ANTI MONEY LAUNDERING, KYC RECORDS & AMENDMENTS IN FOREIGN TRADE POLICY

So let's start the session for today. So it is AML that is Anti Money Laundering. So whenever we talk about money laundering, then in three stages this thing is particularly covered. First of all it is related to, I will zoom in a little. See, first of all the funds are placed, that is, in different bank accounts, those balances are placed first. Then there is a process of layering. Layering means, let's assume that money will be deposited in one account. Now if this person will deposit in one account on 1 crore, then definitely the system flag will be generated and the transaction will be caught suspiciously. So what do money launderers actually do? They do deposit not the whole amount, but the small chunks of the amount, that is, they deposit small amounts here. It may be 1000 or Rs 1 lakh, any small amount can be there which they will deposit in the accounts here. And they deposit multiple transactions here. The process is said to be what? We call this process as smurfing. We call this process as smurfing. Where exact amount, not the same amount is deposited, but different small amounts are deposited. And further after that, the second stage starts, that is said to be what? Which is related to layering. Now what is particularly in layering? What we do here is, transactions in one account, in the other account, in the third from the other account, there can be thousands or maybe millions of accounts, in which these transactions will rotate. So that the actual origin of the transaction, we cannot find out. That is said to be what? That is said to be layering. After that, after the second step, this money is used again in a legitimate way. It may be that the money came from offshore company, that is, from some foreign company. Or it may be that the money through shell company, is routed here. And further its use can be done in a legit manner here. That is, dust of the money is removed, and further it can be used as a legit money in the system itself. So these three stages here, they complete the process of money laundering. Okay. So stages are covered in such a manner. About these, you have enough knowledge. You can ask questions related to these, that how many stages can be done. Or you can be given different stages. And you can be asked, which stage is not mentioned correctly here. So you can be asked direct questions related to these things here. If we talk about PMLA, then the Vienna Convention, on a global level, the commitment of India, against that, here, under that, PMLA, that is, Prevention of Money Laundering Act 2002, came here. So that in the banking system, in the banking system, the laundered money, its use can be avoided. Because see, financial system is such a system, through which money can be brought in the market, it can be brought in a legit manner again. It needs proper control related to it here. And we should have such a system, that if there is any suspicious activity, then it can be reported here. Okay. Then, it is very important that, banks have to maintain the transaction records. So here, the first thing is, that is related to cash transactions, which are more than 10 lakhs, which are more than 10 lakhs, or its equivalent amount, whether it is in foreign currency, whether it is in any other transaction, any other type of transaction, all those transaction records, that is, it has to be maintained here. Okay. That is, let's say that person A, he knows about this rule here, that amount of more than 10 lakhs, amount of more than 10 lakhs, not 10 lakhs, but if he deposits this amount of above 10 lakhs, then it will be included in the category of suspicious transaction. So what does this person do? He has 3 accounts. Let's say that one is his current account, and two are his savings fund accounts. And here, what does this person do? That he has deposited 6 lakhs in his current account, he has deposited 3 lakhs in his second savings fund account, and in his other savings fund account, he has deposited 4 lakhs. Keeping in mind that, he has deposited 4 lakhs in the suspicious transaction account, he has deposited 4 lakhs in the suspicious transaction account, but this does not happen. This transaction account, it is included here in aggregate transaction, that is, single reporting entity, we call reporting entity, we understand bank here, bank is considered as reporting entity here, which reports transactions. So here, if you have aggregate amount in a month, that is, total accumulated amount, by combining all accounts, if it is more than 10 lakhs, then also they are considered as suspicious transactions, and their related data, that will be maintained here, those records will be maintained, and further, those are to be submitted further to the Reserve Bank of India, and further, whatever we have, enforcement directorates, whatever the government guidelines are here, according to them, those reports, they have to be submitted to them. Okay? That is particularly given over there. Now, cash transactions, which are forged, or are of counterfeit currency notes, or bank notes, have been forged, that too, they have to report here, and related transaction data, which is there, that has to be maintained here. If we talk about preservation, that the record that is being maintained here, for how long will it be maintained, then the bank, for at least 5 years, from the date of cessation of the transaction, that is, when the banker-customer relationship is seized here, is also over, then also the bank, for at least 5 years, this data, it has to be maintained, whatever necessary records are here, they have