What is the role of the Financial Intelligence Unit?

FIU-IND was established in 2004

While it does not really act in the shadows, it does not seek headlines either, but the Financial Intelligence Unit-India was in the news recently when it imposed a penalty of Rs 5.49 crore on Paytm Payments Bank on March 1 for violating norms pertaining to money-laundering. So what is this office? Since it was set up in 2004, FIU-IND has significantly strengthened the country's anti-money-laundering and counter-terrorist financing framework. By serving as a centralised hub for financial intelligence, FIU-IND enables proactive detection and disruption of illicit financial activities, thereby safeguarding the integrity of the nation's financial system.

Establishment 

FIU-IND was established in 2004 as a specialised agency under the Ministry of Finance. Its primary mandate is to serve as the central national agency responsible for receiving, processing, analysing and disseminating information related to suspicious financial transactions. These transactions could be indicative of money laundering, terrorist financing or other illegal activities.

Under the Prevention of Money Laundering Act (PMLA), certain categories of organisations are required to register with FIU-IND as reporting entities. These reporting entities are mandated to comply with various regulations on anti-money laundering and combating terror financing (AML/CTF) and are tasked with  reporting certain types of financial transactions to FIU-IND. These include banks and financial institutions, stockbrokers and depository participants, payment system operators, insurance companies, mutual funds and asset management companies, among others.

Earlier notices

American online payments gateway service provider PayPal registered its operations with FIU-IND in February this year, following a six-year legal battle. FIU-IND had in December 2020 slapped a Rs 96-lakh penalty against the global online payments giant for not registering with it.

As many as 28 virtual digital assets (VDA) service providers, including WazirX, Coin DCX and Coinswitch, are registered with FIU-IND. On December 28, 2023, VDA service providers including Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global and Bitfinex received notices from FIU-IND under the PMLA for not complying with local money laundering laws.

Functions

Information processing and analysis: FIU-IND acts as a centralised repository of financial intelligence gathered from various reporting entities, including banks, financial institutions and intermediaries. It utilises sophisticated analytical tools to identify patterns, trends and anomalies in financial transactions that may indicate illicit activities.

Reporting and dissemination: If it comes across suspicious transactions, FIU-IND disseminates actionable intelligence to law enforcement agencies, regulatory authorities and other relevant stakeholders. Timely dissemination of information enables prompt investigation and prosecution of financial crimes, thereby deterring illicit activities.

Capacity building and training: FIU-IND plays a crucial role in enhancing the capability of reporting entities and law enforcement agencies in combating financial crimes. It conducts workshops, seminars and training programmes to educate stakeholders about AML and CTF measures, compliance requirements, and best practices.

International cooperation: Recognising the transnational nature of financial crimes, FIU-IND actively collaborates with its international counterparts and participates in global initiatives aimed at combating money laundering and terrorist financing. Such cooperation facilitates information sharing, joint investigations and the adoption of international standards and best practices.