Understanding AML Guidelines for International Financial Services Center (IFSC)

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In Gujarat’s GIFT City, India has built a modern financial center called the International Financial Services Center (IFSC). This center attracts investors and businesses from around the world. But with this growth comes the need to protect the financial system from money laundering.

IFSCA Guidelines

To combat money laundering, the IFSC has strict Anti-Money Laundering (AML) rules overseen by the International Financial Services Centres Authority (IFSCA). These rules are designed to stop criminals from using the financial system for illegal activities.

The International Financial Services Centres Authority (IFSCA) Guidelines from 2022 are the main rules for Anti-Money Laundering (AML), Counter Terrorist-Financing (CFT), and Know Your Customer (KYC) in IFSCs. They cover things like:

  • Checking customers carefully and knowing who they are.
  • Keeping an eye on transactions and reporting anything suspicious.
  • Having plans to manage risks.
  • Keeping records and reporting as needed.
  • Checking for any sanctions against people or countries.

Prevention of Money Laundering Act from 2002 (PMLA) and other related rules also apply to everyone in India, including those in IFSCs. These laws give the basic legal rules for AML.

IFSCA Compliances are slightly different

Primarily governed by the International Financial Services Centres Authority (IFSCA) Act, 2019, and its AML/CFT regulations issued under it. These regulations are specifically designed for the IFSC ecosystem, considering its unique characteristics and international focus.

Anti-money laundering (AML), counter-terrorist financing (CFT), and know-your-customer (KYC) guidelines apply to all businesses registered in the IFSC. These guidelines, issued by the IFSC Authority, are not specific to any particular industry. They are general rules that each business needs to understand and follow based on their own sector.

To comply with these rules, every business in the IFSC must make its own internal guidelines. These rules are different from what similar businesses outside this economic zone use in regular places in India.

Each business in this economic zone needs to appoint a Designated Director (DD) and Principal Officer (PO). These officials should be stationed within the economic zone. They cannot share these roles with businesses outside the IFSC. They also need to register separately with the Financial Intelligence Unit India (FIU-IND). The head of the business in the IFSC can also be the DD. The PO can be in charge of making sure the business follows the rules, but they cannot be involved in developing projects or doing audits.

No Cash in IFSC

You can’t use cash to exchange money at the IFSC. When a business from this economic zone sends money to one outside it then it’s a cross-border transfer. Even if it’s a business in regular Indian locations it is cross-border. These transfers must follow certain guidelines.

Data and information about the business in the IFSC must be kept separate from data of businesses in regular Indian locations. This means that things like checking for suspicious activity and keeping track of transactions must be done separately for businesses in the IFSC.

Businesses in the IFSC should be ready for a review by the Financial Action Task Force (FATF). As part of this review, the FIU-IND may ask for more data, information, and reports from businesses in the IFSC. During the review, some businesses in the IFSC might also be chosen by the FATF team for a closer look, so all businesses in the IFSC need to be prepared for this possibility.

Encourage the use of RegTech and SupTech solutions to automate and enhance AML/CFT compliance processes. The IFSCA uses advanced technologies and data analysis to detect and stop money laundering. They constantly watch for signs of financial crimes and take action to stop them.

Learning about IFSC Guidelines

Explore the IFSCA guidelines as part of the Certified Anti Money Laundering Expert course offered by Indiaforensic. This course provides practical insights into the regulations set by the International Financial Services Centres Authority.

You will learn about the rules and procedures designed to prevent and detect money laundering activities within the IFSC. This knowledge is crucial for professionals seeking expertise in AML compliance within the financial sector. You can register for the upcoming CAME Cohort.

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