to be maintained here. See, related questions are asked from them, like, how much amount of transaction related, record has to be maintained here, this question can be made from here, or, whether the transaction record related to bank notes, or the data related to forged currency, has to be maintained, this question can be made from here, further, for how long, this record has to be maintained, that can also be asked as a question, so you have to remember, that for at least 5 years, from the date of cessation, of the banker-customer relationship, this data will be maintained here, it will be necessary, okay, then further, if we talk about reporting, that FIU, that is, financial intelligence unit, which is IND, India's financial intelligence unit, they have to send this transaction report, so I told you, that RBI will have to send data here, that is, in the form of CTR, whatever is the cash transaction report, it will have to be sent, STR will have to be sent, along with that, FIU, FIU is, financial intelligence unit, which is the Indian version of FIU, they also have to submit these reports, these are 5 reports, it is very important, now note down, what are these reports, first, we have the cash transaction report, that is, CTR, which we call it, and second, it is related to CCR, that is, counterfeit currency notes report, third, it is related to non-profit organization transaction report, that is, whatever non-profit organizations you have, whatever transactions they have, because here only, there are more chances of, you can say, there are chances of cheating, then that report will have to be submitted separately, apart from that, your cross border wire transaction report, wire transaction means, electronic, now as the range of e-commerce has increased, the range of digital payments has increased, along with that, the cross border wire transactions, through them also, there can be a change, then CBWR also, you will have to submit it, apart from that, STR means, suspicious transaction report, let's say, that someone visits your branch, asking that I have 5 crore rupees, that you tell me, how can I submit this money in different accounts, so that, my money is saved here, and who knows, if someone comes to you, whether you had an account or not, but that is a suspicion, he creates a suspicion for that person, that that person, definitely he must be carrying a laundered fund, which he has generated black money here, black money does not mean that, he has earned money only through drugs, or through terrorist activity, it can also be that, he has saved tax on that money, or not paid tax, that can also be under this same category over there, so that is a STR, and the suspicious transaction report over there, as soon as your transaction is found, within 7 days, you have to submit this transaction report, again, I will tell you again, that the bank here, that is said to be reporting entity, and the reporting entity, has to do here, whatever data is there, it has to be submitted to the FIU IND, and further to the Reserve Bank of India, okay, and now it is related to violation under the, prevention of money laundering, if a person here, violates PMLA, if a person here, means to say, that if under PMLA, the rules and guidelines that were given, if a person does not follow them, and is involved in the process of money laundering, then in his case, he can be in jail for at least 3 years, which can be extended to 7 years, and further, a fine can also be imposed on him, which can be up to 5 lakh rupees, what used to happen earlier, that if that person is involved here, and he has worked very stringently, in his case, it was said that he can be imprisoned for 10 years, but now, the imprisonment of 10 years, has been substituted, with the 7 years of the imprisonment, this is the biggest update of PMLA here, which you have to keep in your mind, first for 10 years also, in stringent cases, where there used to be a lot of stringent event, there 10 years of imprisonment could have been done, but now it is not like that, now the imprisonment for 7 years has been kept here, okay, so this was the important update here, then it is related to Central KYC, now banks are told that, you KYC, that is to maintain the terms of the customer, that is you have to maintain KYC data, and this is mandatory for every customer here, now maintain KYC data, okay, what is KYC, like suppose I go to open my account, then I have my ID proofs, I will deposit it with my ID proof bank, that is, Aadhar card, PAN card, driving license, or whatever important documents you need here, I will have to deposit them, that is related to KYC, now KYC is also simplified KYC here, it is also advanced KYC here, it is also enhanced KYC here, so related to that, like suppose a company wants to open its account, then the company is not a lateral person, that is an artificial person, it is a legal person, now in that case, here the company's important documents, whether it is Memorandum of Association, Articles of Association, Board of Debtors Resolution, or whatever authorized person is, their signatures, their KYC, and the company's stamp, that is, the company's signature, which we call common seal, all those documents have to be deposited here, but because these documents are repeatedly in use, whether it is in your capital market, whether you open a Demat account, whether you open a Saving Fund account, these documents are repeatedly in use, so for that they created a portal, so that there is no fraudulent activity, the second thing is that the customer will be able to escape from the usage repeatedly, so what has been done here, a Central KYC