Financial Intelligence Unit India- An Overview

Financial Intelligence Unit India was set up with a view of scrutinise suspected financial transactions in India. This unit was set up by the Central Government on 18th November 2004 with a main motive of processing, receiving and strengthening national efforts to tackle suspected financial transactions and offences related to money laundering.

The financial intelligence unit India is also known as FIU-IND which has the main objectives of strengthening the cooperation of national and international bodies to tackle money laundering activities. The FIU has collaborated with different financial institutions and has MOUs with foreign financial intelligence units to develop methods to tackle money laundering.

This body is set up as an independent and autonomous agency to tackle money laundering and financing of terrorist activities in India. The Financial Intelligence Unit India is an independent and autonomous body which reports directly to the Economic Intelligence Council (EIC). This council is headed by the finance minister of India.

Functions of the Financial Intelligence Unit India (FIU- IND Functions)

The following are the functions of the financial intelligence unit of India:

• Information Collecting

  All different forms of reports are provided to this unit. Such reports would also include cash transaction reports, reports of financial transactions carried out by non-profit organisations, any reports related to international wire transfers, reports on the purchase of immovable properties in India and different forms of suspicious transactions reports (STR).

• Analysing Information

  Another function which is carried out by the financial intelligence unit India is to analyse different forms of transactions which occur in India. Through this only suspected money laundering circumstances can be understood.

• Information Sharing

  Such information when collected is shared with other regulatory agencies such as the national intelligence/law enforcement agencies, national regulatory authorities and foreign Financial Intelligence Units.

• Central Repository

  Such unit acts as a central repository for all forms of financial transactions and accounting reports in India. Reporting aspects related to the RBI, Banks and other institutions would directly go to the FIU-IND.

• Coordinating with Other Agencies

  This institution also carries out activities related to coordination. It coordinates with other institutes at a regional, national and international level in order to improve the performance of suspected financial activities in India.

• Research and Development

  Apart from this the unit also carries out research related to money laundering, terrorist financing and other areas.

Reporting Entity under the Financial Intelligence Unit India

In order to understand the meaning of money laundering, first and foremost the meaning of a reporting entity must be understood.

A reporting entity is defined under section 2(WA) of the Prevention of Money Laundering Act (PMLA Act), 2002 as any form of company that carries out banking activities or an institution that deals with financial activities or a company which is engaged in Chit Funds.

Types of Reporting Entities under Financial Intelligence Unit India (FIU-IND)

The following are the types of reporting entities that have to register with the financial intelligence unit of India:

Identity Verification

All reporting entities have to verify the identity of the respective client and carry out measures related to Customer Due Diligence (CDD). The verification of identity is present under section 11A of the Prevention of Money Laundering Act, 2002. There are different modes to verify the identity of the client:

• Online Authentication of the Aadhaar
• Offline Authentication of Aadhaar
• Authentication of Identity through Passport
• Any other document which is officially issued by the Government of India.

As per rule 9 of the Prevention of Money Laundering (Maintenance Of Records) Rules 2005, all reporting entities are required to carry out customer due diligence as per the requirements of the above rules. Such verification would happen as per the rules related to ‘Know Your Client’ (KYC verification). Rule 10 of the Prevention of Money Laundering (Maintenance of Records) Rules 2005 requires all reporting entities to maintain physical records and relevant electronic records as per the above rules for a particular period of time.

The Prevention of Money Laundering (Maintenance of Records) Rules 2005 has been amended several times in 2020.

What is the meaning of Suspicious Transaction under Financial Intelligence Unit India?

The meaning of suspicious transactions would include any transaction which happens or attempts to happen whether or not made to occur in the form of cash. The following would be included in the meaning of a suspicious transaction under Financial Intelligence Unit of India (FIU-INC):

• If there is any form of reasonable ground of suspicion that the transaction is an offence under the schedule.
• If the transaction is very complex and carrying out such transaction would lead to an unsafe environment.
• If there is no form of bonafide purpose of carrying out the transaction.
• If there are any reasonable grounds that the transaction would lead to financing of terrorism and other forms of activities..

Maintenance of Records under Financial Intelligence Unit India (FIU-IND)

As per section 12(1) of the Prevention of Money Laundering Act, 2002 every form of reporting entity are required to maintain records and transactions which are carried out by clients. As per section 12(3) of the Prevention of Money Laundering Act, 2002 such records have to be stored for a period of five years from the date of the transaction and the reporting entity.

