NEW DELHI, Aug 24: Amid concerns over possible money laundering through stock markets, lapses have been found in online submission of Suspicious Transaction Reports (STRs) by many brokers and other market entities to the government’s Financial Intelligence Unit (FIU-IND).
Concerns were raised in this regard at a recent meeting of the exchanges and depositories with FIU-IND, the agency responsible for receiving, processing and analysing financial transactions and disseminating information relating to suspect transactions to various intelligence and enforcement agencies.
Pursuant to the meeting, leading bourse NSE has now issued a circular to all its member brokers that “it has been informed by FIU that members are not using the FINnet Gateway Portal” for online submission of their STRs.
This follows a similar circular issued by another bourse BSE, wherein the exchange had asked all its member brokers to “get themselves registered with FIU India through the FINnet Gateway Portal (FINgate)” — an online interface between the reporting entities and the FIU-IND.
These reports help the enforcement agencies check manipulative practices, fraud and scams, among others. The FIU-IND was set up by the government to coordinate and strengthen collection and sharing of financial intelligence through national, regional and global networks to combat money laundering and related crimes.
The Prevention of Money laundering Act, 2002 and the Rules thereunder requires every reporting entity (banking company, financial institution and intermediaries) to furnish various reports pertaining to financial transactions to FIU.
The regulations framed by markets regulator Sebi also require all entities under its jurisdiction to submit STRs electronically to the FIU. However, many brokers and other market entities have been found to be lax in such submissions.
Some financial sector entities are also required to submit Counterfeit Currency Reports (CCRs) electronically to the FIU. Earlier, all such reports used to be furnished physically, but the online gateway, which was first rolled out in 2012, has made these processes faster.
The details required to be furnished to the FIU include all cash transactions worth over Rs 10 lakh, all suspicious transactions whether or not made in cash and all series of cash transactions below Rs 10 lakh but connected to each other and having taken place within a month.
Besides, all transactions over Rs 10 lakh involving receipts by non-profit organisations and transactions where counterfeit currency or forged security or documents have been used, are also required to be reported to FIU.
Suspicious transactions are those that give rise to a reasonable ground for suspicion of involvement of proceeds of an offence, appear to be made in circumstances of unusual or unjustified complexity, appear to have no economic rationale or bonafide purpose and those giving rise to suspicion about financing of terrorism-related activities.
FIU initiated its project FINnet (Financial Intelligence Network) in 2007 with the objective to “adopt industry best practices and appropriate technology to collect, analyse and disseminate valuable financial information for combating money laundering and related crimes”. (PTI)
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