FIU India: Unveiling the Powerhouse of Financial Intelligence

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CA Mayur Joshi
CA Mayur Joshi
CA Mayur Joshi is a Forensic Accounting evangelist in India. He is the co-founder of Indiaforensic and is author of 7 books on forensic accounting, fraud investigations and money laundering.

Did you know that behind the scenes, a formidable agency is working tirelessly to combat money laundering and financial crimes in our country? Enter the Financial Intelligence Unit India FIU, the national regulatory authority entrusted with the critical task of gathering and analyzing financial intelligence. It aligns with international standards and the recommendations of the Financial Action Task Force (FATF).

FIU India has many important jobs. First, it watches over financial activities to make sure they follow the rules. Second, it collects all the important financial information in one place. Finally, it teams up with other financial intelligence units to share important details and work together. This helps keep the financial system safe and secure.

Reporting Entities under FIU India ?

In India, reporting entities are institutions that report financial transactions to FIU and help prevent money laundering and other financial crimes. Examples of reporting entities include banks, where you have your savings and also current accounts, and non-banking financial companies (NBFCs) that provide services like loans and investments. Insurance companies are also reporting entities because they handle financial transactions related to insurance policies. Additionally, stockbrokers and entities dealing with valuable assets, like jewelry or real estate, fall under the reporting category.

Essentially, any institution handling significant financial transactions is a reporting entity, contributing to the efforts of FIU India in maintaining financial transparency and preventing illicit activities.

When someone breaks the rules set by the Prevention of Money Laundering Act (PMLA), FIU India can take strict action against them. In December 2020, it fined PayPal, a big online payment company, Rs. 96 lakh for not following its directions properly. (In 2023 Paypal won the battle against FIU)

Their mission? To safeguard our financial system and protect us from illicit activities.

FIU India works as a part of a bigger system called the National Intelligence Law Enforcement Agencies. The Ministry of Finance supervises the National Intelligence. This makes it one of the premier central government organizations in the country. Pankaj Kumar Mishra is the current director of the Financial Intelligence Unit of India. It collaborates with other law enforcement agencies in the country to tackle financial crimes. Moreover, FIU invites proposals seeking engagement of consultants regularly.

But How do they Do It? 🤔

1️⃣ Cash Transaction Reports: FIU India keeps a close watch on large cash transactions. It ensures that any suspicious or unlawful activities are promptly identified and reported. Every reporting entity has to file cash transaction reports with FIU on the 15th Day of the Succeeding month. This report is different from the Suspicious Transactions Report.

2️⃣ Cross-Border Wire Transfers: By monitoring cross-border wire transfers above Rs. 5 lacs, FIU India tracks the movement of funds. It also identifies potential money laundering or terrorist financing activities. Every reporting entity has to file cash transaction reports with FIU on the 15th Day of the Succeeding month.

3️⃣ Suspicious Transactions: Companies, also called reporting entities, must send reports about suspicious transactions to FIU India. They have to do this within 7 working days once they are sure a transaction seems suspicious. There’s no specific amount limit for reporting suspicious transactions.

4️⃣ NTRs: This report is filed when Non-Profit Organizations (NPOs) receive money in a bank worth Rs. 10 lakhs or more. REs report these transactions to the Financial Intelligence Unit (FIU) within 15 days of the next month.

5️⃣ Real Estate Transactions: FIU India keeps a close eye on the purchase or sale of immovable properties. Moreover, it ensures smooth reporting of suspicious transactions to uncover potential money laundering schemes.

Prevention of Money Laundering

FIU India actively collaborates with law enforcement agencies and national regulatory authorities. Their goal is to prevent the illicit flow of funds and disrupt money laundering networks. The Prevention of Money Laundering Act (PMLA) 2002 and Prevention of Money Laundering Rules (PMLR) 2005 are the most important mandates of FIU.

With its direct reporting to the Economic Intelligence Council (EIC), this unit also acts as the backbone of our financial intelligence infrastructure, providing vital support to the fight against financial crimes.

The FIU is working to improve communication between private and public organizations in India. They have a special initiative called ARIFAC for this purpose. More information about this initiative is available here.

They have to share this information using a modern technology portal called FINGATE 2.0, which is a special platform provided by the FIU. This process ensures that all the reports sent to the FIU are in a consistent format, making it easier for the authorities to understand and analyze the data.

With the changes made to the Prevention of Money Laundering Act (PMLA) in 2023, the role of the FIU has become even more significant. The unit now has additional responsibilities in dealing with financial crimes.

So, next time you make a financial transaction, remember that the Financial Intelligence Unit India is diligently working behind the scenes to protect your hard-earned money and ensure a safer financial ecosystem for all.

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