Reserve Bank of India issued ‘Internal Risk Assessment Guidance’ for Money Laundering/Terrorist Financing Risks’

Key Focus of guidelines

• Focus on a data driven quantitative approach to  frauds.
• Stress on the risk-based framework in its entirety with compliance, due diligence, and continuous monitoring.

Relevance of Guidelines

• Increasing Incidents: RBI Annual Report 2023-24 shows that the total number of fraud cases jumped from 13,564 in 2022-23 to 36,075 in 2023-24.
• Loss to global GDP: The United Nations Office on Drugs and Crime estimates that between $800 billion and $2 trillion is laundered globally each year, which is 2–5% of the global GDP.

Risks associated to financial system with ML/TF

• Political: Weakening countries and affecting stability.
• Security: Internal and external, terrorism and terrorist financing threats, including related to ISIL or Al Qaeda.
• Economic: Credit Frauds with bank's money used for illegitimate activities thereby circumventing finances for other economic sectors. 
• Social: Affecting the social harmony, communal tensions, crimes.

Initiatives taken for ML/TF

• Global
  • The International Convention against Transnational Organized Crime (2000; the Palermo Convention)
  • FATF anti-money laundering and counter-terrorist financing (AML/CFT) framework
• India
  • The Prevention of Money Laundering Act, 2002 (PMLA)
  • Financial Intelligence Unit (FIU-IND), Enforcement Directorate (ED)
  • Foreign Exchange Management Act, 2000, (FEMA)