The Hindu : Front Page : Bill to curb money laundering

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Friday, Jun 06, 2008
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Bill to curb money laundering

Special Correspondent

NEW DELHI: In a tough measure against money laundering, the Centre on Thursday decided to bring casinos, international credit card payment gateways such as VISA and MasterCard, full-fledged money changers (FFMCs) and money transfer service providers (MTSPs) such as the Western Union under the purview of Indian laws.

The Cabinet approved the amendment of the Prevention of Money Laundering Act (PMLA) which would make it mandatory for these financial intermediaries to report all suspected transactions involving international transfers. A new category of offences having cross-border implications is also to be added to the provisions of the Act to prevent the transfer of funds related to international crime.

Meeting obligations

Information and Broadcasting Minister Priyaranjan Dasmunsi said: “The Amendment Bill will enable the government to meet certain domestic needs and international obligations.”

Under the Act in its present form, only banks and other financial institutions are mandated to report suspicious transactions regularly to the financial intelligent unit (FIU) set up under the Finance Ministry. After scrutiny, such transactions are forwarded by the FIU to enforcement agencies for action. The decision to amend the PMLA has been taken following reports of transfer of funds through credit cards by a number of persons with a criminal background. This apart, certain traders are engaged in under-invoicing of export bills.

Such deals do not come under the purview of the Act currently. In effect, through money laundering, monetary proceeds derived from criminal activity can be transformed into funds with an apparently legal source such as these financial intermediaries. An official statement pointed out that under the PMLA or any of the existing Indian Acts, FFMCs, MTSPs and international payment gateways are not within the ambit of reporting regime.

New definitions

To plug this loophole, “new definitions of ‘authorised person’ and ‘payment system operator’ are proposed to be incorporated and the definition of ‘Financial Institution’ is to be amended.”

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