Later in this year India is ready to join anti- money laundering task force Financial Action Task Force (FATF) which will help domestic banks access developed markets.
Till now the Indian banks - ICICI bank, Bank of Baroda and State Bank of India have been denied branch licenses by United States on the grounds that India was not a member of the FATF. Though these banks have been able to get temporary reprieve after the government and the Reserve Bank of India (RBI) withheld fresh branch permission to the likes of Citibank.
But as per sources who have been involved in the negotiations with FATF India has completed all the formalities except one - to amend the Prevention of Money Launder Act (PMLA) – to include a host of offenses, such as insider trading and human trafficking, in the schedule of offences. An official said, "This was an oversight that will soon be taken care of." The Bill to amend the PMLA is expected to be brought in Parliament next month for discussion and the government will be able to share the provisions of the proposed law and win a membership.
The sources informed that the other six major fundamentals for a membership have already been identified. For instance, the FATF – that has 35 members, with India being an observer – wanted the government to establish a track of all foreign exchange transactions, including hawala.
While the RBI has put in place a trail by asking agents, including those for wire transfer, to keep records for a specified period of time, it has managed to convince FATF that it is not possible to track hawala deals as such transactions were illegal.
While the other five commandments have already been complied with as the government last year had notified changes to the rules related to the PMLA, specifying that suspected cases of terror financing would be part of the suspicious transaction reporting system.
The other four specifications are in position as soon as the PMLA come into effect. They included naming of enforcement agencies to deal with the notified laws and mandating ‘know your client (KYC)' norms that would be legally binding.
In fact the setting up of the Financial Intelligence Unit (FIU-Ind) two years ago was also part of the exercise to gain a membership of the elite group.