INDIA BUSINESS WORLD - OCTOBER 2006
THE MONTH THAT WAS...

MONEY LAUNDERING ACT TO BE AMENDED

    Indian banks can now look forward to easy entry into the US financial market. The government has decided to move amendments to the Prevention of Money Laundering (PML) Act, which will make it more in sync with the demands of the US and EU about taking tougher action for blocking terrorist financing through banking channels. The demands had been styming the global expansion plans of banks including the State Bank of India, who wants to set up more branches in these markets.

   The amendments will bring terrorism financing and Customs offences under the glare of the Act. While the international Financial Action Task Force (FATF) has also asked for making insider trading in stock markets a money laundering offence, the government is not in favour.

   Instead, government officials say they will take steps to make the Sebi Act tougher to deal with such offences. The domestic regulatory authorities are quite tough with insider trading and by bringing such offences under another Act like money laundering, could instead delay investigations.

   The amendments are significant as monetary authorities in the US, Europe, and Singapore are not satisfied with the existing framework to curb money laundering in India.

As a result, this is delaying licence applications of Indian banks seeking entry into these markets. For instance, applications filed by banks like SBI and ICICI Bank are pending with the Office of the Comptroller of the Currency in the US. The US administration does not seem eager to clear the plans anytime soon. The government is hopeful that the amendments to the Prevention Of Money Laundering Act will give India an observer status with the FATF, to be decided early next year.

The Parisbased inter-governmental organisation was launched in 1989 primarily to fight the flow of drug money, but is now also focused on fighting terror financing. It sets policies that guide countries in adopting anti-money laundering measures.

The organisation has designated 20 categories of offences that should be brought under anti-money laundering rules. India has, so far, acceded to 11 of them. After adding another four, only offences like insider trading and copyright\piracy will be out of the PML list. The PML Act 2002 came into force on July 1, 2005.