• The Financial Intelligence Unit India (FIU IND) under the finance ministry has issued show cause notice to nine offshore cryptocurrency and virtual digital assets platforms for non-compliance with anti-money laundering law.

• Virtual Digital Assets Service Providers (VDA SPs) were brought into the ambit of Anti-Money Laundering/Counter-Financing of Terrorism (AML-CFT) framework under the provisions of the Prevention of Money Laundering Act (PML) Act, 2002 in March 2023.

• Till date, 31 VDA SPs have registered with FIU IND.

• The virtual digital assets service providers operating in India (both offshore and onshore) and engaged in activities like exchange between virtual digital assets and fiat currencies, transfer of virtual digital assets, safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets, etc are required to be registered with FIU IND as ‘Reporting Entity’ and comply with the set of obligations as mandated under Prevention of Money Laundering Act (PMLA), 2002.

• The FIU has written to the ministry of electronics and information technology (MeiTY) to block the URLs of these nine entities that are operating illegally without complying with the provisions of the PML Act in India.

Financial Intelligence Units (FIUs)

• Financial Intelligence Units (FIUs) are specialised government agencies created to act as an interface between the financial sector and law enforcement agencies for collecting, analysing and disseminating information, particularly about suspicious financial transactions, pertaining to money laundering, financing of terrorism and proliferation financing.

• FIUs are also responsible for disseminating analysis results.

• An FIU should obtain additional information from reporting entities and have timely access to required financial, administrative, and law enforcement information to undertake its functions properly. 

A few major considerations shape an FIU’s creation: 

i) Anti-money laundering and counter-terrorism financing laws.

ii) Existing law enforcement.

iii) The need for an authority that will receive, assess, and share financial information.

• FIUs have to conform to international standards, particularly the recommendations of the Financial Action Task Force (FATF).

• The Egmont Group is the international organisation for stimulating cooperation amongst FIUs across the globe.

Financial Intelligence Unit – India

• Financial Intelligence Unit–India (FIU-IND) was established by the government in November 2004 as the central national agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions. 

• FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and financing of terrorism. 

• FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Union Finance Minister.

• FIU-IND is headed by the director, who is an officer of the rank of additional secretary to the government of India. It is an administrative FIU and does not investigate cases.

FIU-IND is a member of following International groups to partner with other countries in countering money laundering, terror and proliferation financing.

i) Financial Action Task Force

ii) Eurasian Group on Combating Money Laundering (EAG)

iii) Asia / Pacific Group On Money Laundering (APG)

iv) Egmont Group.

Functions of FIU-IND:

• Collection of Information: Act as the central reception point for receiving Cash Transaction reports (CTRs), Non-Profit Organisation Transaction Report(NTRs), 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: Analyse received information in order to uncover patterns of transactions suggesting suspicion of money laundering and related crimes.

• Sharing of Information: Share 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 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.

• Research and Analysis: Monitor and identify strategic key areas on money laundering trends, typologies and developments.

What is the Egmont Group?

• The Egmont Group provides its 170 member Financial Intelligence Units (FIUs) with a platform for the secure exchange of information to combat money laundering, terrorist financing and other predicate crimes.

• It aims to provide a forum for FIUs to improve understanding and awareness of issues and an opportunity for enhancement of their capacities to develop intelligence to combat money laundering and terrorist financing. 

• FIU-INDIA has been a member of the Egmont Group since 2007. Ever since its membership, FIU-INDIA has played an active role in the activities of the Egmont Group.

• The Heads of FIU (HoFIU) are the Egmont Group’s main governing body. The HoFIU makes consensus-driven decisions on matters affecting membership, structure, budget, and key principles. The HoFIU communicate regularly through the Egmont Secure Web and meet at least once a year during the Annual Egmont Group Plenary meeting.

• The Egmont Group Secretariat provides strategic, technical, and administrative support to the HoFIU, the EC, the Working Groups, and the Regional Groups. 

• The Egmont Group Secretariat is situated in Canada.

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