Suspicious funding reportage `extremely low` in India

Last Updated: Sunday, July 11, 2010 - 15:07

New Delhi: The reportage of suspicious and terror-related money in India is "extremely low", inspite of the country`s vulnerability to terrorism, a global body to check terror financing and money laundering said in its recent evaluation report of the country.

The report, dated June 25, was prepared by the mutual evaluation team of the Financial Action Task Force (FATF) after they visited the country last year for an on-site assessment of India`s compliance with the recommendations of the global body.

India was inducted as the 34th full-fledged member of the FATF during a plenary session of the body in Amsterdam during June 23-25, ending an almost decade-long wait and efforts for securing this coveted seat in the global body.

After getting membership, the government had said, "The FATF membership is very important for India in its quest to become a major player in international finance. It will help India to build the capacity to fight terrorism and trace terrorist money and to successfully investigate and prosecute money laundering and terrorist financing offences."

The on-site visit of the FATF was assisted by the authorities of the Financial Intelligence Unit -- the agency which keeps track of Suspicious Transaction Reports emanating from banking institutions and intermediaries of the country -- and the Enforcement Directorate, the nodal agency vested with legal powers to investigate money laundering cases.

"Given India`s vulnerability to terrorism and the large number of actual terrorist attacks per year, the number of terrorist related Suspicious Transaction Reports (STRs) also
appears to be extremely low, raising further questions about the implementation and effectiveness of the STR reporting obligation," the report said.

STRs collected by the FIU are subsequently sent to other enforcement and intelligence agencies like the CBI, DRI and Income Tax Department to check illegal money and hawala-like transactions.

"STRs filings appear to be extremely low in relation to the size of the financial system (of India), the scale of economic activity and the reported levels of proceeds generating crimes. This raises significant concerns about the overall effectiveness of the STR reporting regime," the report adds.

The FIU collected a total of 4,409 STRs last year -- banks (2,826), financial institutions (841) and intermediaries (742) -- taking the number of such reports to more than double
the 1,916 transactions reported in 2008.

The FATF, however, contends that the country has made important progress in establishing its STR reporting regime since it first started in 2006 and the total number of STRs has been rising.

The report underlines the country`s economic prowess, though it is also a "significant target for terrorist groups."

"As a leader among the emerging economies in Asia with a strongly growing economy and demography, India faces a range of money laundering and terrorist financing risks.

"The main sources of money laundering in India result from a range of illegal activities committed within and outside the country, mainly drug trafficking, fraud,
counterfeiting of Indian currency, transnational organised crime, human trafficking, and corruption," the report said.

The body also reported its concerns regarding convictions in money laundering cases, primarily under the Prevention of Money Laundering Act and the Narcotic Drugs and Psychotropic Substances Act, as "only six prosecutions were underway" in the country during the on-site visit.

PTI



First Published: Sunday, July 11, 2010 - 15:07

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