Money Laundering Act – Role of the Financial Intelligence Unit

How money laundering works

Here is a typical root of money laundering. Of course, there are people out there who know everything about it. It can be safely claimed that all shady activities such as terrorism or drugs are supported by the dark money, whose origin is hard to trace. But the international community is aware of its potential disrupting effects. (

Leaders throughout the international community recognize that anti-money laundering (AML) and counter-terrorist financing (CFT) measures are powerful tools in their fight against corruption.

In line with the international mindset, the Union Government set up the Financial Intelligence Unit India(FIU-IND) in November 2004. FIU-IND is an independent body and reports directly to the Economic Intelligence Council (EIC) headed by the Finance Minister. It is government’s brain to prevent money laundering and related crimes. The FIU-IND has three major roles: (1) Receives financial information pursuant to country’s anti-money laundering laws; (2) Analyzes and processes such information; and (3) Disseminates the information to appropriate national and international authorities, to support anti-money laundering efforts.

The FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence and enforcement agencies in their efforts against money laundering and other related crimes. The FIU-IND does not have a regulatory role. Its prime responsibility is to gather and share financial intelligence in close cooperation with the regulatory authorities such as the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA). Its role is to processes and analyses financial information received by it and then disseminate the actionable intelligence in appropriate cases to relevant enforcement agencies.

The efforts of FIU-IND are guided by the Financial Action Task Force, which is an inter-governmental body responsible for setting global standards on anti-money laundering and combating financing of terrorism.

What is FATF?

FATFThe Financial Action Task Force (FATF) is an inter-governmental body whose purpose is development and promotion of policies, both at national and international levels, in order to combat money laundering and terrorist financing. The unfortunate 9/11 event in the US has made the FATF a very important international body that suggests ways and means to its member countries so as to strengthen their legislative framework against money laundering related activities. It is therefore a “policy-making body” for regulatory reforms.

It also monitors its members’ progress in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of suitable measures worldwide. It also collaborates with other international bodies involved in combating money laundering and the financing of terrorism.

Although the FATF has been in existence since 1989, it is not a permanent body nor has any fixed constitution. It reviews its mission every five years. In 2004, representatives of all its 35 FATF members agreed to extend the mandate of the Task Force until 2012. It demonstrates the confidence of its members that the task Force is an important instrument in their fight against terrorism and other international crimes.

India Joins FATF

India has become the 34th country member of the Financial Action Task Force in May 2011. India was preparing itself since 2009 to gain this membership by taking necessary steps to meet FATF’s requirements. It had to amend or fabricate some of the laws to suit the FATF guidelines. The issues that were dealt with pertained to the overseas payment gateways such as VISA and Master, money changers and money transfer service providers, insider trading and market manipulation, human trafficking, smuggling of migrants, piracy and environmental crimes, over-invoicing and under-invoicing etc. All these were also made punishable under the Prevention of Money Laundering Act (PMLA). Now the laws are in line with the FATF’s 49 recommendations.

With its induction as a member-country India will have an easy access to information on suspicious financial transactions in, say Switzerland, China, U.S. and U.K and trace the black money stashed away in tax safe havens. The PMLA will have to evolve with time to be in sync with the international needs as guided by FATF.


The FIU-IND has to become all the more vigilant in its scrutiny of suspicious money trails because the threat of terror from across the border is serious and appears to be growing. It can also play a crucial role in speeding up the recovery of black money stashed abroad in safe tax havens.

You may also like to explore: How Healthy is Indian Judicial System?

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3 Responses to Money Laundering Act – Role of the Financial Intelligence Unit

  1. Pingback: How Healthy is Indian Judicial System? | Issues of India

  2. Pingback: A Suggested Roadmap to Reform Indian Judiciary | Issues of India

  3. Pingback: How Healthy is Indian Judicial System? | Lex Regula LLP

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