Mutual Funds
Mutual fund houses to submit report on suspicious transactions to intelligence unit next month

In a bid to prevent unauthorised funds from entering and exiting mutual funds, the Financial Intelligence Unit (FIU), is seeking its first submission of Suspicious Transaction Reports (STRs) from mutual fund (MF) registrar & transfer agents (RTAs) under the revised provisions of the Prevention of Money Laundering Act (PMLA). According to industry sources, RTAs like CAMS, Karvy and Deutsche Investor Services, which have been following STR procedures since 1 July 2010, will file their first sample report next month.

“The FIU is revising the STR reporting process. It expects RTAs to report directly to them,” a source familiar with the development told Moneylife, preferring anonymity.
The STR contains details of investors carrying out dubious transactions. For instance, if an investor requests an address change or switches money from one fund to another five times in a year, the details would be recorded by the vigilance team at the RTAs and sent to the concerned fund house. The fund house then will investigate these transactions for any possible suspicious activity.
These alerts are sent to Asset Management Companies (AMCs) and the concerned fund house further reviews it. If it finds the activity to be suspicious then these AMCs will report the same to the FIU. All the parameters are decided by FIU under PMLA guidelines.
“We don’t have cash transactions in mutual funds, so it is very difficult for us to find out suspicious transactions. Therefore, it was decided that any unusual activity which is different from normal behaviour has to be tracked. It is an alert mechanism to trace suspicious elements. So it needs more investigation from the compliance side of the AMCs. Once it is classified as ‘suspicious’ then fund houses report these transactions to the FIU. The onus is more on the AMCs. They have to be doubly sure. This is being done to review what RTAs are doing, and to ensure that some quality alerts are generated. The parameters are confidential and are not supposed to be discussed in the public domain for security reasons,” said a source from the industry.
Earlier in February, the revised guidelines were contemplated in a meeting held in New Delhi that was attended by top officials from the Association of Mutual Funds in India (AMFI), the Securities and Exchange Board of India (SEBI), various AMCs and RTAs.
During the meeting, FIU instructed AMFI to form a committee of six members comprising Reliance MF, UTI MF, HDFC MF, Karvy, CAMS and Deutsche Investor Services. This committee has recommended a few more alerts and STRs for MF investments.
The FIU has also instructed RTAs to furnish a consolidated STR across the fund houses serviced by respective RTAs. The date for implementing these new guidelines would be decided by industry body AMFI after studying the sample report sent by RTAs in August 2010.
Established in 2004, the FIU is the central national agency that analyses and disseminates information relating to dubious financial transactions. FIU is an independent body that reports to the Economic Intelligence Council (EIC) headed by finance minister Pranab Mukherjee.
Moneylife has a copy of the revised guidelines issued by the FIU. However due to security reasons, we have decided not to publish the details of the transaction parameters.
The reporting of STRs to the FIU will be entrusted with principal officers of AMCs. RTAs will facilitate the alert-generation mechanism to fund houses. The new parameters contain frequent changes in bank account details, threshold of investment limits and folios, redemptions, switchovers in a short span of time, transaction activities in schemes, etc. The guidelines are applicable for Indian residents, Non-resident Indians (NRIs) and companies.



R Balakrishnan

7 years ago

Funny. Recently, M&M Finance advertised for fixed deposits. They indicated acceptance of up to Rs.15,000/- per deposit in CASH! RBI is behind SEBI in terms of regulatory check on Money Laundering.

PSU insurers deny any deal with medical equipment and pharma companies

PSU insurers have denied some newspaper reports which said that these firms were planning to deal directly with suppliers of medical equipment and pharmaceutical companies

Public sector insurance companies have denied some newspaper reports which said that these insurers were planning to deal directly with suppliers of medical equipment and pharma companies. According to the report published today, the move by insurers to deal directly with suppliers of medical equipment and pharma companies was to save 20%-30% of the cost of claims.
M Ramadoss, chairman and managing director, New India Assurance Co Ltd told Moneylife, “No. The news is not correct as we don’t have any immediate plans of doing so.”
According to the report, with the proposed deal between public sector insurers and medical equipment and pharma companies, patients will gain through lowered costs and premiums. However, hospitals are not happy with the move. The report, quoting the chief executive of Mumbai’s Breach Candy Hospital said that recent developments give an impression that the hospitals are committing fraud.
"Another concern is about who would take blame if medical equipment or a drug is of inferior quality?," the report quoted other Mumbai-based clinic. 
According to insurers, most of the overcharging allegedly happens when drugs or implants are imported.
Over the past few weeks, the healthcare industry has been in turmoil after cashless facility was revoked all of a sudden from leading hospitals. Preferred Provider Network (PPN) is a network of providers who agree to negotiated rates on specified procedures. Public sector insurers have restricted cashless facilities to hospitals in the PPN.
Public sector insurers are toying with the idea of launching a separate cashless 'Platinum' policy for high-end hospitals in order to retain affluent customers by continuing for them cashless policies at hospitals outside the PPN. However, this plan is fraught with difficulty because the premium is bound to be significantly higher. According to some industry experts, the premium for such a 'Platinum' policy can be as high as 50% over the existing premium.
"Lack of quality hospital supply does make it difficult to negotiate with corporate hospitals. They need to give us discounts on volume of business. If we are unable to convince high-end corporate hospitals to join our PPN list, then we (PSU insurers) will be forced to come up with a separate plan for cashless facilities at high-end hospitals. The premium for this 'Platinum' policy will be higher, but we have not finalised it. It is at the drawing board. We have solidarity from private insurers too. They are also suffering due to erratic charges from some hospitals,” said Mr Ramadoss.
There are definitely winds of change blowing in the healthcare industry, which is bleeding under losses. New India Assurance itself is running losses of 20% — excluding administrative costs — for health insurance. The losses are over 40% when administrative and other costs are included. The loss scenario is present for the other three public sector insurers too. For the same set of hospitals, private sector insurers have managed to keep their head above the water till now. Private insurers have also become wiser after they failed to rein in losses to the tune of crores of rupees, allegedly due to fraudulent methods adopted by some hospitals and Third Party Administrators (TPAs). It is possible that they too will move to PPN because the underlying causes remain similar for all insurers.


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