India
Answer ... Over the past two decades, India has systematically introduced a variety of laws – including specialised AML statutes – in a structured attempt to combat financial crimes more effectively. Enforcement of this robust legislative framework has also been made a priority, as evidenced by a significant uptick in recent enforcement activity by specialised agencies.
India’s specialised AML statute is the Prevention of Money Laundering (PML) Act, 2002 which, together with the various rules framed thereunder, forms the legislative backbone for the prosecution of AML-related offences in India. The Directorate of Enforcement is the primary investigative agency in India responsible for enforcing the PML Act. To supplement its efforts, the Financial Intelligence Unit of India (FIU) – another central agency – has been constituted to receive, process, analyse, possess and disseminate information with a view to identifying and reporting suspicious financial transactions which may potentially constitute a violation of the AML requirements under the PML Act.
Additionally, the following bodies have been authorised to identify and report AML violations and to frame preventive guidelines in their respective sectors to combat sector-specific AML violations:
- the principal banking regulator, the Reserve Bank of India (RBI);
- the primary financial markets regulator, the Securities and Exchange Board of India (SEBI); and
- the insurance sector regulator, the Insurance Regulatory and Development Authority of India (IRDAI).
The guidelines and rules laid down by the RBI, SEBI and the IRDAI dealing with money laundering include:
- the RBI Master Direction: Know Your Customer Direction, 2016 (‘RBI KYC Direction’);
- the Guidelines on Anti-Money Laundering Standards and Combating the Financing of Terrorism Obligations of Securities Market Intermediaries (‘SEBI Anti Money Laundering Guidelines’); and
- the IRDAI Master Guidelines on Anti-Money Laundering/Counter Financing of Terrorism, 2022.
The PML Act applies throughout India, and all guidelines and rules framed by the abovementioned national agencies apply nationally. There are no additional state-specific requirements.
India
Answer ... To assist in the effective enforcement of the PML Act, the central agencies tasked with enforcement have expanded their global footprint and established lines of cooperation with other federal agencies in several international jurisdictions. Bilateral and multilateral instruments between India and other countries have formalised standards of international cooperation to a large extent, as demonstrated by the following:
- In 2008, the FIU signed separate bilateral memoranda of understanding with Mauritius, the Philippines and Brazil to facilitate the exchange of information and resources, with a view to effectively cooperate and analyse information concerning financial transactions that are suspected of being related to money laundering and terrorist financing. A similar treaty was signed with Saudi Arabia in 2016. In its 2021-2022 Annual Report, the FIU stated that it has entered into international cooperation treaties with 49 countries (some of which are still under negotiation).
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The Agreement between India and the United Kingdom concerning the Investigation and Prosecution of Crime and the Tracing, Restraint and Confiscation of the Proceeds and Instruments of Crime (Including Crimes involving Currency Transfers) and Terrorist Funds aims to provide the widest measures for mutual assistance in:
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- the investigation and prosecution of crime; and
- the tracing, restraint and confiscation of the proceeds and instruments of crime (including crimes involving currency transfers) and terrorist funds.
- The Agreement between the FIU and the Federal Financial Monitoring Service of the Russian Federation aims to formulate an understanding between the two countries to share and analyse information in their possession regarding financial transactions that are suspected of being related to the laundering of proceeds of crime and persons or companies involved in such transactions.
- India is a party to the United Nations Convention against Transnational Organized Crime, 2000, which aims to prevent and combat transnational organised crime, including money laundering related to such crimes.
- India has ratified the United Nations Convention against Corruption, 2003, which sets out preventive measures to be adopted by countries for international cooperation in combating corruption and money laundering.
India
Answer ... The following public sector bodies are responsible for enforcing the AML laws and regulations.
Directorate of Enforcement: The Directorate of Enforcement is the primary enforcement agency responsible for the investigation and prosecution of offences under the PML Act. The Directorate of Enforcement has the power:
- to conduct arrests, searches and seizures;
- to initiate proceedings for the attachment of property that is suspected of having been acquired through the proceeds of crime; and
- to initiate and pursue prosecution proceedings before a special court (specially designated to deal with cases under the PML Act) against persons accused of violations of the PML Act.
Other authorised officers: Section 54 of the PML Act sets out a comprehensive list of officers/public authorities that are empowered to enforce the act. Such authorities are empowered to:
- assist in the investigation of PML Act offences; and
- report violations of any specific acts, rules and directions issued by the specific authority with a view to enforcing the objectives of the PML Act.
The authorities specified under the PML Act are as follows:
- officers of the Customs and Central Excise Department;
- officers appointed under Section 5(1) of the Narcotic Drugs and Psychotropic Substances Act (61/1985);
- income tax authorities, which are empowered to impose taxes on undisclosed income and foreign assets of India to prevent offences falling within the ambit of money laundering;
- officers of the stock exchange recognised under Section 4 of the Securities Contracts (Regulation) Act (42/1956);
- officers of the RBI, which has the power to impose penalties under Section 58B of the RBI Act 1934 in event of violation of the RBI KYC Direction by reporting entities;
- police officers;
- enforcement officers appointed under Section 36(1) of the Foreign Exchange Management Act (40/1999);
- officers of the SEBI. That said, while the SEBI Anti-Money Laundering Guidelines clearly mandate every banking company, financial institution and intermediary to adhere to the client account opening procedures stipulated in the guidelines and the rules, SEBI has no independent powers in the event of violation of the guidelines;
- officers of any other body corporate constituted or established under a central act or a state act – every company under Section 89 of the Companies Act is required to file with the Registrar of Companies a record of its significant owners. Such information is mandated to prevent money laundering through beneficial ownership; and
- such other officers of the central government, state governments, local authorities or banking companies as the central government may, by notification, specify in this regard.
