India

India

  Back to search

Country contact

Ravi Kumar Mahto - ravi.mahto@platinumpartners.co.in
PLATINUM PARTNERS Block-E,
2nd Floor Plot-1&2,
The MIRA Ishwar Nagar Mathura Road New Delhi
110 065 Ph: 011
42603045-46-47-48
Fax: 011 - 42603049

There is no central reporting authority specifically for lawyers in India.

Generally, Financial Intelligence Unit – India (FIU-IND) is the central authority for receiving, processing, analysing and disseminating information relating to suspicious financial transactions in India. FIU-IND reports to the Economic Intelligence Council headed by the Finance Minister. FIU-IND receives information about suspicious transactions, analyses and processes such information, and disseminates the information to appropriate national and international authorities, to support anti-money laundering efforts.

FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence and enforcement agencies in pursuing the global efforts against money laundering and related crimes. FIU-IND is, however, not a regulatory authority or a law enforcement authority.

Money Laundering has been defined under the (Indian) Prevention of Money-Laundering Act, 2002 (PMLA) as the offence of ‘directly or indirectly attempting to indulge, or knowingly assisting, or knowingly being a party or being actually involved in any process or activity connected with the proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as untainted property’. Proceeds of crime means ‘any property derived or obtained directly or indirectly, by any person as a result of a criminal activity relating to an offence specified in the schedule to the PMLA, including the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad’.

The primary offence of money laundering covers knowing involvement in any process or activity connected with the proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as untainted property.

The primary enforcement authority under the PMLA is the Directorate of Enforcement, which also serves as the enforcement agency in connection with contraventions of exchange control laws.

Other anti-money laundering regulators in India include the following:

  • (i) Securities and Exchange Board of India (SEBI): SEBI has prescribed various know your customer (KYC) norms and requirements for financial intermediaries and investors in the securities market to combat money laundering.
  • (ii) Reserve Bank of India (RBI): RBI has laid down anti-money laundering guidelines for banks and other financial institutions to adhere to.
  • (iii) Insurance Regulatory & Development Authority of India (IRDAI): IRDAI has issued anti-money laundering and anti-terrorism financing guidelines applicable to certain categories of insurers.
  • (iv) Central Bureau of Investigation (CBI) – Economics Offences Wing: CBI is a special police establishment which has been constituted to investigate into certain specific types of offences.
  • (v) Income Tax Department: The Income Tax Department, Government of India under the Income Tax Act, 1961 is also authorised to take steps to prevent the offence of money laundering by imposing tax on undisclosed foreign income and assets on Indian residents. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 has further enhanced the powers of the Income Tax Department.
  • (vi) Registrar of Companies: Following the recommendations of the Financial Action Task Force (FATF) and consistent with the changes made in jurisdictions such as the Russian Union and the UK, a new requirement has been introduced under the Companies Act, 2013, requiring every Indian company to file with the Registrar of Companies a return of significant beneficial owners in the company.

Not applicable to India

India does not have any law on money laundering which is aimed specifically at lawyers. The anti-money laundering legislations are either of general applicability or are limited in their applicability to banks, financial institutions, other financial intermediaries and certain other high-risk businesses. An overview of the anti-money laundering laws is provided below:

  • (i) PMLA and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005

    The PMLA is the primary legislation in India with general applicability to tackle money laundering. It aims to prevent money laundering and restrict use of the proceeds of crime in India. It prescribes strict penalties for breach of its provisions, including imprisonment of up to ten years and the seizure or confiscation of tainted property. Also, under the PMLA, “reporting entities” comprising of banking companies, financial institutions, intermediaries, and persons carrying on certain specified businesses or professions are required to conduct client due diligence (which includes determination of beneficial ownership as part of KYC checks) and also maintain records of all transactions with their clients for a period of ten years.
  • (ii) The Black Money (Undisclosed Foreign Income and Assets) and imposition of Tax Act, 2015.

    This statute was enacted to tackle black money existing in the form of undisclosed foreign income and assets. It sets out the procedure for dealing with such income and assets and to provide for imposition of tax on any undisclosed foreign income and asset held outside India. It empowers the authorities to impose tax on undisclosed foreign income and assets at a rate of 30%. Non-disclosure of foreign income and assets is penalised more heavily at the rate of 100% of such tax, in addition to the 30% tax.
  • (iii) Foreign Exchange Management Act, 1999

    This statute prescribes checks and limitations on various foreign exchange remittances.
  • (iv) Benami Transactions (Prohibition) Act, 1988 as amended by Benami Transactions (Prohibition) Amendment Act, 2016

