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Finance Ministry Lists 9,500 Non-Banking Institutions as High Risk

The Finance Ministry on Monday, 26 February, released a list of 9,500 non-banking financial companies, categorising them as ‘high risk financial institutions’.

The list, released by the Financial Intelligence Unit of the ministry, states that the named companies do not comply with the provisions of the Prevention of Money Laundering Act (PMLA), as of 31 January.

The named companies reportedly came under the scanner of the Income Tax department and the Enforcement Directorate for illegally converting banned currency notes into legal tender after demonetisation was announcement in November 2016.

According to a report in Times of India, many of the financial institutions were found converting bank notes by issuing back-dated cheques and fixed deposits in return for receiving cash as deposits, overriding the RBI’s direction against doing so.

The daily further says that the PMLA stipulates that all non-banking financial institutions have a principal officer to report all suspicious and cash transactions above Rs 10 lakh. The PMLA also requires that the said officer record all such transactions in the prescribed manner and report them to the FIU.

The act further states that then institutions can hide the identity of the clients for five years.

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