The Prevention of Money Laundering Act 2002 (PMLA) requires regulated entities to identify and report suspicious transactions to the Financial Intelligence Unit of India (FIU-IND).
The AML regulations outline a four-step process for identifying suspicious transactions. The first step involves reviewing and monitoring customer and transaction records to identify potential red flags or indicators of ML/FT risk. If any risk indicators are detected, the next step is to seek clarification or additional details from the customer to either substantiate the identified red flag or dismiss it.
During this process, regulated entities must ensure that inquiries do not result in “tipping off” the customer about the possibility of reporting to the FIU-IND.
The third step requires regulated entities to examine the customer’s historical records and the information gathered during due diligence. This review aims to determine whether the identified potential suspicion aligns with the customer’s profile or is inconsistent with their expected activities.
After collecting all relevant information regarding risk indicators, customer explanations, and due diligence findings, the regulated entities must assess whether the activity is connected to the proceeds of crime or indicates potential terrorism financing. If so, they are required to report this to the FIU-IND by submitting a Suspicious Transaction Report (STR).
For a clearer understanding, we offer an infographic that outlines the step-by-step process for identifying suspicious transactions.
NIYEAHMA Consultants LLP is a global AML consultancy firm, with “AML India” dedicated to supporting regulated entities in India. AML India provides comprehensive AML services, helping regulated entities design customized AML/CFT policies and procedures, along with training to effectively implement the AML program and identify suspicious transactions.