    This statute prohibits transactions in which property is transferred to one person for consideration paid or provided by another person. The amendment has expanded the definition of ‘benami transactions.
  • (v) Narcotics, Drugs and Psychotropic Substances Act, 1985

    This statute independently provides for an offence of laundering proceeds of crime resulting from offences under the statute.
  • (vi) SEBI’s Guidelines for Anti-Money Laundering Measures, 2006 and other KYC requirements

    SEBI has published guidelines for capital market intermediaries for anti-money laundering and anti-terrorist financing activities in India. The guidelines also set out the steps that a registered intermediary and any of its representatives should implement to discourage and identify any money laundering or terrorist financing activities. In addition, certain intermediaries regulated by SEBI (e.g., foreign portfolio investors) are required to comply with various KYC requirements, including in relation to identification of beneficial owners as per the PMLA regime.
  • (vii) RBI’s Know Your Customer Direction, 2016 (RBI-KYC Direction) and RBI Master Circular – Know Your Customer norms / Anti-Money Laundering standards/Combating Financing of Terrorism /Obligation of banks and financial institutions under PMLA, 2002 (RBI Master Circular)

    RBI has prescribed various KYC and anti-money laundering norms for banks, financial institutions, non-banking financial companies and money changers to adhere to. The guidelines have been made in the context of recommendations made by the FATF on anti-money laundering standards and combating financing of terrorism.
  • (viii) Anti-Money Laundering/Counter Financing of Terrorism – Guidelines for Insurers.

    IRDAI has issued various anti-money laundering guidelines applicable to both life and general insurers. Establishment of anti-money laundering programs by financial institutions is one of the central recommendations of the FATF and also forms part of the insurance core principles of the International Association of Insurance Supervisors.
  • (ix) Fugitive Economic Offenders Act, 2018

    This act applies to fugitive economic offenders i.e. individuals against whom a warrant for arrest in relation to certain offences, including offences under the PMLA, has been issued by any court in India, and who has left India so as to avoid criminal prosecution or being abroad, refuses to return to India to face criminal prosecution. The act empowers authorities to attach any property for which there is a reason to believe that the property is a proceeds of crime, or is a property or benami property owned by an individual who is a fugitive economic offender, and which is being or is likely to be dealt with in a manner which may result in the property being unavailable for confiscation.
    • No, except to the extent covered by the general anti-money laundering legislations summarised above and applicable to any other visitor, there are no specific requirements under Indian money laundering laws for visiting lawyers.

    The reporting obligations under PMLA apply to banking companies, financial institutions, other intermediaries (including capital market intermediaries and non-banking financial companies) and persons carrying on certain specified businesses and professions (including gaming businesses, dealers in precious metals, precious stones and other high value goods, and persons engaged in safekeeping and administration of cash and liquid securities on behalf of other persons).

    The Bar Council of India (BCI) regulates the legal profession in India. There is no specific money laundering guidance for lawyers currently in place.

    The BCI is not involved in supervising or enforcing compliance with any anti-money laundering regulations.

    Not applicable to India.

    There are no Client Due Diligence (CDD) obligations for lawyers in India.

    However, CDD requirements have been prescribed under the PMLA for certain other persons. In such cases, CDD is required to be undertaken by every ‘reporting entity’ (i) at the time of commencement of an account based relationship with the client; (ii) while carrying out a transaction of an amount equal to or exceeding rupees fifty thousand, whether conducted as a single transaction or several transactions that appear to be connected; or (iii) while carrying out any international money transfer operations. The reporting entities are also required to conduct on-going diligence of the client, closely examine the transactions in order to ensure that they are consistent with their knowledge of the client, their business and risk profile and where necessary, the source of funds.

    In addition to this, SEBI and RBI have laid down separate procedures for the respective entities supervised by them to undertake CDD in relation to their clients.

    Not applicable to India.

    As mentioned above, CDD requirements are not applicable to lawyers in India.

    No

    If yes please provide details of these requirements and examples of the types of evidence required to demonstrate an enhanced level of CDD.

    As mentioned above, CDD requirements are not applicable to lawyers in India.

    As mentioned above, CDD requirements are not applicable to lawyers in India.

    Yes, use of nominee beneficial owners is permitted. However, the actual beneficial ownership of shares as also any significant beneficial ownership in companies needs to be identified. Use of bearer shares is not permitted.

    Not Applicable to lawyers in India.

    Lawyers in India do not have separate anti-money laundering compliance requirements.

    There is no express obligation on lawyers to report suspicious transactions. However, under the Code of Criminal Procedure, 1973, every person who is aware of the commission of, or the intention of any other person to commit, certain offences under the Indian Penal Code, 1860, including the offence of criminal breach of trust by a banker, merchant or attorney, is required to report such matter to the nearest Magistrate or Police Officer.

