Reports by RE under RBI : PMLA 2002

The following are the major reports and their expected contents prescribed to be submitted by every Reporting Entity (RE):

1) Cash Transaction Reports

Cash transaction reports refer to:

All cash transactions of the value of more than rupees ten lakhs or its equivalent in foreign currency.

All series of cash transactions integrally connected to each other which have been valued below rupees ten lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month. Cash Transaction Reports are to be reported on a monthly basis by the 15th day of the month following the month of transaction. A Cash Transaction Report covers details of account, related persons and transactions for a month in a bank account

2). Counterfeit Currency Report

The Prevention of Money-laundering Act, 2002, and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 require banking companies to report all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine or where any forgery of a valuable security or a document has taken place facilitating the transactions.

All cash transactions, where forged or counterfeit Indian currency notes have been used as genuine should be reported by the Principal Officer of the bank to FIU-IND in the specified format(Counterfeit Currency Report – CCR), by 15thday of the next month. These cash transactions should also include transactions where forgery of valuable security or documents has taken place and may be reported to FIU-IND in plain text form.

A summary of cash transaction reports for the bank as a whole should be compiled by the Principal Officer of the bank every month in physical form as per the format specified. The summary should be signed by the Principal Officer and submitted to FIU-IND. In case of CTRs compiled centrally by banks for the branches having Core Banking Solution (CBS) at their central data centre, banks may generate centralised CTRs in respect of the branches under core banking solution at one point for onward transmission to FIU-IND, provided the CTR is to be generated in the format prescribed by FIU-IND;

A copy of the monthly CTR submitted to FIU-India in respect of the branches should be available at the branches for production to auditors/inspectors, when asked for; and

The instruction on ‘Maintenance of records of transactions’; and ‘Preservation of records’ as contained above in this Master Circular at Para 6.1 and 6.2 respectively should be scrupulously followed by the branches. viii) However, in respect of branches not under CBS, the monthly CTR should continue to be compiled and forwarded by the branch to the Principal Officer for onward transmission to FIU-IND.

3). Suspicious Transaction Reports

Suspicious transaction means a transaction whether or not made in cash which, to a person acting in good faith:

(a) Gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or

(b) Appears to be made in circumstances of unusual or unjustified complexity; or

(d) Gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism.

Transaction involving financing of the activities relating to terrorism includes transaction involving funds suspected to be linked or related to, or to be used for terrorism, terrorist acts or by a terrorist, terrorist organization or those who finance or are attempting to finance terrorism. Suspicious Transaction Reports are required to be reported by the principal officer within [7 working days] Immediately on confirmation of suspicion wef 17/10/2023 on being satisfied that the transaction is suspicious. Suspicious Transaction Reports will include details of all accounts, transactions, individuals and legal persons/entities related to suspicious transaction

Examples of Suspicious Transactions for a banking company

Identity of client

– False identification documents

– Identification documents which could not be verified within reasonable time

– Accounts opened with names very close to other established business entities

Background of client

– Suspicious background or links with known criminals

Multiple accounts

– Large number of accounts having a common account holder, introducer or authorized signatory with no rationale

– Unexplained transfers between multiple accounts with no rationale Activity in accounts – Unusual activity compared with past transactions

– Sudden activity in dormant accounts

– Activity inconsistent with what would be expected from declared business

Nature of transactions

– Unusual or unjustified complexity

– No economic rationale or bona fide purpose

– Frequent purchases of drafts or other negotiable instruments with cash

– Nature of transactions inconsistent with what would be expected from declared business

Value of transactions

– Value just under the reporting threshold amount in an apparent attempt to avoid reporting

– Value inconsistent with the client’s apparent financial standing

Examples of Suspicious Transactions for an intermediary

Identity of Client

– False identification documents

– Identification documents which could not be verified within reasonable time

– Non-face to face client

– Doubt over the real beneficiary of the account

– Accounts opened with names very close to other established business entities

Suspicious Background

– Suspicious background or links with known criminals

Multiple Accounts

– Large number of accounts having a common account holder, introducer or authorized signatory with no rationale

– Unexplained transfers between multiple accounts with no rationale

Activity in Accounts

– Unusual activity compared to past transactions

– Use of different accounts by client alternatively

– Sudden activity in dormant accounts

– Activity inconsistent with what would be expected from declared business

– Account used for circular trading

Nature of Transactions

– Unusual or unjustified complexity

– No economic rationale or bonafide purpose

– Source of funds are doubtful

– Appears to be case of insider trading

– Investment proceeds transferred to a third party

– Transactions reflect likely market manipulations

– Suspicious off market transactions

Value of Transactions

– Value just under the reporting threshold amount in an apparent attempt to avoid reporting

