The finance ministry’s financial intelligence unit has categorised about 9,500 non-banking financial companies (NBFCs) in the country as “high risk” prone as they have not complied with a stipulated provision of the anti-money laundering law.
A list of 9,491 “high risk financial institutions” has been published by the Financial Intelligence Unit (FIU) that works under the Union Finance Ministry to check crimes in the Indian economy and alert enforcement agencies against such instances.
The list, containing the names of the firms, has been updated till January this year.
Under the Prevention of Money Laundering Act (PMLA), the NBFCs, which include cooperative banks, are required to furnish details about their financial operations and transactions to the FIU.
The FIU processed the data of these companies and found that they did not comply largely on one stipulated condition of appointing a principal officer who is responsible to check and report suspicious transactions and cash transactions of Rs 10 lakh and above, and report it to the agency, sources said.
The activities of these institutions — post the demonetisation of large currency notes of Rs 1,000 and Rs 500 in November, 2016 — were under the scanner of the FIU and it published their names after analysing their data from various information sources, they said.
“The publication of names is primarily a step by the FIU to make aware the public that these NBFCs are not law compliant and those they should refrain from indulging into transactions with them,” a senior official said.
NBFC is defined as a company registered under the Companies Act which is engaged in the business of loans and advances, acquisition of shares, stocks, bonds, debentures and securities issued by the government or local authority or other marketable securities.
NBFCs lend and make investments and hence, their activities are akin to that of banks, however, there they cannot accept demand deposits and do not form part of the payment and settlement system and cannot issue cheques drawn on itself.