    Not applicable.

    Not applicable to lawyers in India.

    No information on this matter.

    There are no on-going monitoring requirements applicable to lawyers.

    However, there are various on-going monitoring requirements under the general anti-money laundering laws. For example, the PMLA requires every reporting entity to exercise on-going due diligence with respect to the business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge of the client, their business and risk profile and where necessary, the source of funds. The relevant RBI Master Circular requires banks and financial institutions to closely examine the transactions to ensure that they are consistent with the customer’s profile and source of funds as per extant instructions. Further, it also provides that banks should conduct on-going monitoring of accounts of politically exposed persons, including family members or close relatives of politically exposed persons.

    Lawyers in India are not required to verify the source of wealth of their clients.

    Lawyers in India are not required to verify the source of funds. However, generally speaking, if the funds are routed through normal banking channels, lawyers would be comfortable that source of funds have been verified by the relevant banks and intermediaries.

    Lawyers are not required to verify the identity of their clients.

    However, under the PMLA, generally the following documents are required to verify a private individual client:

    • (i) the Aadhaar number where he is desirous of receiving any benefit or subsidy under any scheme notified under section 7 of the Aadhaar (Targeted Delivery of Financial and Other subsidies, Benefits and Services) Act, 2016, or a copy of any other officially valid document in other cases containing details of his identity and address, and one recent photograph; and
    • (ii) the permanent account number or Form No. 60 as defined in Income-tax Rules, 1962, and such other documents including in respect of the nature of business and financial status of the client as may be required by the reporting entity.

    Lawyers are not required to verify their clients.

    However, under the PMLA, generally the following documents are required to verify a company client:

    • (i) Certificate of incorporation of the company;
    • (ii) Memorandum and articles of association of the company;
    • (iii) Permanent Account Number of the company;
    • (iv) A resolution from the board of directors of the company and the power of attorney granted to its managers, officers or employees to transact on its behalf;
    • (v) One copy of an officially valid document containing details of identity and address, one recent photograph and Permanent account numbers or Form 60 of the managers, officers or employees holding an attorney to transact on the company's behalf.

    The Indian anti-money laundering laws do not affect lawyers in any significant way, unless they are themselves complicit in anti-money laundering.

    Yes, there have been a couple of recent instances where lawyers have been arrested for money laundering. In the first case, Mr. Rohit Tandon was arrested for money laundering when a huge amount of cash was found in his possession (https://www.indiatoday.in/india/story/delhi-lawyer-rohit-tandon-arrested-money-laundering-case-360079-2016-12-29). In another recent case, Mr. Gautam Khaitan was also arrested on charges of money laundering (https://timesofindia.indiatimes.com/india/ed-arrests-vvip-chopper-scam-accused-gautam-khaitan-in-fresh-money-laundering-case/articleshow/67700624.cms). In another case, the Central Bureau of Investigation filed a first information report against ‘Lawyers Collective’, a non-governmental organization led by two lawyers, Indira Jaising and Anand Grover, for allegedly violating the PMLA (https://scroll.in/article/927800/the-daily-fix-cbi-action-against-lawyers-collective-smacks-of-vendetta-it-must-prove-why-it-isnt).

    Yes, the FATF has conducted a mutual evaluation of India. The first mutual evaluation report of India was adopted on 24 June 2010.

    Initially, India was placed in the regular follow-up process for mutual evaluation purposes because of partially compliant ratings on certain core and key recommendations by the FATF. Since the publication of the mutual evaluation report, India has been reporting back to the FATF on a regular basis on the progress made in the implementation of its action plan to strengthen India’s anti-money laundering / combating financing of terrorism system. In June 2013, the FATF decided that India had reached a satisfactory level of compliance with all the core and key recommendations and thereby removed it from the regular follow-up process.

    If yes, what were the findings concerning Lawyers' compliance with the FATF 40+9 recommendations?

    There was no conclusive finding concerning lawyers’ compliance with the FATF 40+9 recommendations. However, the mutual evaluation report of India discusses how lawyers do not handle business outside the legal obligations to their client, and therefore do not engage in financial transactions on behalf of their clients. Lawyers are prohibited from facilitating any financial transactions for their clients, though they do routinely hold funds on deposit and in escrow for their clients.

    In June 2013, however, the FATF released an 8th Follow up Report on the Mutual Evaluation of India which states that in India no immediate action is currently planned with respect to lawyers and accountants, who the authorities consider to pose a low risk for money laundering on the basis of two risk assessments that have been undertaken.

    Though a National Risk Assessment was commenced in 2016, no report is available in public domain

    Such information is not available.

    Not applicable.