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Financial Intelligence Unit Registration – A mandate for Financial Institutions

Vikalp Mishra

| Updated: Jan 23, 2020 | Category: Latest News

Financial Intelligence Unit Registration

The main aim of criminal activity is to generate profit. The individuals or groups involved in such crime try to find ways to control proceeds of such crime with minimum attention to towards the activity or towards themselves. The modus operandi of this is by masking the source of income or proceeds, changing the form or even rerouting and moving the funds to a place where they are less likely to attract attention. This process of concealing the source of money obtained by illicit means is called money laundering in general parlance. There are various methods by which money can be laundered and that too in sophisticated form. Hence with a mission to provide quality financial intelligence and safeguarding the financial system from ill effects of economic offences, including money laundering and terrorism financing Financial Intelligence Unit – India (FIU-IND) was setup by the Indian Government in the year 2004.

Need for Financial Intelligence Unit (FIU)?

Reserve Bank of India has been one of the major regulators of money laundering. RBI takes appropriate actions from time to time to check the money laundering activity. Financial Intelligence Unit, on the other hand, is not a regulatory body rather it is an agency of repository nature for receiving, processing, analyzing and disseminating information relating to suspect financial transactions to enforcement agencies and foreign FIUs.

Prevention of Money Laundering Act, 2002 (PMLA Act) came into effect in 2005 and under Section 12 (1) it obligates banks, financial institutions and intermediaries (reporting entities) to

a. Maintain a record of nature and value of transactions as prescribed, be it a single transaction or a series of it (though integrally connected) within a month;

b. Provide all such transactional details to the Director, Financial Intelligence Unit through a designated Principal Officer. It can be done within the prescribed time limit along with the records of the identity of all its clients.

Section 12 (2) prescribes that the records referred to in sub-section (1) as mentioned above, must be maintained for ten years from the cessation of transaction. The Indian Income Tax Department specifically handles this record.

What are the functions of the Financial Intelligence Unit (FIU – India)?

Financial Intelligence Unit is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister. The primary function of FIU (India) is to receive cash transaction reports (CTR)/suspicious transaction reports (STR), analyse them and disseminate to intelligence/enforcement agencies and regulatory authorities any valuable financial information so found.

The functions of FIU-IND are:

Collection of Information :- to act as central reception point for receiving all transnational reports from various reporting entities
Analysis of Information :- analyze recieved information in order to uncover patters of transactions suggesting suspicioun of money laundering and related crimes.
Sharing of Information :- Share information with national intelligence/law enforcement agencies, national regulatory authorities and foreign Financial Intelligence Units.
Acting as Central Repository :- Establish and maintain national database on the basis of reports recieved from reporting entities.
Co-ordination :- Coordinate and strengthen collection and sharing of financial intelligence through an effective national and global network to combat money laundering.
Research and Analysis :- Monitor and identify strategic key areas on money laundering trends, typologies and developments.

Who is ‘Reporting Entity’?

FIU-IND has identified the following entities to be registered under FIU-IND and provide reporting of transactions:

What kind of information is required to be furnished?

Every reporting entity is required to furnish information regarding 5 types of reporting formats. They are Suspicious Transaction Report (STR), Cash Transaction Report (CTR), Counterfeit Currency Report (CCR), Report on sale/purchase of immovable property (IPR) and Cross-Border Wire Transfer Report (CBWTR).

The requirements in each of them being as follows:

  • All cash transactions valuing more than 10 lakh rupees or equivalent in foreign currency.
  • Series of all cash transactions integrally connected and have taken place within a month if their aggregate is more than 10 lakh rupees or its equivalent in foreign currency.
  • All transactions involving non-profit organizations with a receipt value of more than 10 lakh rupees or its equivalent in foreign currency.
  • All incidents involving forged or counterfeit currency notes or bank notes used as genuine or all such cases wherever a transaction is facilitated by forgery of a valuable security or any document of like nature.
  • All transactions of suspicious nature weather in cash or not.
  • Every cross border transfer of funds if the origin or destination of fund is in India and the value is more than five lakh rupees or its equivalent in foreign currency.
  • Every sale and purchase of immovable property valued fifty lakh rupees or more that is registered by the reporting entity.

What are the due dates for filing various reports?

All the specified reports above are to be filed electronically over secure gateway through a portal developed by Financial Intelligence Unit named ‘FINnet Gateway’.

