Under Prevention of Money Laundering Act, 2002, the revenue department has issued a notification for precious metals and precious stones dealers. The department made it mandatory for the dealers to report the suspicious or doubtful transactions to the department i.e., FIU (Financial Intelligence Unit).
Background of PMLA and Money Laundering under ACT:
PMLA: This act was formed to fight against the black money. Further this act give power to Government or public authority to confiscate the property earned from illegal money.
Money Laundering: Money Laundering is a process though which a black money is converted into white money. Due to this Financing of Terrorism increases and which is threat to country.
Objective for bringing this regulation:
- Prevent black money;
- Preventing circulation of black money into illegal activities and economic crimes;
- Give the punishment to the persons who are involved in such activities.
- Establishing a communication chain between dealers and FIU for information sharing and reporting, to prevent misuse of sector for black money circulation.
What is the reporting obligation?
Every dealer in precious metal and precious stone, need to report the transaction which he feels that such transaction is suspicious. Further needs to report a cash transaction with the customer equal to or more than Rs. 10 Lakhs.
Rs. 10 Lakhs transaction can be carried out in single transaction or multiple transactions.
Further, if dealers identify the following red flags, if customer:
- Behavior is inconsistent or suspicious;
- Wants to purchase in foreign currency or cards;
- Try to make payment from different unrelated accounts for transactions;
- Transactions involving fake currency notes;
- Sudden spike in gold purchase amount;
- Dealer receiving cash payment in total to Rs. 10 lakhs or above in single or several transactions and feels such transactions are linked to each other;
- For balances outstanding, receive individual payments through foreign remittance.
- Customer details matches with the sanction lists (issues by United Nations Security Council resolution (UNSCR), Unlawful Activities (Prevention) Act (UAPA), other criminal lists, FIU-Ind Alert list)
Does every dealer need to report and how to report?
The dealers in precious metals and precious stones, need to report through appoint a Nodal officer. Nodal officer will serve a link between government and dealer.
Nodal officer will report such transactions to respective department and further inform the dealers about the alert list changes. So, dealers can keep updated their customer list and identify whenever such transactions occur.
Does every one need to appoint a Nodal officer?
Yes, if your business turnover is more than Rs. 500 Crores during the immediate previous year. In such case, dealer needs to appoint personal Nodal officer, who will serve link between him and government.
If turnover of business is less than Rs. 500 crores during the immediate previous year. In such case, then nodal officer should be appointed by industry council and association and would serve a link between the dealers, whose turnover is less than Rs. 500 Crores, for sharing the information.
What is role of Nodal officer? Nodal officer will be acting as a post man, who will be sharing information with dealers received from FIU and on other hand report the transactions informed by dealers to FIU. This information sharing will be through fingate.
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10 July 2023