Tribunal upholds fine for breaching Anti-Money Laundering rules. Compliance is key.

The tribunal upheld the Director's order, dismissing the appellant's arguments and affirming fines for failing to report Cash Transaction Reports (CTRs) and lacking an internal mechanism. It emphasized the necessity of complying with Prevention of Money Laundering Act (PMLA) provisions and maintaining effective internal systems for detecting and reporting cash transactions.

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Issues Involved:
1. Failure to Report Cash Transaction Report (CTR)
2. Internal Mechanism for Furnishing Information
3. Interpretation of Rules under PMLA
4. Jurisdiction of Director vs. Regulator (RBI)

Detailed Analysis:

1. Failure to Report Cash Transaction Report (CTR):
The appellant, a banking company, was fined for not filing the CTR for two cash transactions totaling Rs. 10,04,964/- in April 2011. The appellant argued that the transactions did not exceed Rs. 10 lakh, excluding exchange and service tax. However, the tribunal found that the total amount, including bank charges, exceeded the threshold and should have been reported. The tribunal emphasized that all cash transactions over Rs. 10 lakh must be reported, regardless of whether they are bona fide or involve existing customers.

2. Internal Mechanism for Furnishing Information:
The appellant was also fined for not having an internal mechanism to report such transactions. The tribunal noted that the appellant failed to evolve an internal mechanism for maintaining and furnishing information as required by the rules, despite previous fines for similar failures. The tribunal highlighted that the appellant's internal system was inadequate, as evidenced by the failure to detect and report the transactions.

3. Interpretation of Rules under PMLA:
The appellant contended that the bank charges should be excluded from the transaction value as per RBI guidelines, which state that CTR should exclude transactions between the internal accounts of the bank. The tribunal rejected this argument, clarifying that the transactions were not between internal accounts but between the customer and the bank's internal account. The tribunal also dismissed the appellant's plea that the Principal Officer's discretion under Section 12 of PMLA should determine whether transactions are integrally connected, stating that the proviso to Section 12(1) adds to the obligations rather than derogates from them.

4. Jurisdiction of Director vs. Regulator (RBI):
The appellant argued that only RBI, as the regulator, had jurisdiction under PMLA to impose fines, not the Director. The tribunal refuted this, stating that Section 13 of PMLA clearly authorizes the Director to impose fines. The tribunal also noted that the RBI's acceptance of the appellant's explanation was irrelevant to the Director's jurisdiction to initiate proceedings and impose fines under PMLA.

Conclusion:
The tribunal upheld the Director's order, finding no merit in the appellant's arguments. The appeal was dismissed, and the fines for failing to report the CTR and not having an internal mechanism were affirmed. The tribunal emphasized the importance of compliance with PMLA provisions and the need for robust internal mechanisms to detect and report cash transactions.

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