Mumbai, Oct. 22: The Reserve Bank of India (RBI) will soon come out with new reporting systems for banks covering suspicious transactions or transactions valued at over Rs 10 lakh.
“The RBI is in the process of prescribing reporting systems for banks under which cash transactions of more than Rs 10 lakh or of suspicious nature are reported to financial intelligence unit (FIU) of India on a regular basis,” said Anand Sinha, who is the chief general manager of RBI’s department of banking operating and development (DBOD).
Addressing a seminar organised by the Indian Banks’ Association (IBA) here today, Sinha said the central bank was looking at money laundering in a serious manner.
“Money laundering was a localised phenomenon earlier but it has become international now and that is why we have been forced to look at it closely,” Sinha said.
Sinha said anywhere between $600 million and $1.5 billion ' or roughly 2 to 5 per cent of the gross domestic product (GDP) ' was laundered every year.
Sinha said the introduction of financial action task force (FATF) was in the interest of the nation.
“Countries not co-operating with FATF were treated as outcasts and its implementation this year is in the national interest,” he said.
Last year, the RBI had directed banks to monitor all transactions of a questionable nature, keep a close vigil on the antecedents of those opening new bank accounts, and oversee existing accounts in order to halt money laundering and prevent the financing of terrorism.
At that time, the banks were told that they could set their own threshold limits for a particular category of accounts and pay attention to the transactions, which exceed these limits. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer would then come under scrutiny.
Banks were also told to ensure that any remittance of funds by way of demand draft, mail telegraphic transfer or any other mode and issue of travellers cheques for value of Rs 50,000 and above is effected by debit to the customer’s account or against cheques and not against cash payment.
Banks were also told to prepare a profile for new customers based on risk. All those whose sources of funds were not clear were to be placed in the high-risk category and subjected to close scrutiny.
They were also asked to exercise greater diligence when dealing with non-resident customers, high net-worth individuals, trusts, charities, NGOs and organisations receiving donations, companies having close family shareholding, firms with ‘sleeping partners’, politically exposed persons (PEPs) of foreign origin, and those with dubious reputation according to public information available.
Despite this, the Reserve Bank feels that money launderers may have got smarter and used other methods to circumvent close scrutiny. It is to plug these avenues that it now wants to put in place tighter norms for reporting.