Registry has been made, where banks have to upload documents within the period of 3 days, as soon as we establish the Banker Customer Relationship, and against that, you will be issued a unique identifier of 14 digits, which you can share with the customer, whenever the customer wants to open an account in another bank, then he will give a copy of these documents, and along with that, he will get this unique identifier deposited, according to which the bank, the financial institute, can verify that data from here, from CKYR, and the bank that will update it last, it will be his responsibility, that he has uploaded the KYC documents there correctly, then it is related to the amendment of the foreign trade policy of India, for rupee settlement, now here foreign trade policy has been amended, for the purpose of rupee settlement, the Central Government has changed it in foreign trade policy, see what was earlier, current account convertibility is 100% available, current account convertibility means, first of all you will have to understand the current account transaction, that means, if I do any transaction for the purpose of my business, then it will be considered as current account transaction, like if I have to send money for my business purpose, outside, in the USA, then it comes under current account convertibility, similarly, if I had to send money for medical aid, or if I had to send a gift, or if I had to make any small expenses, for day to day business activity, then it was included in current account convertibility, but capital account transaction is that transaction, with which the assets, here in foreign country of Indian person, they are altered, or the assets of foreign person in India, liabilities are altered, those transactions are said to be the capital account transactions, capital account transactions, so these two transactions, which are they defined in? these are defined under FEMA, this foreign exchange management act, in 1999, they have been covered, but now the bank, not bank, RBI has updated some here, in foreign trade policy, we know about them, we read in detail, okay, the recently amended foreign trade policy of India, allows international bank, that international bank, international, not bank, international trade, invoicing, payment, they can be settled in Indian rupee, means, any international trade, you have done online business, you have done invoicing, you have to do payment, you have to do settlement, now it can be done in Indian rupee, now the Indian importers, they can do payment in rupee, through the special vostro accounts, of the partner country bank, means, first understand the definition of vostro account, then I will explain you about this point, let's say that here, I have a bank, ABC over here, and in USA, there is a bank, XYZ, now XYZ bank has opened its account, here, near ABC bank, whose denomination is INR, means, this account is in Indian rupee, so this bank, the account opened here, XYZ bank, near ABC bank, in ABC bank's books, that account will be the vostro account, that will be called vostro account, okay, now here, if here, the importer, in his special vostro account, what can he do here, here, the payment, in particular, in INR, in this bank, XYZ bank, in the vostro account, he can do it, so as to settle the trade, whatever trade he did in USA, to settle it, he can do the payment in the vostro account, in rupee, now what will be the benefit from it, that on the global level, the ups and downs in the currencies, its impact, here, will not be on the importer, Russia is also using this kind of things, and majorly, India has also taken this step, the step taken by the RBI, that is related to, that whatever is the transaction, whatever trade is done here with Russia, it will be used here, so definitely, the impact of the ups and downs in foreign currencies, here, will not be on the importer, okay, so new mechanism can get used by the banks, after getting approval, but for this, banks will have to take approval, from which, from the Reserve Bank of India, here, it will have to take approval, after that only, they can use it, and further, what will happen with this mechanism of RBI, that the depreciation of the currencies, on the global level, its impact, will not be here, RBI mechanism aims to promote the, trade with Russia, particularly, to trade with Russia, because, it is also using a similar mechanism system, with Iran, through which, it has, in the vostro account, it pays in the Russian currency, so that, the ups and downs in the currencies, on the global level, here, we read on a daily basis, that the Indian rupee, has become more weak, if we compare it with the USD, then its impact, will not be seen here, because here, the capital account convertibility, is available, okay, so this is a major step, where, we can achieve, the capital account convertibility, so because here, when you will purchase an asset, which is a long term asset, for that, in which you have paid, you have paid in Indian rupee, which earlier, was only possible in, current account transactions, now it will be possible, in capital account transactions, okay, so I have already explained, the definition of vostro account, that is, the foreign bank account, which is maintained, by the Indian bank, in Indian rupee, what will it be called, in the books of the Indian bank, it will be called, vostro account, that would be, related to it, okay, if we talk about, capital account convertibility, then in the country, basically, I have already told you, that suppose, there is an Indian person, okay, if an Indian person, sells his property, then what will happen with him, the