Here are the notes on the financial institutions and intermediaries as per the Prevention of Money Laundering Act, 2002 (PMLA) in detail, with MCQs and answers:
What are financial institutions and intermediaries?
Financial institutions and intermediaries are entities that provide financial services, such as banking, insurance, and securities trading. They are also known as “reporting entities” under the PMLA.
What are the obligations of financial institutions and intermediaries under the PMLA?
The obligations of financial institutions and intermediaries under the PMLA are similar to those of banking companies. They are required to perform CDD, maintain records, and report suspicious transactions. They are also required to:
- Implement an AML/CFT compliance program: This program should be designed to prevent money laundering and terrorist financing.
- Designate a compliance officer: This officer is responsible for ensuring that the entity complies with the PMLA.
- Train their employees: Employees should be trained on the PMLA and how to identify and report suspicious transactions.
Here are some MCQs on the obligations of financial institutions and intermediaries under the PMLA:
- Which of the following is not an obligation of financial institutions and intermediaries under the PMLA?
- Customer due diligence (CDD)
- Record keeping
- Suspicious transaction reporting (STR)
- Implementing an AML/CFT compliance program
- The answer is Designating a compliance officer. The PMLA does not require financial institutions and intermediaries to designate a compliance officer. However, it is a good practice to do so.
- What is the purpose of an AML/CFT compliance program?
- To prevent money laundering and terrorist financing
- To ensure that the entity complies with the PMLA
- To train employees on the PMLA
- All of the above
- The answer is all of the above. An AML/CFT compliance program is designed to prevent money laundering and terrorist financing, ensure that the entity complies with the PMLA, and train employees on the PMLA.
- What are the penalties for non-compliance with the PMLA by financial institutions and intermediaries?
- Imprisonment for up to 3 years and a fine
- Imprisonment for up to 7 years and a fine
- Imprisonment for up to 10 years and a fine
- Imprisonment for up to 14 years and a fine
- The answer is imprisonment for up to 7 years and a fine. The penalties for non-compliance with the PMLA are severe, and can include imprisonment and a fine.