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Applicable Regulatory & Compliance Requirements

  1. BANKING ACTS

Banking Regulation Act

  • The Banking Regulation Act, 1949 in India regulates all banking firms in India.
  • The Act gives the Reserve Bank of India (RBI) the power to
    • license banks,
    • regulation over shareholding and voting rights;
    • appointment of boards;
    • lay down instructions for audits;
    • mergers and liquidation; and
    • impose penalties.
  • RBI provide guidelines on how IT is deployed in banks.
  • RBI also provides the technology platform for NEFT/ RTGS and other centralized processing from time to time.

 

NEGOTIABLE INSTRUMENTS ACT-1881 (NI ACT)

  • Cheque includes truncated cheque and electronic cheque.
  • These electronic cheque requires digital signature IT Act was amended in 2008 to make provision for electronic signature also which includes digital signature also.

 

 

MONEY LAUNDERING

Money Laundering is the process by which the proceeds of the crime and the true ownership of those proceeds are concealed so that the proceeds appear to come from a legitimate source.

 

Three stages of Money Laundering

  • Placement

The first stage involves the Placement of proceeds derived from illegal activities like moving them to less suspicious and more convenient place.

‚ÄĘLayering

Layering involves using complex transactions designed to obscure the audit trail and hide the proceeds like making several bank transfers.

‚ÄĘIntegration

Integration involves conversion of illegal proceeds into apparently legitimate business earnings through normal financial or commercial operations.

 

Financing of Terrorism

  • Money to fund terrorist activities moves through the global financial system via wire transfers and in and out of personal and business accounts.
  • The money frequently starts out clean i.e. as a 'charitable donation' before moving to terrorist accounts. It is highly time sensitive requiring quick response.
  • As per compliance requirements of PMLA, CBS software should include various type of reports for filing with regulatory agencies.

 

Prevention of Money Laundering Act (PMLA)

  • Every banking company, financial institution and intermediary, is required to maintain a record of transactions as may be prescribed by rules and furnish information to the Director within such time as may be prescribed.

 

INFORMATION TECHNOLOGY ACT

The Information Technology Act was passed in 2000 and amended in 2008.

 

Section 43: If any person without permission of the owner or any other person who is in- charge of a computer performs the below given acts, he shall be liable to pay damages by way of compensation to the persons so affected.

  • Securing access to the computer;
  • providing assistance to any person to access any computer
  • downloading or extracting any data
  • damaging any computer
  • disrupting any computer, computer system or computer network;
  • destroys, deletes or alters any information
  • Steals, conceals, destroys or alters any computer source code
  • introducing any computer virus into any computer

 

 

 

Nature of offence

Relevant section

Penalty

Tampering           with                              computer source documents

65 Offences

Punishment upto 3 years/ Fine upto Rs.2 lakhs/ or with both

Does any act specified in Section 43

66

(Amended Vide ITAA 2008)

Punishment upto 3 years/ Fine upto Rs.5 lakhs/ or with both

Receiving stolen computer resource of communication device

66 B

(Amended Vide ITAA 2008)

Punishment upto 3 years/ Fine upto Rs.1 lakh/ or with both

Punishment for identity theft

66 C

(Amended Vide ITAA 2008)

Punishment upto 3 years + Fine upto Rs.1 lakh

Punishment for cheating for personating using computer resource

66 D

(Amended Vide ITAA 2008)

Punishment upto 3 years + Fine upto Rs.1 lakh

Punishment for violating privacy

66 E

(Amended Vide ITAA 2008)

Punishment upto 3 years/ Fine upto Rs.2 lakhs/ or with both

 

 

 

SECTION NO.

HEADING

KEY POINTS

SECTION 3

Offence        of money- laundering

Whosoever directly or indirectly assists (knowingly) or is involved in any activity connected with the 17 proceeds of crime shall be guilty of offence  of money laundering.

SECTION 12

Reporting entity          to maintain records.

  • Maintain records of all transactions
  • Furnish to the director
  • Information¬†¬†¬†¬†¬†¬†¬†¬† maintained¬†¬†¬†¬†¬†¬†¬†¬† shall¬†¬†¬†¬†¬†¬† be¬†¬†¬†¬†¬†¬† kept confidential
  • Five years from the date of transaction

SECTION 13

Powers        of directors to impose fine.

For contravention of above

 

Impose a monetary penalty on such

 

  • Reporting entity
  • Its designated directors on the board
  • Its employees

Which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure.

SECTION 63

Punishment for               false information or failure to give information

.

Person        willfully        &       maliciously         giving        false information be liable to

  • Imprisonment for a term which may extend to two years
  • Fine which may extend to fifty thousand rupees or both

SECTION 70

Offences by companies

Every person who was in charge of and was responsible to the company shall be deemed to be guilty.

 

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