assets of his foreign country, what are they particularly, assets and liabilities of him, are being reduced or increasing, okay, what do we call that, that is said to be, capital account transaction, similarly, suppose, someone here, a foreign account, a foreigner here, whose property was here, in India, so he sold it, because of that, his asset liabilities, which were, in India, they were altered, that is also, the capital account transaction, so the currency of India, is, particularly, partial convertibility, in which, for current account currency, capital account, here, partial convertibility is there, but with this step, here, we want to achieve, capital account convertibility, okay, then the next topic, that we are going to cover, it is related with the, implementation of the, card tokenization, now, why is the need for, card tokenization, we will read about it here, what used to happen till now, let's say, that ABC website is here, and further, I have to purchase something here, when I, here, I have to purchase something, I have to purchase something, I have purchased it on their website, first, I have selected the product here, and further, I came here on the payment page, this is the payment page, where, we were asked, that how do you want to, do payment here, let's say, I selected, that I have to do payment, through credit card, or through debit card, now, in that case, I had to enter, the details of my credit card, and, many cases, were seen here, where, this data was compromised, due to hacking, or due to fraudulent activities, this data was compromised, and, so, RBI has found its alternate, what? Card tokenization, now, what will happen particularly, that, whoever these persons are, website owners, or whoever these handlers are, they will not be able to, save the data of the card, with them, now, here, they will not have to save the data of the card, those who will be card issuing banks, they will, under this process, issue a token to them, now, what will happen here, particularly, a token can go from the website, that, there will be a unique identifier, here, there will be a unique identifier, which will work as a token here, and, unique identifier, against the card details, here, card issuing bank, here, will be stored, and, through this unique identifier, this card details, this, website, what can it do here, it can, here, restore, can restore, not store, can restore, because, customers do not like, that they repeatedly, enter the details of the card, on the website, let's say, I use Amazon a lot, I am using Amazon a lot, for the products, okay, so here, I have to enter my card details, on the checkout page, repeatedly, that would be, the process will be very annoying, okay, so in that case, what can we do, that the Amazon, will give a unique identifier, which, in my credit card company, who has issued, there, that unique identifier, against the card number, card details, it will be stored here, and further, when I go to the checkout page, then I will not even know, that card details, will be retrieved, but here, the thing to understand is, that the website owners, in their database, anywhere, here, the card details, they will not be stored, that is the main step, related to the, card tokenization, okay, and this will be implemented, from the October 1, 2022, it had to be implemented, and it has been implemented, already, so, Reserve Bank of India, had already announced, that the deadline of October 1, is here, and it will not be extended further, because, this deadline, had already been extended, twice, and further, 35 crore tokens, have already been created, in September, which make up 40% of the transactions, were undertaken, using the tokens, that is, 40% of the transactions, that took place, under the card tokenization scheme, whose value was, around 63 crores, RBA has, for all the merchants, for the merchants, that is, for the websites, for the e-commerce partners, it has been made mandatory, that the details of the debit, or credit card of the customer, can't be stored here, and they have to replace, those cards, with the card tokenization, that is, with the unique tokens, that has to be replaced here, under which, they can retrieve, the data, from the banking website, and it has been made mandatory, that all sensitive digits, like, 16 digit card number, or CBV code, expiry dates, names, and other things, can't be stored here, and in return, a token will be generated, which token, will be stored, only, for the card issuing company, and the card details, will also be stored, only, with the card issuing bank, okay, so that would be related, to the tokenization, so tokenization, is a process, through which, the card details, have been replaced, with a unique token, with a unique code, and with this, the individuals, will not be impacted, but, they will be, but their details, of the card, will not be compromised, the token will be, a randomly generated, unique placeholder, which will be generated, from the internal network, of the company, that means, Amazon itself, will generate, this unique token, that unique token, here, the bank, will keep it, against the card details, and whenever, those details, will be required, then here, the company, the merchant, online, will forward, the unique token, with the authorization, to the card details, to the Amazon, to the merchant, over here, and from there, you will be able to, check out, without any delay, you will not even know, but the card details, will not be stored, anywhere, on the merchant's, website, only, near the bank, will be stored, that would be, related to it, okay, so, that would be, all related to today's video,