The report the entire work of receiving information concerning important STRs, processing and dissemination on priority, and giving feedback to the reporting entities has been "instituted" under the important case division (ICD) vertical of the FIU, from March 18, 2020.
The “upheavals” generated by the spread of COVID-19 pandemic can become a “breeding ground” for new variants of electronic and cyber crimes in the coming days, the head of India’s Financial Intelligence Unit (FIU) has said in a latest report.
The federal organisation had last year created a special unit to deal with high-risk or important suspect transactions.
“Financial year 2019-20 was a rather challenging year for the global economy on account of COVID-19 pandemic,” FIU-India Director Pankaj Kumar Mishra wrote in the recently released annual report for the agency (2019-20).
“The upheavals generated by COVID-19 might prove to be a breeding ground for novel modus operandi and crimes such as electronic frauds and cybercrimes,” he said. The report has also been submitted to the Union finance ministry under which the agency functions.
The FIU acts as an interface between the financial sector of the country and law enforcement agencies for collecting, analysing and disseminating information, particularly about suspicious financial transactions pertaining to money laundering and financing of terrorism.
The FIU chief added that the reporting entities, like banks and other financial institutions, must further “strengthen their systems in order to identify new methods and trends which are emerging in times of this pandemic crisis”.
The report said that the FIU received a slightly higher number of suspicious transaction reports (STRs) at over 5.47 lakh during 2019-20 as compared to about 3.23 lakh in 2018-19.
An STR, generated by the reporting entities like banks and other financial intermediaries, is defined as a
“transaction involving financing of the activities relating to terrorism including transaction involving funds suspected to be linked or related to, or to be used for terrorism, terrorist acts or by a terrorist or a terrorist organisation or those who finance or are attempting to finance terrorism”.
Also, transactions done under circumstances of unusual or unjustified complexity or appear to have no economic rationale or bona fide purpose can be categorised under an STR.
The FIU gathers these reports on the basis of legal powers given to it under the Prevention of Money Laundering Act (PMLA).
After analysing the STRs, it disseminates these reports to various law-enforcement agencies in the country such as the CBI, Enforcement Directorate (ED), Income Tax Department, Directorate of Revenue Intelligence, Intelligence Bureau, Military Intelligence, and various state police units among others.
The organisation recently created an Important Case Division (ICD) to obtain and process on priority certain STRs linked to high-risk financial and economic probe cases.
A senior Finance Ministry officer, however, explained the mechanism of prioritising certain important STRs has “been existing in the FIU for some years and the mechanism has now been institutionalised by the creation of the ICD last year”.
“Such priortisation of important suspicious transaction dossiers or reports was being undertaken by the organisation by actively engaging with the reporting entities and making them aware about certain red-flag indicators in a doubtful financial transaction, where time is premium,” the officer, who requested anonymity, explained.
Priority STRs are required in high-risk financial crimes cases as the accused of the case or criminal entities may escape the law either by absconding, covering their finanical tracks or evidence tampering, he said.
“The priortisation of STRs is a practise followed by some FIUs across the globe too.”
“Such priority STRs can be either sought by the FIU or the banks or other reporting entities can themselves share them with the organisation if they find that these need to be shared immediately,” he added.
As per procedure, a reporting entity is normally supposed to furnish an STR to the FIU not later than seven working days on being satisfied that the transaction is suspicious.
Under the new mechanism, the STRs can be shared almost on a real-time basis.
The FIU report explained the rationale for bringing in the new system.
“The number of STRs reported by the reporting entities in recent years has increased considerably. There are always certain STRs which are more important than the others, for reasons such as significantly higher value of reported suspicious transactions compared to STRs of similar category.”
“Such STRs require urgent and prompt law enforcement attention and action. Therefore, FIU-IND is always looking to prioritise certain STRs for processing and dissemination,” the annual report, accessed by PTI, said.
It said the new mechanism of prioritising certain STRs was working well and the agency received 161 such dossiers from banks and other financial institutions during 2019-20.
These reports were processed by the organisation and shared with the concerned agencies “on priority”.
The report said major public and private sector banks have been made partners under the new mechanism.
“Learning from this (161 STRs received in 2019-20) experience, the practice of separately intimating important STRs has been extended to all major public sector and private sector banks.”
The report the entire work of receiving information concerning important STRs, processing and dissemination on priority, and giving feedback to the reporting entities has been “instituted” under the important case division (ICD) vertical of the FIU, from March 18, 2020.