Money Laundering is a process or activity of moving illegally acquired money through financial systems so that it appears to be legally acquired. Anti-Money Laundering (AML) laws refers to a set of laws, regulations, and procedures designed to prevent individuals from disguising illegally obtained funds as legitimate income; with the goal to prevent such funds from entering the financial system of the country and utilisation of such funds in illegal activities like financing terrorism, etc. The financial institutions and other regulated entities are required to implement and maintain appropriate procedures and controls for detecting and reporting such suspicious activities. It applies to a wide range of industries, including banking, finance, insurance, etc., and are enforced by regulatory authorities around the world. As per Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA) the offence of money laundering is defined as follows:
“whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.”
In terms of the provisions of Prevention of Money- Laundering Act, 2002 and the Prevention of Money- Laundering (Maintenance of records) Rules, 2005 (as amended from time to time), insurers are required to follow Customer Identification Procedures while undertaking a transaction at the time of establishing an account based relationship/ client based relationship and monitor their transaction. Insurers shall take steps to implement provisions of Prevention of Money-Laundering Act, 2002 (�PMLA�) and the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, (�PML Rules�) as amended from time to time, including operational instructions issued in pursuance of such amendment(s).
The General Law in India pertaining to obtaining General Insurance cover for a non- related third party prohibits such a transaction. Consequently, a person/ entity are not legally allowed to take any kind of General Insurance cover for a non-related third party.
One of the cardinal reasons for the above-mentioned prohibition is to prevent Money laundering. As per Anti-Money Laundering provisions in India, the money for the premium of any Insurance policy ought to be debited either from the bank account or the credit card of the Insured (The person whose risk/interest in the subject matter is secured through the Policy). Therefore, any payment of policy premium on behalf of a non-related third party is illegal
Group Insurance is peculiar type of insurance which insures a group of people against certain risks but the Premium (money) is paid by a non-related third party/entity which is generally not a part of the said Group. As per IRDAI, groups can be formal such as employer-employee groups or informal such as non-employer- employee groups, for example a family, society, cultural association. In case of an office, the employer is the Master Policy holder of the insurance policy for its employees.
The concept of Group Insurance emerges as a contradiction to the AML laws and is still legal in India. Although, ostensibly it would throw an impression of Group policies being an instrument of Money Laundering. However, IRDAI in its recent revised guidelines Ref: IRDAI/IID/GDL/MISC/160/8/2022 called as Master Guidelines on Anti-Money laundering/Counter Financing of Terrorism (AML/CFT) dated 01.08.2022 has carved out an exception to the same if the procedures enumerated by the Master guidelines are followed to the word. Under Clause 8.1.8 of the said Guideline, it has been clarified that �under all kinds of Group Insurance (Life /General/Health), KYC of Master Policyholders / Juridical Person / Legal Entity and the respective Beneficial Owners (BO) shall be collected. However, the Master Policyholders under the group insurance shall maintain the details of all the individual members covered, which shall also be made available to the insurer as and when required.�
Therefore, form the above mentioned clause 8.1.8 of the guidelines it can be reasonable inferred that the money paid by the Master in a Group Policy for the beneficial individual members would not tantamount to Money Laundering if proper KYC details of the Master as well as of each of the Beneficial owner is collected and maintained by the Insurance Company. This is also true by virtue of the fact that Money Laundering essentially occurs when the real source of money is unknown; which would not be the case in Group policies. Here are some things to be careful about whenever anyone buys a group policy:
- A MOU needs to be executed with the Insurance Company specifying the rates of premium, procedures and terms & conditions.
- Only one master policy will be issued to the Manager of the group and will be in the name of the group.
- You are entitled to get a certificate of insurance.
- This certificate should contain
- the schedule of benefits
- premium charged and
- terms and conditions of the cover
- The cover for any customer would cease if they leave the group.
- The Manager of the group should disclose the premium rate and terms of the policy including the premium discounts offered to the group and should pass on the discounts to all members.
- The manager of the group has to disclose any administrative or other charges he is collecting from members over and above the premium charged by the insurance company.
- A specific timeline should be mutually agreed upon for addition and deletion of names of customers as and when they come and leave.
As such, if the source of the money is known, i.e. if the route of transfer of such money can be traced and if proper KYC details of the Master Policy holder and of each of the beneficial owner is collected and maintained by the Master Policy Holders and Insurance Company, then payment of premium for the Group Insurance by a third party shall not be considered as an act of money laundering.
Case Update 1:
Supreme Court hears pleas for legal recognition of same-sex marriage, discusses adoption by queer couples
The Supreme Court in the case of SupriyoVs the Union of India on 27th April,2023 expressed their concern regarding same sex marriage and raising a child by them. The court had a constitutional bench comprising of the Chief Justice DY. Chandrachud, Justices Sanjay Kishan Kaul, S. RavindraBhat, HimaKohli and PS. Narasimha hearing pleas for the legal recognition of same sex marriage.
The senior advocate KV. Viswanathan who was appearing for the transgender rights activist Zainab Patel requested the court to not look at the idea of bearing a child through the narrow mindset wherein only a heterosexual couple can procreate a child or in some cases adopt one. He also pointed out that in its hundred and eighteenth annual report of the parliamentary committee a new legislation to be made that would cover the LGBTQIA community as well. According to the case referred by him from Hawaii in the United States there is no evidence wherein we can find that a queer couple does not provide the basic amenities that a child needs. The senior counsel emphasised that same sex couples were as well suited as a heterosexual couple.
