Court Upholds Appeal Dismissal, Warning Letter Closed Matter

The court dismissed the appeal, upholding the Appellate Tribunal's decision to set aside the penalty order dated 04.09.2015. It was determined that the warning letter issued on 18.09.2014 had closed the matter, and imposing a penalty afterward was deemed an afterthought. The court also confirmed that the Additional Director, FIU, was authorized to issue the warning letter with the approval of the Director, FIU.

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Issues Involved:
1. Whether the Appellate Tribunal erred in proceeding on the basis that the letter dated 18.09.2014 was issued by the FIU in respect of the failure to report suspicious transactions related to the Cobrapost sting operation.
2. Whether the order dated 04.09.2015 imposing a penalty was an afterthought.
3. Whether the Additional Director, FIU, was authorized to issue the warning letter dated 18.09.2014.

Issue-wise Detailed Analysis:

1. Whether the Appellate Tribunal erred in proceeding on the basis that the letter dated 18.09.2014 was issued by the FIU in respect of the failure to report suspicious transactions related to the Cobrapost sting operation:

The appellant, FIU, argued that the letter dated 18.09.2014, which issued a warning to the respondent bank, was related to a different set of transactions and not the Cobrapost sting operation. The FIU contended that the Appellate Tribunal failed to appreciate this distinction. However, the court noted that all communications referenced the same file number (F25-1/2013-FIU-IND), indicating they were part of a single proceeding. The initial communication from FIU dated 10.07.2013 explicitly mentioned the Cobrapost sting operation. Subsequent communications, including the show cause notice dated 27.01.2014 and the letter dated 03.02.2014, were also in reference to the Cobrapost sting operation. The personal hearing on 15.04.2014 and the questions raised therein were directly related to the Cobrapost sting operation. The letter dated 18.09.2014, which issued a warning, also referred to the respondent’s letter dated 21.02.2014, which was a response to the FIU’s letter dated 03.02.2014. Thus, the court concluded that the warning letter dated 18.09.2014 was indeed issued in respect of the alleged violation related to the Cobrapost sting operation.

2. Whether the order dated 04.09.2015 imposing a penalty was an afterthought:

The court found that the FIU had closed the matter with the issuance of a warning letter dated 18.09.2014. The warning letter directed the respondent bank to be vigilant in the future and indicated that any reoccurrence of lapses would result in complaint proceedings. The court noted that the inquiry by the FIU was comprehensive, covering both the non-reporting of transactions from the Cobrapost sting operation and the respondent bank’s internal control systems. Given this, the court agreed with the Appellate Tribunal that the order dated 04.09.2015 imposing a penalty of Rs. 3 lakhs was an afterthought, as the matter had already been closed with the issuance of the warning.

3. Whether the Additional Director, FIU, was authorized to issue the warning letter dated 18.09.2014:

The appellant argued that the Additional Director, FIU, who issued the warning letter, was not authorized to do so under Section 13 of the PMLA. However, the court found this contention unsustainable. The letter dated 18.09.2014 indicated that it was issued with the approval of the Director, FIU, who is the designated authority for imposing fines under Section 13 of the PMLA. Therefore, the court held that the warning letter was authorized.

Conclusion:

The court dismissed the appeal, finding no merit in the appellant’s contentions. The Appellate Tribunal’s decision to set aside the order dated 04.09.2015 was upheld, as the matter had been closed with the issuance of the warning letter dated 18.09.2014. The court also found that the warning letter was authorized, as it was issued with the approval of the Director, FIU.

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