Faced with the rising twin threats of money laundering and terrorism, financed by illegally amassed wealth, India recently sought increased mutual assistance among countries in areas like extradition of those involved in such criminal acts. Inaugurating the 14th annual meeting of the Asia-Pacific Group(APG) on Money Laundering at Kochi recently, Union Finance Minister Pranab Mukherjee said laundered money has become an important source of funding of international terrorism, and this menace cannot be contained by any nation along.
Estimates have it that the quantum of money generated from criminal activities and laundered throughout the world ran into several billions of dollars—up to as much as two to five per cent of the global GDP. Beneficiaries of money laundering are acquiring enough muscle to threaten political stability worldwide. Their cross border linkages demand collective efforts in dealing with money laundering ruthlessly, the minister said.
Annual Report of the Financial Intelligent Unit of India explains money laundering as “the process by which criminals disguise the illegal origin of their wealth to avoid suspicion of law enforcement authorities and to wipe the trial of incriminating evidence.” Money laundering impacts a nation’s economy as ‘dirty money’ moves rapidly across borders to obscure the audit trail and affects interest and exchange rates.
Financial Intelligence Unit – India (FIU-IND) is the central national agency of India responsible for receiving, processing and analyzing and disseminating information of suspect financial transactions. FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in combating money laundering and related crimes.
The Prevention of Money Laundering Act 2002(PMLA) forms the core of the legal frame work put in place by India to combat money laundering. PMLA and the Rules notified there under came into force with effect from July 1 2005. The PMLA and rules notified there-under impose obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information to FIU-IND. PMLA defines money laundering offence and provides for freezing, seizure and confiscation of the proceeds of crime.
Section2(1)(g) of PMLA Rules defines suspicious transaction as a transaction whether or not made in cash which, a person acting in good faith: (a) gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or (b)appears to be made in circumstance of unusual or unjustified complexity; or (c) appears to have no economic rationale or bona fide purpose; or (d) gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism.
At the APG meet here, Mr.Mukherjee disclosed that India was in the process of suitably amending the PMLA to make those legislations more effective in dealing with money laundering and terror funding. These amendments will be in line with the key recommendations of the Financial Action Task Force(FATF) formed by several countries way back in 1989 to evolve a global policy response to the threats posed by money laundering.
The Asia/Pacific Group on Money Laundering(APG) is an international organization consisting of forty members and a number of international and regional observers including United Nationals, IMF, Asian Development Bank and Financial Action Task Force(FATF), whose secretariat is located in the OECD headquarters in Paris(http://www.apgml.org/). All APG members are committed to effectively implementing the FATF’s international standards for anti-money laundering and combating the financing of terrorism, referred to as the 40+9 Recommendations. Part of this commitment includes implementing measures against terrorists listed by the United Nations in the “UNSC 1267 Committee Consolidated List.”
The APG has a number of functions including:(1)Assess APG members’ compliance with the global AML/CFT standards through mutual evaluations (2)Co-ordinate technical assistance and training with donor agencies and APG members/observers to improve compliance with the AM L/CFT standards(3)Co-operate with the international AML/CFT network(4)Conduct research into money laundering and terrorist financing methods, trends, risks and vulnerabilities(5)Contribute to the global AML/CFT policy development by active membership of FATF.
The engagements at the APG conference included meetings of Working Group, Group dealing with Implementation Issues, APG Steering Group and mutual evaluation meeting. Delegates discussed and adopted mutual evaluation reports. As part of the FATF’s policy of protecting the international financial system from money laundering and terrorist financing, working groups took a number of important steps including publishing reports on(1) Organised money laundering (2)Terrorism Financing (3) Maritime Piracy (4) Human Trafficking.
During the current session of the APG, six nations were subjected to mutual evaluation. The countries were Afghanistan, Nepal, Papua New Guinea, the Maldives, Marshal Islands and Lao PDR. Mutual evaluation progress reports of 30 members were also reviewed. India underwent the process last year and fared well enough to secure admission to the FATF. The APG has a 49 point evaluation system, which the member-states have to undergo. Those found not complying with this regime will be assisted in bringing out amendments to their legal system and adopting international standards of security against money laundering and funding of terrorist activities according to the APG briefing.
Repeated non-compliance can lead to blacklisting of the member-state, which will affect foreign investments to that nation. One of the key recommendations was the formation of Finance Intelligence Units, which will collect information regarding financial transactions and look into suspicious deals. India has already set up the FIU and this is working effectively according to K.Jose Cyriac, APG co-chair and Secretary to the Union Government. “The deliberations in the meeting were very fruitful and ended with reiteration by all members and observers of their commitment to deter money laundering and terrorist financing,” he said.
The APG meet discussed a suggestion that crime committed by the money transactions should also be brought under the purview of the FIU. The suggestion was to provide information from police stations to the FIU so that details of criminals were with it. This would enhance the value of information regarding suspicious transactions of money, it was suggested. Ever since India passed legislations to check money laundering, as per the norms of the FATF standards, the number of cases registered shot up from 50 to 1300.
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