The Detection and reporting of suspicious transactions by FIU

Context

• The report of the Financial Intelligence Unit (FIU), stated that fake notes and cross-border fund transfers in the country’s economic channels doubled in the last fiscal year, leading to the unearthing of over Rs. 560 crore in black money.

Finding of the report

• The report of the FIU, the premier technical investigation wing under the Finance Ministry, stated that the financial year 2015-16 saw a “record increase” in the detection of such instances.
• All banks and financial mediators explained the FIU detections is in compliance with anti-money laundering and counter-terror financing measures.
• The number of cash transaction reports (CTRs) doubled from 80 lakhs in 2014-15 to over 1.6 crore in 2015-16.
• The number of suspicious transaction reports (STRs) rose from 58,646 to 1,05,973 during the period.
• The report said that based on the STRs disseminated by the FIU, the Central Board of Direct Tax (CBDT) had detected unaccounted income of Rs. 154.89 crore, the Enforcement Directorate nosed out proceeds of crime of Rs. 107.47 crore and the Directorate of Revenue Intelligence (DRI) came across assets worth Rs. 300 crore during 2015-16.
• The total value of money unearthed stands at Rs. 562.36 crore.
• The report said the black money detection figures in the last fiscal year are for “only 5% of cases” flagged by the FIU to probe agencies.
• A similar growth was registered in counterfeit currency reports (CCRs)—over 16%, NTRs—nearly 25%, while there was an 850% growth in the number of cross border wire transfer reports (CBWTRs) during the period.

Reason behind the successful detection

• Due to the “increasing penetration” of technology and awareness against suspect fund movements at a time when the fight against black money is actively being pursued in the country and the world.
• An increased awareness and the fight against black money is leading all the stakeholders, including the government and reporting entities such as banks and others, to be proactive in detecting suspicious activities in their channels.

What is Financial Intelligence Unit (FIU)?

A Financial Intelligence Unit (FIU) is central agency set by the Government of India in 2004 as the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions.

• Receives financial information pursuant to country’s anti-money laundering laws
• Analyzes and processes such information and
• Disseminates the information to appropriate national and international authorities, to support for anti-money laundering and combating financing of terrorism.
• The FIU obtains reports from banks and other institutions and sends them for action to investigative and enforcement agencies that are mandated under the law to combat economic crimes.

Functions of FIU

• Collection of Information:Act as the central reception point for receiving Cash Transaction reports (CTRs), Cross Border Wire Transfer Reports (CBWTRs), Reports on Purchase or Sale of Immovable Property (IPRs) and Suspicious Transaction Reports (STRs) from various reporting entities.
• Analysis of Information:Analyze received information to uncover patterns of transactions suggesting suspicion of money laundering and related crimes.
• Sharing of Information: Sharing information with national intelligence/law enforcement agencies, national regulatory authorities and foreign Financial Intelligence Units.
• Act as Central Repository: Establish and maintain national data base on cash transactions and suspicious transactions on the basis of reports received from reporting entities.
• Coordination: Coordinate and strengthen collection and sharing of financial intelligence through an effective national, regional and global network to combat money laundering and related crimes.

CCR

• CCR is defined as the usage of a forged or counterfeit currency note or bank note as genuine or where any forgery of a valuable security or a document has taken place during a cash transaction at a bank.

STR

• Suspicious Transaction Report (STR) is a transaction that either indicates that it has been made in circumstances of unusual or unjustified complexity or appears to have no economic rationale or bona fide purpose.
• It is also applicable to the transactions that give rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism.

NTR

An NPO Transaction Report (NTR) pertains to all transactions involving receipts by non-profit organizations of more than Rs10 lakh