1. India@ RobustRegulatoryWorld:Whenwill we make it?
Withthe firstGlobal chapteronAnti-moneyLaundering unfoldinginthe UnitedStates ona
backdropof recentspurtsin compliance relatedfinestobanks,financialsinstitutes aswell as
casinos, the entire worldseemstobe talkingthe compliance languageagain.Justtogive youan
insight, asperthe US treasurydepartment, finesclose toaround$12 billionhasbeenimposedon
these institutessince 2011, includingBNPparibuswhichhadpleaded guiltyagreedtopayalmost$9
billiontoresolveaccusationsitviolatedU.S.sanctionsagainstSudan,CubaandIran.
UnitedStatesisthe obviousbenchmarkwhenitcomestoGlobal compliance howeverthe situation
inU.S. alsoseemsto have changedonlya decade ago.In 2004-05, U.S. federal governmentFCPA
investigationswereattheirinfancy,andthe DOJand the FBI were justbeginningtofocusheavilyon
significantglobal corruptionandforeignbriberyinvestigationsandprosecutions.Similarly,many
companies,includinganumberof multi-nationals,didnothave “compliance”departmentstill recent
times.
The Indianstory on the other handisyet to take off withrespecttoAML regulation implementations
and I hope thatwe notwaitingour9/11 tohappenbecause that’swhenAML/Terroristfinancing
became the focuspointsinU.S.
Eventhoughthe regulationswithrespecttomoneylaundering inIndiabecame more stringent with
the passage of ForeignExchange ManagementAct(FEMA) in1999 as well as Preventionof Money
LaunderingAct(PMLA) in2002, the ground realitiesshow acompletelydifferentpicture.The only
recentcase whichcomesto mindisthe investigationinto Bankof Barodainvolvingalleged
launderingof blackmoneytothe tune of Rs. 6000 crore throughfraudulenttrade circuitwhere
exportersclaimeddutydrawbackoninflatedexportbillsornon-existentimports.
Indiahas been aregional economicpowerandfinancialcentre.Ithas beenan economy inwhich
boththe formal andinformal financial systems have existedandaccordingtosome expertsthe
informal sectorismuchlargerin scale thanthe formal sector,thoughit’sdifficulttoassessin
numbers.Thisextensiveinformal economyandremittance systems,persistentcorruption,onerous
tax administration,andcurrencycontrolscontribute toitsvulnerabilitytoeconomiccrimes,
includingfraud,cybercrime,identitytheft,moneylaundering,andterrorismfinancing.India’sporous
bordersand locationbetweenheroin-producingcountriesinthe GoldenTriangleof SoutheastAsia
and GoldenCrescentof Central Asiamake ita frequenttransitpointfornarcoticstrafficking.
ProceedsfromIndian-basedherointraffickersiswidelyknowntore-enterthe countryviabank
accounts,the Hawala system,andmoneytransfercompanies.
Above all the rampantcorruption existinginthe systemona backdropof a weaklegal systemhad
beenthe mainreasonwhyIndiahasyet to see the lightof the day whenitcomesto Money
Launderingchargesandprosecutions. The currentadministrationthoughhastakensome corrective
stepsinthisregard:
1) A comprehensive Bill,introducedinthe Budgetsessionof the Parliament, includes aslew of
measurestoreininblackmoney.The Bill aimsto make concealmentof income andassets
and evasionof tax inrelationtoforeignassetsprosecutable withrigorousimprisonmentup
to 10 years.
2) Alsosigningthe ForeignAccountTax Compliance Act(FATCA)agreementbetweenIndiaand
US which is designedtoincrease transparencybetweenthe twonationsontax mattersand
mutual informationsharing,meaningthatthe U.S. will alsoshare financialinformationon
Indianresidentswhohave investmentsinthe U.S.withthe IndianMinistryof Finance (MoF).

2. Everyone knowsandagreesthatthese are not enough,Indianlawshave alwaysbeen
comprehensive innature,itisthe inabilityof the regulatorstoapplythese lawsstringentlywhichisa
cause of worry. The concern isalsothat Indiancompanies includingvariousmulti-nationalsthat
operate here today wouldratherworktowardscorrectingtheirwrongdoingthroughfraud
investigationsinsteadof focussingonarobust compliance culture throughoutthe organization
whichwouldmake sure thatthese compliance issuesneverarise atthe firstplace.
Accordingto a surveyconductedbythe Associationof CertifiedFraudExaminers(ACFE),atypical
organizationloses5%of revenueseachyeartofraud.If appliedtothe 2013 estimatedGrossWorld
Product,thistranslatestoa potential projectedglobal fraudlossof nearly$3.7 trillion.Now that’san
astoundingnumberandiselaborativeof the factthat the companiescanno longerignore the
importance of havinga compliance programwhichisbotheffective andeconomical.
We all agree that ittakesa lota time ina countrylike India tomove things. The IndianPrime
MinisterMr. NarendraModi inone of the famous interviews toFacebookfounderMarkZuckerberg,
had saidreferringtothe changingIndianeconomythatit’seasyto turnthe directionof atwo-
wheelerbutto move a trainwithfortybogiesisgoingtotake time.
Whenthistrain will arrive atitsdestination@Robustregulatoryenvironment?Onlytime will tell.