Marketing executives in commercial banks are working under
tremendous pressure to fulfill their business targets at any cost. These
executives are selling various banking and insurance products of high value
without adhering strictly to KYC norms, allowing high magnitude cash
transactions and even fill in forms with wrong permanent account number (PAN)
to facilitate transactions. Even, there have been instances where RBI has found
that money was deposited in certain accounts through countless demand drafts
valued at between Rs 49,500 and Rs 49,900 within months. These transactions
short-circuited the transaction-tracking process and helped the customers to
evade tax and may have even facilitated money laundering. The banks involved
may feign ignorance of this, but under the norms of Prevention of Money
Laundering Act, 2002, they are required to file Cash Transaction Report (CTR)
and suspicious transaction reports (STRs) to Financial Intelligence Unit (FIU).

Money laundering (ML) has always been a matter of discussion for government of
all the countries. Money Laundering is the process of concealing the source of
money obtained by illicit means. The methods by which money may be laundered
are varied and can range in sophistication. In 1996, the International Monetary
Fund estimated that two to five percent of the worldwide global economy involved
laundered money. In India the Prevention of Money Laundering Act 2002 (PMLA),
comes into effect on July 1, 2005. Section 12 (1) of PMLA prescribes the
obligations on banks, financial institutions and intermediaries (a) to maintain
records detailing the nature and value of transactions which may be prescribed,
whether such transactions comprise of a single transaction or a series of
transactions integrally connected to each other, and where such series of
transactions take place within a month; (b) to furnish information of
transactions referred to in clause (a) to the Director (FIU) within such time
as may be prescribed and the records of the identity of all its clients.
Section 12 (2) of PLMA prescribes that the records referred to in sub-section
(1) as mentioned above, must be maintained for 10 years after the transactions
finished.

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This law lays down the mandates for reporting Cash Transaction
Reports, Suspicious Transaction Report and Counterfeit currency transactions to
the Financial Intelligence Unit (FIU). Each government is expected to set up a
FIU according to recommendations from the United Nations. These FIU
institutions help in the implementation of the Money Laundering Act. In India
we have the FIU under the Department of Revenue, Ministry of Finance, India.
Implementation of Anti Money Laundering Act is through Financial Intelligence
Unit and Enforcement Directorate. Role of Financial Intelligence Unit in India
FIU are specialized government agencies created to act as an interface between
financial sector and law enforcement agencies for collecting, analyzing and
disseminating information particularly about suspicious financial transactions.

Financial Intelligence Unit – India (FIU-IND) was set by the Government of
India in 2004 as the central national agency responsible for receiving,
processing, analyzing and disseminating information relating to suspicious
financial transactions. FIU-IND is also responsible for co-ordinating and
strengthening efforts of national and international intelligence, investigation
and enforcement agencies in pursuing the global efforts against money
laundering and related crimes. FIU-IND is an independent body reporting
directly to the Economic Intelligence Council (EIC) headed by the Finance
Minister. The main function of FIU-IND is to receive cash/suspicious
transaction reports, analyze them and, as appropriate, disseminate valuable
financial information to intelligence/enforcement agencies and regulatory
authorities. Reporting requirements of Banks: Cash Transaction Report is
defined in the Prevention of Money Laundering law as list of transactions
having value above Rs 10 lakh which are to be reported by banks to the FIU.
Cash Transaction Report PMLA requires banks, financial institutes and capital
market intermediaries to furnish the FIU information related to:: 3 – All cash
transactions of the value of more than rupees 10 Lakhs or its equivalent in
foreign currency. – All series of cash transactions integrally connected to
each other, which have been valued below rupees 10 Lakhs or its equivalent in
foreign currency where such transactions take place within a month

Suspicious Transaction Report Under PMLA 2002, reporting
entities are required to report suspicious transactions to FIU. Rule 2(1)(g) of
the PMLA Rules defines a suspicious transaction as a transaction, whether or
not made in cash, which to a person acting in good faith – – Gives rise to a
reasonable ground of suspicion that it may involve the proceeds of crime of an
offence specificied in the schedule to the act. – Appears to be made in
circumstances of unusual or unjustified complexity. – Appears to have no
economic rationale or bonafide purpose – Gives rise to reasonable ground of
suspicion that it may involve financing of the activities related to terrorism.

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