Prevention of Money Laundering Act, 2002
Maintenance and Reporting of Records: Sections 12 and 12A
A reporting entity that knows its customers must also remember what they do and tell the authorities when something looks wrong. Section 12 requires records of every transaction and of every client's identity, and reports of prescribed transactions to FIU-IND. Section 12A gives the Director access to them. The Maintenance of Records Rules, 2005 specify which transactions must be recorded and reported, and when. This note covers the records, the six kinds of report, the meaning of a suspicious transaction, and the rules on confidentiality and tipping off.
The six reports to FIU-IND with their triggers and deadlines, the meaning of suspicion, and confidentiality
1. The Duties in Section 12
Clause | Duty |
|---|---|
s. 12(1)(a) | Maintain a record of all transactions, in a manner that allows individual transactions to be reconstructed |
s. 12(1)(b) | Furnish to the Director, within the prescribed time, information about prescribed transactions, whether attempted or executed |
s. 12(1)(e) | Maintain records of documents evidencing the identity of clients and beneficial owners, account files and business correspondence |
s. 12(2) | Keep the information confidential |
s. 12(3) | Keep transaction records for five years from the date of the transaction |
s. 12(4) | Keep identity records for five years after the business relationship ends or the account closes, whichever is later |
§ Access to information: Section 12A The Director may call for any records referred to in Section 12(1) and any additional information he considers necessary. The entity must furnish it within the time and in the manner specified. Confidentiality. Information so obtained is kept confidential, save as the Act provides. |
2. Transactions to Be Recorded and Reported
Report | Trigger under Rule 3 | Due under Rule 8 |
|---|---|---|
Cash Transaction Report (CTR) | Cash transactions above ten lakh rupees, or a series of integrally connected cash transactions in a month which together exceed that amount | By the 15th of the following month |
Suspicious Transaction Report (STR) | Any suspicious transaction, whether or not in cash, whether attempted or completed, of any value | Within seven working days of being satisfied that the transaction is suspicious |
Counterfeit Currency Report (CCR) | Cash transactions where forged or counterfeit notes were used as genuine, or where forgery of a valuable security took place | By the 15th of the following month |
Cross-Border Wire Transfer Report (CBWTR) | Cross-border wire transfers above five lakh rupees where either the origin or destination is in India | By the 15th of the following month |
Non-Profit Organisation Transaction Report (NTR) | Receipts by non-profit organisations above ten lakh rupees | By the 15th of the following month |
Immovable property transactions | Purchase or sale of immovable property valued at fifty lakh rupees or more, by registering authorities | As prescribed |
3. Suspicious Transactions
§ Meaning, under the Rules A suspicious transaction is a transaction, including an attempted transaction, whether or not in cash, which, to a person acting in good faith: (a) gives rise to a reasonable ground of suspicion that it may involve proceeds of a scheduled offence, regardless of value; (b) appears to be made in circumstances of unusual or unjustified complexity; (c) appears to have no economic rationale or bona fide purpose; or (d) gives rise to a reasonable ground of suspicion that it may involve financing of terrorism. Attempted transactions must be reported even if the customer abandons them, because abandonment on being questioned is itself a warning sign. |
§ Red flags and monitoring • Structuring or smurfing. Breaking large amounts into smaller deposits to stay below reporting thresholds, often through many accounts or persons. • Unusual patterns. Sudden activity in dormant accounts; funds received and paid out immediately; transactions inconsistent with the customer's profile; round amounts; many third-party deposits. • Transaction monitoring. Automated systems generate alerts against rules and risk profiles; alerts are reviewed, escalated to the Principal Officer, and reported where suspicion is formed. |
4. Wire Transfers and the Travel Rule
i. Wire transfers must carry complete originator and beneficiary information, so that funds can be traced, reflecting FATF Recommendation 16.
ii. The travel rule for virtual digital assets. FIU-IND's guidelines for VDA service providers require the equivalent information to accompany transfers of virtual digital assets between service providers.
5. Confidentiality and Tipping Off
§ Keeping the report secret Confidentiality. Information maintained, furnished or verified is kept confidential under Sections 12(2), 12A(3) and 12AA(4). Tipping off. Reporting entities and their staff must not disclose to the customer, or anyone else, that an STR has been or may be filed, or that information has been furnished to FIU-IND. Doing so could alert a launderer and defeat the investigation. Protection. Section 14 protects the entity and its staff from civil and criminal proceedings for furnishing information. |
6. Furnishing Information: FINnet and FINGate
i. FINnet is FIU-IND's technology programme for receiving, processing and analysing financial intelligence; its upgraded version was rolled out in 2023.
ii. FINGate is the portal through which reporting entities register and file reports electronically, through their Principal Officer.
7. Frequently Asked Questions
What is a Cash Transaction Report?
A report of cash transactions above ten lakh rupees, or integrally connected monthly series exceeding that amount, filed by the 15th of the following month.
When must an STR be filed?
Within seven working days of the reporting entity being satisfied that a transaction, including an attempted one, is suspicious.
What is tipping off?
Disclosing to the customer or others that an STR has been or may be filed. Reporting entities and their staff must not do so.
How long must records be kept?
Transaction records for five years from the transaction; identity records for five years after the relationship ends or the account closes, whichever is later.