India
Answer ... There are several industry-specific self-regulatory organisations and professional associations. These self-regulatory organisations and professional associations have not been authorised to enforce the PML Act and thus have no enforcement powers in case of AML-related violations. However, these self-regulatory organisations and professional organisations play an important role in voicing industry-specific concerns and issues arising from compliance with obligations that are imposed on certain industries under the PML Act.
India
Answer ... The PML Act lays down a broad framework for AML compliance which applies to banking companies, financial institutions, intermediaries and reporting entities (as defined under the PML Act). Based on this framework, financial services regulators (eg, the RBI, SEBI and the IRDAI) have framed industry-specific rules, directions and guidelines to ensure compliance with the AML objectives set out in the PML Act. These directions and guidelines (see question 1.1) are aimed at monitoring the manner in which banking companies, financial institutions, intermediaries and reporting entities are obliged to furnish information with a view to identifying suspicious transactions and accordingly report such information to the FIU. In turn, the FIU is responsible for analysing the reports/information provided by financial service regulators and, where necessary, reporting such transactions to the Directorate of Enforcement, so that appropriate action can be initiated in terms of the PML Act.
India
Answer ... There has been a significant increase in the number of money-laundering investigations in recent year. The Eighth Follow-Up Report of the Financial Action Task Force (FATF) noted that the number of investigations being conducted for AML-related violations increased from 798 in December 2009 to 1,405 in December 2011 and subsequently to 1,561 in April 2013. However, conviction rates remain extremely low since, under Indian law, the standard of proof for criminal prosecution is beyond all reasonable doubt.
India
Answer ... All reporting entities (as defined under the PML Act), in accordance with Rule 3(d) and Rule 8(2) of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 (‘PML Maintenance of Records Rules’), must maintain and furnish information in relation to all suspicious transactions (as defined by Rule 2(1)(g)). The financial service regulators, by way of specific rules, guidelines and directions (see question 2.1), further stipulate specific reporting procedures for reporting suspicious transactions with a view to preventing money laundering in the market. The reports generated and submitted by reporting entities are then analysed by financial regulators and the matter can be escalated (as mentioned in question 1.5) if required.
With regard to the power to identify proceeds of crime or require an explanation of the source of funds, the Directorate of Enforcement has the power to attach property that it considers was acquired through the proceeds of crime. Once a property is attached, Section 5 of the PML Act specifies that the Director of the Directorate of Enforcement must notify the Adjudicating Authority – a quasi-judicial authority constituted within the framework of the PML Act to deal with cases involving the attachment of property and so on – of the specific reasons for attaching the property. At this stage, the attachment of property is provisional. The persons whose property has been attached are then given the opportunity by the Adjudicating Authority to argue against the attachment of the property (including by proving the source of funds). After consideration of the same, the Adjudicating Authority will pass an order either confirming or setting aside the attachment of the property by the Directorate of Enforcement.
India
Answer ... Yes, the FIU is a central agency which is responsible for receiving information regarding all transactions which are suspicious in terms of Rule 2(1)(g) of the PML Maintenance of Records Rules. The FIU will analyse the relevant information and any activity which seems to be related to money laundering or terrorist financing will be reported to the Directorate of Enforcement for it to take necessary action. The FIU operates internationally and has led the Indian delegation at various participatory meetings of the FATF. The FIU also participates in the Joint Working Groups on Counter Terrorism set up by the Indian government with various countries to evaluate AML/counter-terrorist financing vulnerabilities and conduct national risk assessments.
India
Answer ... Under Indian corporate laws, companies, limited liability firms and partnership firms must be registered and comply with:
- various reporting and filing obligations in relation to ownership, shareholdings and other relevant details as part of the registration process; and
- various ongoing periodic filing requirements (eg, financial statements, updates regarding significant changes in ownership/directorship).
These filings are accessible through the public information portals maintained by government agencies – for example, the Ministry of Corporate Affairs maintains an online repository of all public information and filings of registered companies and limited liability partnerships on its website (www.mca.gov.in). These publicly available information repositories maintained by government authorities can be used to assist in conducting and/or validating AML information, ultimate beneficial ownership and other details. While these registries interoperate more often than not, they do not ordinarily do so internationally.
The central government, in accordance with Rule 9A of the PML Maintenance of Records Rules, is obliged to establish a Central Know-Your-Customer (KYC) Records Register for the purpose of receiving, storing, safeguarding and retrieving electronic copies of KYC records/information obtained by reporting entities.
India
The publicly available records and filings of registered firms are available to all industry-specific regulators registers. Therefore, any investigation being conducted in relation to any AML violation under the PML Act will benefit from the cooperation of all authorities involved in the registration and documentation of records of registered firms. Unlike the FIU, which has a track record of international cooperation, these registers do not generally work internationally.