Prevention of Money Laundering Act, 2002 (PMLA) forms the core of legal framework put in place by
India to combat money laundering and related crimes. PMLA and the Rules notified there under came
into force from 1stJuly, 2005. Under PMLA, all the entries registered with SEBI are required to furnish
information of all the suspicious transactions whether or not made in cash to FIU-IND. Under Section
3 of PMLA, projecting of crime as untainted property is an offence of money laundering liable to be
punishment under section 4 of the PMLA.
Money Laundering involves disguising financial assets so that they can be used without
detection of
the illegal activity that produced them. Through money laundering, the launderer transforms the
monetary proceeds derived from criminal activity into funds with as apparently legal source.
Financial Intelligence Unit-India (FIU-IND) is the central national agency of India responsible for
receiving, processing, analysing and disseminating information of suspect financial transactions. FIUIND is also responsible for coordinating and strengthening efforts of national and international
intelligence, investigation and enforcement agencies in combating money laundering and related
crimes.
Section 2 (1) (g) of PMLA Rules defines suspicious transaction whether or not made in cash which, to
a person acting in good faith:
• Gives rise to a reasonable ground of suspicious that it may involve the proceeds of
crime: or
Appears to be made in circumstances of unusual or unjustified complexity; or
Appears to have no economic rationale or bonafied purpose; or
Gives rise to a reasonable ground of suspicious that it may involve facing of the
activities relating to terrorism.
Some examples of suspicious transactions reported to FIU-IND are as under:
| Category | Examples of Suspicious transactions |
| Identity of Clients | Identification documents were found to be forged Address details given by the account holder were found to be false Doubt over the real beneficiary of the account |
| Suspicious Background | Positive match of name and date of births with person on various lists Account of publicly known criminals |
| Multiple Accounts | Large number of accounts having a common account holder, introducer or authorized Signatory with no rational or bono fide purpose Unexplained transfers between multiple accounts with no rationale |
| Activity in Accounts | Unexplained activity in dormant accounts Unexplained activity in account inconsistent with what would be excepted from declared Business |
| Nature of Transaction | Doubtful sources of Funds Doubtful overseas fund transfer Doubtful foreign remittance to non-relatives Doubtful cash deposits in a bank account at multiple locations Suspicious us of ATM/Credit card Doubtful foreclosure of loan account in cash Suspicious off-market transactions in demat accounts |
| Value of transactions | Multiple transactions of value just under the reporting threshold amount in an apparent attempt to avoid reporting Unexplained large value transaction inconsistent with the client's apparent financial Standing |
