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Suspicious transaction reporting: an Indian experience

B. Viritha (Department of Banking Technology, School of Management, Pondicherry University, Puducherry, India)
V. Mariappan (Department of Banking Technology, School of Management, Pondicherry University, Puducherry, India)
Irfan Ul Haq (Department of Banking Technology, School of Management, Pondicherry University, Puducherry, India)

Journal of Money Laundering Control

ISSN: 1368-5201

Publication date: 5 January 2015

Abstract

Purpose

The purpose of this paper is to assess the effectiveness of anti-money laundering (AML) reporting system in India in terms of Suspicious Transaction Reports (STRs) and its impact on countering money laundering through the conviction and confiscation. The main emphasis of financial action task force (FATF) guidelines on AML and countering of financing of terrorism (CFT) is the obligation of financial institutions and designated non-financial businesses and professions to instantaneously report the suspicious transactions to Financial Intelligence Unit (FIU), an agency with a mandate to deal with AML.

Design/methodology/approach

It is a descriptive study to explore the outcome of the AML process. The study has used the secondary information published in the annual reports of FIU-India and FATF. The study period is 2006-2007 to 2011-2012.

Findings

Though there is a significant increase in the STRs filed, the impact of AML is not realized in terms of neither AML-related convictions nor confiscations, since the enactment of the Prevention of Money Laundering Act (PMLA). However, the AML/CFT regime in India has just started earnestly, and it still has to go a long way before stabilizing and achieve tangible results.

Research limitations/implications

In the Indian context, only few of the effectiveness indicators of the FATF methodology 2013 could be selected due to the limited availability of data, as much of the information maintained by various stakeholders, including reporting entities, FIU-India and other investigative and enforcement agencies, is kept confidential. Thus, it is difficult to establish the effectiveness of enforcement function of AML. Evaluation of effectiveness of AML is judged on the basis of convictions and confiscations.

Originality/value

There is a dearth of studies assessing the reporting system under PMLA and thus this paper attempts to throw some insights on the outcome of AML chain, especially the impact of reporting suspicious transactions.

Keywords

Acknowledgements

The authors wish to express their sincere gratitude to the following people for their support in completion of this study. Shri. B. Siva kumar, General Manager, Reserve Bank Staff College, Chennai, India; Shri. Dr. R. Sankaranarayanan, Professor, Department of Banking Technology, Pondicherry University, Pondicherry, India; Shri. Dr. B. Brahmananda Reddy, Professor and Head of Department of Physiology, Rajiv Gandhi College of Veterinary and Animal Sciences, Pondicherry, India.

Citation

Viritha, B., Mariappan, V. and Haq, I.U. (2015), "Suspicious transaction reporting: an Indian experience", Journal of Money Laundering Control, Vol. 18 No. 1, pp. 2-16. https://doi.org/10.1108/JMLC-11-2013-0046

Publisher

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Emerald Group Publishing Limited

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