A new Financial Intelligence Unit (FIU) report has found that the country's banks not only received an all-time high amount of fake currency in 2016-17, but also detected an over 480 per cent jump in suspicious transactions post demonetization, the PTI reported.
"A noteworthy growth was also seen in the number of counterfeit currency reports (CCRs) which increased from more than 4.10 lakh in 2015-16 to over 7.33 lakh in 2016-17, which may also be attributed to the demonetisation exercise," said the FIU report, but it did not specify the value of such fake currencies detected. That's an increase of over 3.22 lakh such cases in banking and other economic channels in just a year. CCRs are "transaction based reports" and they are generated only when a fake Indian currency note (FICN) is detected or where any forgery of a valuable security or a document has taken place during a cash transaction at a bank.
The FIU, the premier technical snoop wing under the Finance Ministry tasked with analysing suspicious financial transactions pertaining to money laundering and terror financing the country, has been compiling such data since 2007-08. As per its anti-money laundering rules, the banks and other financial bodies are required to report all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine or where any forgery of a valuable security or a document has taken place.
The annual spike registered in 2016-17 is the highest since 2012. The Reserve Bank of India's annual report for 2016-17 told a similar story. "At the Reserve Bank's currency verification and processing system, during 2015-16, there were 2.4 pieces of FICNs of Rs 500 denomination and 5.8 pieces of FICNs of Rs 1000 denomination for every million pieces notes processed; which rose to 5.5 pieces and 12.4 pieces, respectively, during the post-demonetisation period," it said. But its survey-based estimation of FICNs processed at currency chests had thrown up higher figures.
According to FIU, banks, including those in the private and cooperative sectors, and other financial institutions collectively generated a record 4.73 lakh suspicious transaction reports (STRs) during 2016-17, ie post demonetisation. The STRs are generated when a transaction either indicates that it has been made in circumstances of unusual or unjustified complexity or appears to have no economic rationale or bona fide purpose. "The number of STRs received in 2016-17 is 4,73,006 which is more than four times as compared to 2015-16 and this increase is attributed to demonetisation exercise...," said the report.
However, it clarified that some volume of the increase in the number of STRs can be credited to the outreach steps taken by the agency in sensitising banks and others to comply with the rule of compulsorily filing these reports under the Prevention of Money Laundering Act. "The most notable increase (in generating STRs) was in the category of banks, which recorded almost a 489 per cent increase over 2015-16. The increase was 270 per cent in the category of financial intermediaries," it said.
STRs are also generated by the banks for those transactions that give rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism. Some of those generated post demonetisation, according to the report, had "possible links" to terror funding.
In the wake of the increasing reportage of CCRs and STRs, the FIU ramped up its efforts in 2016-17 and disseminated 56,000 STRs to various investigative agencies like the Income Tax Department, the Enforcement Directorate, the CBI and the Directorate of Revenue Intelligence, among others, up from 53,000 sent in the previous year.
"The results of the STRs pertaining to demonetisation period will be seen in the subsequent years," the report said in an indication towards the quantum of black money that would be unearthed after acting on these classified reports. In 2015-16, the detection and reportage of suspicious transactions, fake notes and cross-border fund transfers had reportedly led to the FIU unearthing black money worth over Rs 560 crore.
With PTI inputs