As per rule 3 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 the following transactions have to be maintained by the reporting entity:

• Cash Transactions which are more than Rs 10 Lakh or an equivalent foreign currency denomination.
• If a series of interconnected and integrated cash transactions which happen in a month reach more than Rs. 10 Lakh. The aggregate value of the cash transactions is utilised for understanding the amount.
• If the transactions exceed more than Rs 10 lakh and which are received by Non Governmental Organisations. For such transactions, any amount in the respective foreign currency would also be considered.
• Any cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine or where any forgery of a valuable security.
• Suspicious transaction whether in cash or not.
• All cross-border wire transfer of the value of more than Rs. 5 lakhs or its equivalent in foreign currency where either the origin or destination of fund is in India.
• Any purchase or sale of immovable property valued at Rs. 50 lakhs or more that is registered by the reporting entity.

When maintaining the records as per the requirements of the PMLA and allied rules the nature of the transaction must also be recorded. This would be compliant with the requirement of Rule 4 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005.

The following information has to be recorded:

• Transaction Nature
• The Currency or the amount of transaction in the relevant denomination
• The date on which the transaction was conducted; and
• The parties to the transaction.

Reports to be Submitted under Financial Intelligence Unit India

Under the PMLA and respective rules there are different forms of reports which have to be submitted. The following are the types of reports which have to be submitted:

• Cash Transaction Report (CTR)
• Suspicious Transaction Report (STR)
• Counterfeit Currency Report (CCR)
• Cross-Border Wire Transfer Report (CBWTR)
• Report on sale/purchase of immovable property

The following table shows the due date and periods of submission of reports:

Procedure for Registering Reporting Entity under Financial Intelligence Unit India (FIU- IND)

The following method has to be considered for FIU registration:

• The format which is utilised for registering a reporting entity is present under Project FINnet.
• The applicant has to first visit the following website https://finnet.gov.in/  .
• In the next step the applicant has to go to new registration in the login page and click on Search Reporting Entity.
• Then the applicant has to click on register new entity.
• In the next step information on the reporting entity must be submitted.  All the details of the reporting entity must be submitted such as the type of reporting.
• The following information would be displayed after filing in the information “The following registration details of the reporting entity have been submitted to FIU-IND. Your Reporting Entity registration request number is: ________.”
• After this the applicant has to request for the registration number and print a hard copy of the same. This hard copy is required to be sent to the FIU-IND.
• The scanned copy can be emailed to ctrcell@fiuindia.gov.in  .
• The Hard copy must be sent to the following address:

To the Director,
Financial Intelligence Unit-India,
 6th Floor, Hotel Samrat,
New Delhi 110021.

• The envelop must have the subject New Registration.
• When the unit is successfully registered the FIUREID (the unique identity number of your organization registered with FIU-IND) will be sent through email.

Procedure for Registering Principal Officer under Financial Intelligence Unit India (FIU- IND)

• The format which is utilised for registering a reporting entity is present under Project FINnet.
• The applicant has to first visit the following website https://finnet.gov.in/ .
• The applicant has to click on Search Reporting Entity.
• Enter the FIUREID FIU Reporting Entity Identification Number.
• Check the results which are displayed.
• Click on Select the respective reporting entity to go the next page.
• Provide details of the principal officer. After this a FINnet Registration request would be generated as per the requirements.
• This FINnet registration request must be printed a signed by the principal officer as well as the supervisor to the principal officer. This document would be stamped.
• The scanned copy can be emailed to ctrcell@fiuindia.gov.in.
• The Hard copy must be sent to the following address:

To the Director,
Financial Intelligence Unit-India,
 6th Floor, Hotel Samrat,
New Delhi 110021.

• The envelop must have the subject PO Registration Request.

Documents Required for Registering as an Entity under Financial Intelligence Unit India

The following documents are required for registering under the Financial Intelligence Unit India:

Individual

• One certified copy of an officially valid document containing details of identity and address
• Any identification documents
• One recent photograph
• Such other documents including in respect of nature of business and financial status of the client as may be required by the reporting entity

Company

• Certificate of Incorporation (COI)/MOA & AOA of Company
• Resolution from BOD and POA granted to its managers, officers or employees to transact on its behalf
• Officially valid document in respect of managers, officers or employees holding an attorney to transact on its behalf.

Partnership Firm

• Registration Certificate
• Partnership Deed
• An officially valid document in respect of the person holding an attorney to transact on its behalf.

Trust

• Registration Certificate
• Trust Deed
• An officially valid document in respect of the person holding an attorney to transact on its behalf.

UIB/BOI

• Resolution of Managing body of such association or body of individuals
• POA granted to him to transact on its behalf
• An officially valid document in respect of the person holding an attorney to transact on its behalf
• Such information as may be required by reporting entity to collectively establish the legal existence of such association or Body of Individual (BOI).

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