment adviser etc.

an association recognised or registered under the Forward Contracts

(Regulation) Act, 1952 (74 of 1952) or any member of such association; or

intermediary registered by the Pension Fund Regulatory and Development

Authority;

a recognised stock exchange referred to in clause (f) of section 2 of the

Securities Contracts (Regulation) Act, 1956 (42 of 1956);

Person carrying on designated business – (defined u/s clause (sa))


Records to be Maintained � All cash transactions over Rs.10 lacs or its equivalent in foreign

currency.

� Series of cash transactions within a month, integrally connected with

each other, which have been valued below Rs.10 lacs or its equivalent in

foreign currency.

� All cash transactions where forged or counterfeit currency notes or bank

notes have been used.

� All transactions where forgery of a valuable security or document has

taken place facilitating such transaction.

� All Suspicious Transaction Reports

� Other transactions added in accordance with rules


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Contents And Other Rules

� Nature of the Transactions.

� Amount and Currency in which denominated.

� Date of the transaction

� Parties to the Transaction

Record to be maintained as per guidelines of the Regulatory

body (RBI/SEBI/IRDA) in soft as well as hard copy.


.....Contd..

� Records to be retained for a period of 10 yrs from the

date of cessation of transactions.

� Principal Officer to be appointed by these entities and

to communicate name, designation and address of such

PO to the Director


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Periodicity & Time lines

� Cash Transactions- Report to be furnished for every

month by the 15th day of the succeeding month.

� Forgery- within 7 working days from the date of

occurrence of such transaction.

� Suspicious Transactions- within 7 working days from

the date of occurrence of such transaction.


Verify & Maintain Records of Clients’ Identity

� Identity of client

� Address- current and permanent

� Nature of business

� Financial status

Such records to be maintained for a period of 10 yrs from the

date of cessation of transaction with the client. There are

several modifications and amendments in the Rules and KYC

norms. The same is applicable only for reporting entities.


38

.......Thank You

There are no failures, only FEEDBACK.

Please mail them to

[email protected]


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