Financial Crime World

Title: Indian Financial Institutions Brace for Enhanced AML/CTF Regulations

Background

In recent years, the Indian financial sector has witnessed a significant shift in Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations. The Prevention of Money Laundering Act (PMLA) was expanded in 2005 to include all financial institutions and intermediaries. Regulatory bodies have taken center stage in ensuring financial integrity.

Primary AML/CTF Regulators in India

  1. Financial Intelligence Unit-India (FIU-IND)
    • Founded in 2004: FIU-IND serves as the central national organization for gathering, classifying, analyzing, and distributing information to law enforcement agencies and international financial intelligence units about suspect financial activity.
  2. Reserve Bank of India (RBI)
    • India’s primary financial regulator: responsible for issuing bank licenses and implementing AML/CTF legislation.
    • Adheres to the Financial Action Task Force’s (FATF) anti-money laundering and counter-terrorist financing guidelines.
    • Enforces compliance with relevant rules for banks and financial institutions.
  3. Securities and Exchange Board of India (SEBI)
    • Established in April 1992: SEBI’s mission is to protect securities investors’ interests and regulate the securities industry.
    • Lays down standards for financial markets’ AML/CTF compliance.
  4. Insurance Regulatory Development Authority (IRDA)
    • In charge of regulating, promoting, and ensuring the orderly development of the insurance and reinsurance sectors.

Complying with AML/CTF Regulations in India

Designated service providers must implement a robust AML/CTF policy consisting of:

  • Customer Identification: Identify, risk categorize, and conduct regular reviews.
  • Transaction Monitoring: High-risk accounts require constant focus.
  • Capable AML/CTF Programme: Must be well-managed and adequately resourced.
  • Internal Audits: Regularly examine and verify compliance.
  • Appoint a Compliance Officer: Qualifications must be suitable.

Custom Solutions for Your Entity

Each registered entity should consider its specific:

  • Market
  • Corporate Structure
  • Client Base
  • Transaction Types

when developing AML/CTF initiatives and procedures.

Risk-Based Compliance

All AML/CTF strategies must employ a risk-based approach with a clear correlation between identified risks and the procedures, practices, and controls put in place to mitigate them.

Reporting Obligations

Designated service providers must adhere to specific reporting requirements:

  • Suspicious Transaction Report (STR): Submit within seven days of identifying a suspicious transaction.
  • Cash Transaction Reports: Report to FIU-IND by the 15th of the month after the month of the transaction for transactions exceeding INR 1,000,000.
  • Counterfeit Currency Reports: Report immediately upon detection.
  • Non-Profit Transaction Reports (NTR): For transactions surpassing INR 10,00,000 by non-profit organizations.

Maintaining Compliance

As the regulatory landscape evolves, Indian financial institutions must remain diligent in their AML/CTF efforts to maintain the integrity of India’s financial system and safeguard their reputation.

Records Retention

Maintain records for a minimum of ten years post-transaction termination.