Report

Description

Due date

CTR

Rs. 10 lakh or more

15th day of the succeeding month

CCR

Forged or Counterfeit currency

15th day of succeeding month

NTR

Any transaction with a value of more than 10 lakhs involving receipts by NPO.

15th day of succeeding month

CBWTR

Cross-Border Transfer Rs. 5 lakhs or more

15th day of succeeding month

IPR

Purchase and Sale of Immovable property with a value exceeding Rs. 50 lakh

By 15th day of the month next to when the quarter ends

STR

Every suspicious transaction be it in cash or not.

Within 7 working days on being satisfied that the transaction is suspicious

Registration of Reporting Entity

Registration for the Financial Intelligence Unit is a two-staged process. It requires registration of two-person

  1. first, the entity itself needs to be registered and
  2. second registration of the principal officer.

I. Registration of the entity

  • One needs to visit http://finnet.gov.in/ and register as a new user.
  • Register as a new reporting entity.
  • Basic details such as reporting entity name, category and details of user have to be filled and submitted via the form.
  • Post submission a message confirming such submission of details is displayed and also gives reporting entity registration request number for further reference.
  • The registration request number is to be printed and a copy sends to FIU. In case of a scanned copy, it is to be emailed to ctrcell@fiuindia.gov.in. For Paper/hard copy it may be couriered to the Director, FIU-India, 6th Floor, Hotel Samrat, New Delhi-110021 and the envelop superscripted as “New Registration Request”

On approval, The FIUREID (unique identity number of an organization registered with FIU-IND) is communicated to the email ID provided.

II. Registration of Principal Officer

The process to register the Principal Officer (PO) and that of Reporting Entity (RE) are almost similar. However, the registration of the PO will be enabled only after RE registration is completed.

Both registration processes are merely designed to gather basic credentials of Reporting Entity and Principal Officer and there is no need to upload any document(s).

Checklist for Registration

For Reporting Entity (RE):

  • Registration Number granted by Regulator
  • Name of User, Contact Number (11 digits) & Email Id

For Principal Officer (PO):

  • Aadhar Card of Principal Officer
  • Telephone Number of Officer is mandatory
  • Mobile No. & Email Id (Preferably organization email-id)

Who all fall under the definition of ‘Reporting Entity’?

  • Banking Company: Banking company under PMLA means a banking company or a co-operative bank to which the Banking Regulation Act, 1949 applies.
  • Intermediary:
    • a stock-broker, banker to an issue, registrar to an issue, trustee to a trust deed, share transfer agent, merchant banker, underwriter, portfolio manager, investment adviser or any other intermediary associated with securities market (as defined under section 12 of the Securities and Exchange Board of India Act, 1992)
    • an association registered as per the Forward Contracts (Regulation) Act, 1952
    • intermediary registered under the Pension Fund Regulatory and Development Authority
    • any recognized stock exchange as referred under section 2 clause (f) of of the Securities Contracts (Regulation) Act, 1956
  • Financial institution: defined under clause (c) of section 45- I of the Reserve Bank of India Act, 1934 and also includes
    • Chit Fund Company – as defined in Section 2 of the Chit Funds Act, 1982.
    • Co-operative Bank – as provided under clause(dd) of section 2 of the Deposit Insurance and Credit Guarantee Corporation Act 1961
    • Housing Finance Institution – having meaning so assigned under clause (d) of section 2 of the National Housing Bank Act, 1987.
    • Non-banking Financial Company – as meaning assigned to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934.

Conclusion

The government has been taking hard steps for the past few years, in its aim to curb financial frauds, to make sure that ‘reporting entities’ comply with the obligations provided for them in the Prevention of Money Laundering Act, 2005. In pursuance to this goal, the Financial Intelligence Unit (FIU), under the Finance Ministry, published a list of unregistered NBFCs explaining that those institutions were being outside the ambit of FIU and posed a threat to the integrity of countries financial system. Further, as a corrective measure, they were asked to register their Reporting Entity(RE), Principal Officer (PO) and Designated Director with the FIU.

The list was to be revised monthly, and after compliance, the names were to be removed from the list. The method of filing reports by NBFCs is almost the same as that by other ‘reporting entities. Enterslice can help organizations looking for the same. Please contact our representative to enable us to serve you in this regard.

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Vikalp Mishra

Vikalp is NLU graduate from Patiala (Punjab) and has a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata. He specializes in Corporate Law, IPR and has fair share of litigation practice under his belt. Other facets of him are voracious reader, health freak and avid traveler. To him content writing comes naturally in effort to simplify the law for general public/reader.

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