The Government informed the Lok Sabha that 10 suspicious transactions linked to terrorist financing using the stock exchanges have been reported from 2009-10 till November this year. They have been referred for further investigations.

In a written reply, Mr Namo Narain Meena, Minister of State for Finance, said that some of these transactions are suspected to be linked to money laundering. These suspicious transaction reports (STRs) have been received by the Financial Intelligence Unit-India (FIU-IND) through various stock market intermediaries such as stock brokers and asset management companies. Five of these transactions were reported in 2009-10, four the next year and one so far this year.

Mr Meena said that several steps have been taken to prevent black money or terrorist funds from flowing into the stock markets. For instance, strict vigil is being maintained on the payment system. Payments for transactions in the stock markets have to be made through banking channels.

Banks and other financial intermediaries are required to ensure compliance with the customer due diligence norms as recommended by the Financial Action Task Force (FATF). FATF is an international inter-government body, of which India is a member, for setting standards to combat money laundering and financing of terrorism.

SEBI registered intermediaries such as mutual funds, depository participants and stock brokers follow the ‘Know Your Client (KYC)' guidelines laid down by the market regulator when clients are registered. All these financial and market intermediaries besides payment system operators and casinos are required to make suspicious transactions known to the FIU-IND.

In 2007, the then National Security Advisor, Mr. M K Narayanan, had apprehended that terror funds were being routed into the Indian stock market through dubious overseas accounts, but it was categorically denied by the Finance Ministry. It was then said that the system was competent enough to block such transactions.

>Shishir.s@thehindu.co.in

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