On 01st May,2023 while discussing about this case, the Chief Justice observed that one of the two people can adopt a child under the legal infrastructure as a single parent. He says that �Today, even if a couple is in a gay or a lesbian relationship, one of them can still adopt. It is just that the child loses the benefits of parenthood of both the parents.� While the National Commission for Protection of Child Rights raised concerns about same sex couples adopting a child, the Delhi Commission of Child Rights took a step ahead for supporting adoption by the queer couples.
Case Update:
Sarabjit Kaur Vs The State of Punjab & Anr.
The recent judgment Sarabjit Kaur vs The State of Punjab &Anr., has left no room for doubt on a significant legal issue regarding criminal liability for a mere breach of contract. The Apex Court, in a learned, commendable, landmark, logical, and latest ruling, made it clear that a mere allegation of 2023 LiveLaw (SC) 156 failing to keep a promise is insufficient to initiate criminal proceedings. This ruling was pronounced by the Bench of Hon�ble Mr. Justice Abhay S Oka and Hon�ble Mr. Justice Rajesh Bindal on March 1, 2023, exercising its criminal appellate jurisdiction.
In essence, the Court stated that a breach of contract alone does not establish the basis for criminal prosecution for cheating, unless fraudulent or dishonest intentions are evident at the outset of the transaction. It is worth noting that the Bench emphasized that criminal courts should not be utilized to settle personal scores or compel parties to settle civil disputes. This judgment establishes a significant precedent, and it is crucial that courts consider it carefully in future cases.
Legal news 1:
Landlords seek possession of shops with perishable goods amid future retail insolvency
The landlords renting to Future Retail Ltd. are becoming anxious about the perishable goods stored in their properties. Some of them have sought relief from the insolvency court, requesting a prompt return of their possessions. The landlords claim that since Future Retail went into insolvency, most of the shops it occupied have been left unattended, without any upkeep, resulting in the spoilage of perishable goods stored on these premises.
As a result of the moratorium, they were unable to access these properties. A significant amount of stock, including perishable goods belonging to Future Retail, remains on these premises. The landlords argue that these goods could pose a permanent threat to their properties and a potential health hazard.
The Court was then informed by VijayakumarIyer’s counsel, the resolution professional, that the matter will be addressed after the committee of creditors reviews the same. According to Iyer, they are considering a resolution, and the CoC will decide soon on which shops the company plans to retain to continue as a going concern.
Legal News 2:
Ministry of Finance tightens regulations for financial professionals under Prevention of Money Laundering Act
On Wednesday, the Ministry of Finance announced revisions to the Prevention of Money Laundering Act that introduce stricter compliance procedures and enhance the regulations governing financial professionals who conduct transactions on behalf of their clients. The amendments bring “relevant persons,” including practicing chartered accountants, company secretaries, and cost and works accountants, under the ambit of the anti-money laundering law.
The ministry has specified in a notification the scope of financial transactions that will be subject to the new regulations when performed on the client’s behalf. These transactions include the purchase and sale of immovable property, the management of client money, securities or other assets, the administration of bank, savings or securities accounts, the organization of contributions for the creation, operation, or management of companies, and the formation, operation, or management of companies, limited liability partnerships, or trusts, as well as the buying and selling of business entities.
Legal News 3:
Kerala High Court�s view on The Kerala Story
The petitioners in Tamil Nadu claim that the State authorities influenced the exhibitors, resulting in the withdrawal of the film. The movie has faced controversy as it is accused of portraying the entire Muslim community and the state of Kerala in a negative light while depicting the recruitment of women into ISIS through deceit.
A division bench consisting of N Nagaresh and Sophy Thomas heard multiple writ petitions seeking an order to prohibit the film’s exhibition. The movie was released in Kerala on Friday amidst protests from various organizations. On May 4, 2023, the Supreme Court declined to entertain a request to direct the Kerala High Court to hear a petition challenging the clearance given by the CBFC to the film.
Advocate Kaleeswaram Raj, representing the petitioner, argued that the movie not only contains hate speeches but is also available to people who consider them as true incidents. Senior advocate S. Sreekumar, representing the defendant, countered that the movie was approved and certified by the censor board before its release on social media. The petitioner claimed that the movie is based on incidents that occurred in Kerala, where Hindu and Christian women were allegedly lured into “love jihad,” converted by Islamic groups, and trafficked for missions in Syria, Iraq, and Afghanistan.
On May 5, a division bench of the Kerala High Court, comprising Justice N. Nagaresh and Justice Sophy Thomas, rejected the request to halt the film’s exhibition. The court noted that the film only stated it was “inspired by true events” and had received certification from the Central Board of Film Certification (CBFC) for public viewing. After watching the film’s trailer, the bench expressed the opinion that it did not contain anything offensive towards any particular community. The bench also pointed out that none of the petitioners had actually watched the film, and the producers had included a disclaimer stating that the events in the movie were fictionalized. However, the High Court acknowledged the producer’s submission that the teaser claiming over 32,000 women from Kerala were recruited to ISIS would be removed from their social media accounts.
In a related development, the Supreme Court has agreed to hear a special leave petition on May 15, challenging the Kerala High Court’s decision to not halt the film’s exhibition.
