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Financial Institutions and Markets Act (FIAMLA) Guidelines: Foundations, Limited Liability Partnerships, and Compliance with Regulations

The Financial Institutions and Markets Act (FIAMLA) has issued guidelines to ensure compliance with regulations by institutions and individuals. Failure to comply with these guidelines can result in severe penalties.

Foundations, Limited Liability Partnerships, and Similar Entities

Section 1.8 of FIAMLA outlines the roles and responsibilities of foundations, limited liability partnerships, and similar entities. These entities are required to:

  • Act as directors, secretaries, or partners of companies, foundations, or other similar entities
  • Provide registered offices, business addresses, or accommodation for legal persons
  • Comply with guidelines issued under subsection (2)(ba) or (c)
  • Pay penalties not exceeding 50,000 rupees per day for each breach

Monetary Laundering and Financing of Terrorism

What is Money Laundering?

Definition

Money laundering is the process of concealing the source and ownership of funds generated from illegal activities. It involves three stages:

  • Placement: introducing initial proceeds into the financial system or carrying cash across borders
  • Layering: generating a series of financial transactions to separate illegal proceeds from their source
  • Integration: reintroducing illegal proceeds into the economy through legitimate-appearing transactions

What is Terrorism Financing?

Terrorism financing refers to the financing of terrorist acts and organizations. Sources of terrorism financing may be legitimate or illegitimate.

  • Governments, organizations, and individuals often provide funds to terrorist groups
  • Funds can also be generated through revenue-generating activities or illegal activities such as smuggling and fraud

Proliferation Financing

Proliferation financing involves the transfer or export of technology, goods, software, services, or expertise that can be used in weapons of mass destruction programs. Unscrupulous individuals may use the international financial system to facilitate transactions and business deals.

As part of efforts to combat money laundering, terrorism financing, and proliferation financing, financial institutions and markets must comply with guidelines issued under FIAMLA. Failure to do so can result in severe penalties.