9,491 NBFCs placed under high-risk category

Mumbai : The Financial Intelligence Unit has put 9,491 non-banking finance companies under the high-risk category because of non-compliance with Prevention of Money Laundering Act, which industry experts reckon is more technical than anything else. The high-risk list includes NBFCs such as Shriram Capital and Reliance Finvest for not registering their principal officers.

The rules require a principal officer to be designated and registered with FIU to file returns on a monthly basis for all cash transactions of more than Rs 10 lakh, or equivalent into foreign currency, and all suspicious transactions — whether or not made in cash — deposits, cheques, transfer from one account to another, transfer to nostro or vostro accounts.

FIU has put out the list of NBFCs categorised as ‘High Risk Financial Institutions’ for non-compliance with PMLA and PML Rules non-registration of Principal Officer (PO) as on January 31, 2018.


“It is a technical non-compliance, and isn’t like 9,500 NBFCs have become high risk overnight,” said Raman Aggarwal, chairman of Finance Industry Development Council FIDC, an umbrella body of NBFCs.

All cash transactions worth more than Rs 10 lakh or its equivalent into foreign currency and all suspicious transactions in cash or otherwise need to be reported to FIU. Any transactions by people or entities identified as suspicious by FIU has to be reported on a monthly basis. FIU shares lists of suspicious or cash transactions with all financial institutions banks and NBFCs that need to be reported.

A principal officer, who is a touchpoint of FIU and company, needs to submit returns on a monthly basis to FIU. These norms have been in place since PMLA Act came into being. The Act prevents money laundering and tracks down terror funding.

The government has in 2017 Budget banned cash transactions of Rs 2 lakh as one single instalment payment to discourage cash transactions and go for more digital options.