– Large sums being transferred from overseas for making payments

– Inconsistent with the clients apparent financial standing

– Inconsistency in the payment pattern by client

– Block deal which is not at market price or prices appear to be artificially inflated/deflated

Examples of Suspicious Transactions for an insurance company

- Customer insisting on anonymity, reluctance to provide identifying information, or providing minimal, seemingly fictitious information

- Cash based suspicious transactions for payment of premium and top ups. It should also consider multiple demand drafts each denominated for less than Rs.50,000 - Frequent free look cancellations by customers

- Assignments to unrelated parties without valid consideration

- Request for a purchase of policy in amount considered beyond his apparent need

- Policy from a place where he does not reside or is employed

- Frequent request for change in addresses

- Overpayment of premiums with a request for a refund of the amount overpaid

4). Non-Profit Organisation

The report of all transactions involving receipts by non- profit organizations of value more than rupees ten lakh or its equivalent in foreign currency should be submitted every month to the Director, FIU-IND by 15th of the succeeding month in the prescribed format.

5). Cross-border Wire Transfer Report

Cross-border Wire Transfer Report (CWTR) is required to be filed with FIU-IND by 15th of succeeding month for all cross border wire transfers of the value of more than five lakh rupees or its equivalent in foreign currency where either the origin or destination of fund is in India.

Preparation of reports

The reporting entities are required to submit reports to FIU-IND which is compliant with the XML format specifications. Reporting entities which have necessary technical capabilities may generate XML (eXtensible Markup Language) reports directly from their systems. The reporting format guide – version 2.0 of 2011 provides reporting entities with the specifications of prescribed reports required to be submitted to the Financial Intelligence Unit – India (FIU-IND).

This document presents details of the XML schema and provides implementation guidance to the reporting entities in preparation and submission of reports. The reporting formats specified in the reporting format guide are:

Account based reporting format (ARF) for reporting of account based CTRs, STRs and NTRs

Transactions based reporting format (TRF) for reporting of transaction based CTRs, STRs and NTRs

CCR reporting format (CRF) for reporting of counterfeit currency reports (CCRs)

If the reporting entity has account-based relationship, they should use account based reporting format (ARF) for submitting CTR, STR and NTR.

Transaction based reporting format (TRF) can be used for transactions without account based relationship with the customer. E.g. money transfer service, money exchange.

Submission of reports

With the implementation of Project FINnet (Financial Intelligence Network) by FIU-IND in 2010, the primary mode of submission of reports to FIU-IND will be through the FINnet Gateway Portal. The FINnet Gateway Portal - https://finnet.gov.in/ is designed as a comprehensive interface between the reporting entities and FIU-IND. The user guide for the FINnet Gateway Portal provides detailed documentation on using the portal.

Reporting Entities are expected to submit reports in electronic form. However if the reporting entity does not have the capability to generate report in electronic form, reports may be submitted in manual paper-based forms. Reporting Entities should use the FIU-IND provided PDF Form based utilities to capture data and print the report as per the specified format. The paper based report should be duly signed by the Principal Officer and posted to FIU-IND. However, Reporting Entities should make all reasonable efforts to send reports in electronic rather than the paper based format.

Preventive provisions of the Act can be summarised as under:-

(i) Process and procedure regarding attachment, adjudication and confiscation (Section 5, Section 6, Section 7, Section 9, Section 10 and Section 11);

(ii) The Prevention of Money-laundering (Manner of Receiving the Records Authenticated Outside India) Rules 2005, The Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (Section 12, Section 12A, Section 12AA, Section 13, Section 14, Section 15);

(iii) Provisions regarding Survey, Search and Seizure and Retention of Records – (Section 16, Section 17, Section 18, Section 20, Section 21, Section 22);

(iv) Provisions regarding statutory obligation on part of other authorities to assist the Enforcement Directorate in its preventive/regulatory functions (Section 48, Section 49, Section 52, Section 53, Section 54, Section 63, Section 69, Section 72A); and

(v) Provisions regarding International Cooperation and Exchange of Information in order to provide the database for monitoring cross border suspicious transactions– (Section 55, Section 56, Section 57, Section 58, Section 58B, Section 59, Section 60, Section 61).

Happy Reading,

Those who read this, also read:

1. Obligations by RE under PMLA 2002

2. Offence of Money Laundering : PMLA 2002

3. Objectives & Applicability: PMLA 2002

4. Progress of Criminalisation: AML/CFT - India

5. RBI Guidance on Record Management

6. Suspicious Transaction -AML/CFT