Strict norms likely for DPs, brokers

Reporting norms for broking houses and depository participants are likely to made more stringent this financial year (FY09) as the government steps up vigil to track individuals suspected of money laundering activities.

The Financial Intelligence Unit-India (FIU-IND) is planning to make reporting mandatory for all the transactions in excess of Rs 10 lakh a month, particularly for broking houses.

The move is under consideration as the cash transaction reports (CTR) just from commercial banks have shot up from 2.2 million to nearly 6 million for FY08. The number could go up further since data for the full financial year is still being compiled. Similarly, last year, the agency received more than 2,500 suspicious transaction reports (STR) from various entities in the financial sector, as compared with 817 in FY07.

A senior FIU-IND official said the agency was planning to issue a fresh set of anti-money laundering guidelines, particularly for depository participants, or DPs, and broking houses.

"With the increase in the volume of transactions, it has become all the more important to have proper knowledge of all the accounts and keep track of the big transactions. The number of transactions in excess of Rs 10 lakh a month are seeing a rapid rise," the official said.

The source also mentioned that most CTRs come primarily from banks and not broking houses.

The Prevention of Money laundering Act 2002 (PMLA) came into force on 1 July, 2005. The government set up and designated FIU-IND as the agency to receive and process information relating to large cash and suspicious transactions under PMLA. The information related to suspicious transactions is subsequently disseminated to relevant intelligence and law enforcement agencies. FIU-IND is also authorised to share information relating to suspect financial transactions with its counterparts in other countries.

According to FIU-IND's annual report, out of the 22 lakh CTRs submitted by commercial banks, private banks, public sector banks and foreign banks accounted for 11.4 lakh, 9.21 lakh and 66,000 CTRs, respectively.

Although the pattern remains same, the number of CTRs have more than doubled in the last one year, according to FIU-IND officials.

"With the increase in compliance across the sectors, banks have become more conscious about PMLA and, hence, the reports are rising," said the official.

In case of STRs, about 56 per cent of the data came from commercial banks, 36 per cent from the financial intermediaries and 11 per cent from various financial institutions. STRs arise when the activity of the account, value of the transactions and number of accounts are a suspect.

Industry sources, however, said that in the last one year, a large number of STRs from broking houses arose due to multiple accounts. "Multiple accounts are on the rise and a majority of STRs these days arise because of that," said a broker.

Keeping this trend in view, FIU-IND wants certain alerts to identify a suspicious account. "These alerts should be analysed and then, if needed, should be reported to FIU-IND," the official added. In addition, the agency also wants brokerage firms to appoint specialised principal officers.