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Finance ministry calls out nearly 9,500 high risk financial companies

The Financial Intelligence Unit released a list of an astounding 9,491 NBFCs that were found to be non-compliant with anti- money-laundering laws.

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The government, with guns blazing, is cracking down on non-compliant and high risk financial institutions. In its latest blitzkrieg, the Financial Intelligence Unit – a Ministry of Finance entity – has released a list of 9,491 NBFCs that were found to be prone to high risk as they haven’t complied with mandated anti- money-laundering laws.

The recent expose lists several well-known and established NBFCs including Adani Capital, Bajaj Global, Emkay Fincorp, Hinduja Finance, IBM Global Financing, IDC Securities, IndusInd Enterprises & Finance, Morgan Stanley India Securities, and Reliance Commercial Finance, among many others.

The Financial Intelligence Unit (FIU) is charged with maintaining a vigil on both banking and non-banking financial institutions in India. The intelligence unit keeps a lookout for financial crimes in the Indian economy and flags it to enforcement agencies.

What triggered the FIU

Introduced by the NDA government in 2002, the Prevention of Money Laundering Act makes it mandatory for banking companies, financial institutions, and intermediaries to verify its clients’ identity, maintain all records, and share information with the Financial Intelligence Unit.

The 2016 demonetisation drive resulted in numerous NBFCs and cooperative banks coming under scrutiny for illegally converting decommissioned currency notes.

The PML Act makes it mandatory for NBFCs to report all suspicious activity and flag any cash transaction exceeding Rs 10 lakh. Additionally NBFCs are mandated to record all transaction details and customer information for a period of five years.

On February 25, the RBI created an ombudsman for finance companies which aims to address complaints relating to deposits, fees and loans for NBFC customers.