What is Money Laundering?

Money laundering is a method used by individuals or entities to disguise the origins of illegally obtained funds, presenting them as if they originate from legitimate sources. It involves a series of transactions or financial activities to conceal the true source, ownership, or use of the funds. The term "money laundering" is coined from the idea that the process "cleans" or "launders" the unlawfully acquired money to give it the appearance of being lawful.

Stages of Money Laundering

1. Placement: In the initial phase, illicit funds are infiltrated into the financial system. This process often entails the subdivision of substantial sums of cash into smaller, less conspicuous transactions, including but not limited to bank deposits or asset acquisitions.

2. Layering: The primary objective during this stage is to create a considerable separation between the illicit funds and their origin. This involves the implementation of intricate layers of financial transactions, such as wire transfers, securities trading, or other financial activities, strategically designed to complicate the tracing of funds back to their illegal source.

3. Integration: During this conclusive phase, the "purified" funds are reintegrated into the economic framework, assuming the appearance of legitimacy. This may encompass investments in lawful enterprises, acquisition of assets, or participation in transactions designed to project an image of lawful income.

Money laundering constitutes a grave financial offence, carrying substantial economic, social, and political ramifications. Its repercussions extend to fostering corruption, organized criminal activities, and terrorism, as it offers a mechanism to legitimize and deploy unlawfully acquired funds. Rabaadi Financial Services as a Financial institution, is mandated to adopt stringent measures for the identification and reporting of suspicious transactions to the relevant authorities in adherence to regulatory requirements.

Legal Framework in India

In India, the legal framework governing anti-money laundering and combating the financing of terrorism for investment intermediaries is primarily outlined in the Prevention of Money Laundering Act, 2002 (PMLA) and its subsequent amendments. The primary regulatory authority overseeing the implementation of these provisions is the Financial Intelligence Unit-India (FIU-IND), operating under the Ministry of Finance.

Key components of the legal framework under PMLA for investment intermediaries include:

1. Definition of Intermediaries: PMLA broadly categorizes entities involved in financial activities, including investment intermediaries, as 'Reporting Entities' obligated to comply with anti-money laundering (AML) regulations.

2. Customer Due Diligence (CDD): Investment intermediaries are required to establish and maintain risk-based procedures for the verification of the identity of their clients. This involves obtaining sufficient information to reasonably ascertain the true identity of clients, beneficial owners, and individuals conducting transactions.

3. Record Keeping: Investment intermediaries are obligated to maintain records of transactions, including customer identification data, for a minimum period stipulated under the Act. This assists in auditing and investigation procedures related to potential money laundering activities.

4. Suspicious Transaction Reporting (STR): Investment intermediaries are mandated to report suspicious transactions to the FIU-IND. They are required to have internal mechanisms for identifying and reporting transactions that raise suspicions regarding money laundering or terrorist financing.

5. Appointment of Principal Officer: Entities covered under PMLA are required to appoint a Principal Officer responsible for ensuring compliance with the obligations under the Act.

6. Obligation to Furnish Information: Investment intermediaries are required to furnish information to the Director of FIU-IND, as and when required, to facilitate investigations related to money laundering and terrorist financing.

7. Penalties for Non-Compliance: PMLA prescribes penalties for non-compliance, including fines and imprisonment, for entities failing to adhere to the provisions outlined in the Act.

Obligations of Rabaadi Financial Services

Rabaadi Financial Services is committed to upholding the highest standards of integrity and regulatory compliance under the Prevention of Money Laundering Act (PMLA). Our overarching objective is to fortify the financial system against potential abuse by criminal elements while ensuring the protection of both investor interests and Rabaadi Financial Services.

In view of these objectives, we have implemented a rigorous client acceptance policy, a risk-based approach, and a thorough client due diligence process. These protocols are applied meticulously during the client onboarding and registration process and periodically, reflecting our unwavering dedication to professional and legal standards. These measures are essential components of our strategy to foster a secure financial environment and maintain robust regulatory adherence.

Obligations of Investors

To ensure that the customers of Rabaadi Financial Services have access to the financial markets, investors are required to provide the following details/information as and when required.

1. Know your Client (KYC) details and valid documents.

2. Accurate Contact Details

3. In-Person Verification (IPV)

4. Occupation/Business

5. Information and documents regarding their finances, e.g. Income Range, Net Worth, Tax Returns, Source of Funds, etc.

6. Nominee Details and or Beneficial owner details.

7. Any change in information/details should be initiated immediately.

8. Update your KYC regularly.

We request our customers to provide us with the above information or documents, this assists us in justifying and complying with regulatory requirements.