Reporting-compliance penalties under money laundering law sustained for delayed, incomplete and non-filed reports, with duplicate sanctions removed.

Reporting-compliance provisions under the Prevention of Money Laundering Act, 2002 require timely and accurate transaction reporting, and penalties may be sustained for established defaults in CTRs, STRs, NTRs, CBWTRs and section 12A data reporting. Refiled CTRs were not counted once defects were cured, but first-time delay remained actionable; technical difficulty did not excuse non-compliance. In STR matters, delayed reporting and incomplete or inaccurate grounds of suspicion were treated as substantive defaults. Delayed or non-filed NTRs and CBWTRs were also upheld where generic or incorrect information was furnished. However, repetitive penalty for the same failure to maintain an effective internal mechanism was set aside as duplicative.

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Issues: (i) Whether the penalty for delayed or refiled CTRs was sustainable and whether the Bank's plea of technical difficulties and absence of an effective internal mechanism could reduce the penalty; (ii) Whether the penalties for delayed, incomplete, or non-filed STRs were sustainable, including the treatment of incomplete grounds of suspicion and repetitive penalty for lack of internal mechanism; (iii) Whether the penalties for delayed or non-filed NTRs and CBWTRs, and the penalty under section 12A, were justified.

Issue (i): Whether the penalty for delayed or refiled CTRs was sustainable and whether the Bank's plea of technical difficulties and absence of an effective internal mechanism could reduce the penalty?

Analysis: The reporting obligations under section 12 of the Prevention of Money Laundering Act, 2002 and the corresponding rules required timely furnishing of transaction reports and maintenance of an effective internal mechanism for detection and reporting. The refiled CTRs were not to be counted against the Bank where the filing defect was cured, but first-time filing delays remained relevant. The explanation of persistent portal difficulty was rejected, and the finding that the Bank lacked an effective internal mechanism was upheld. The penalty had to be aligned with the delay attributable to non-compliance, and duplication of penalty for the same internal-mechanism lapse was not justified where already accounted for.

Conclusion: The penalty for first-time delayed CTR filings was sustained to the extent of the reduced delay, but the additional penalty for failure to maintain an effective internal mechanism was set aside insofar as it duplicated punishment.

Issue (ii): Whether the penalties for delayed, incomplete, or non-filed STRs were sustainable, including the treatment of incomplete grounds of suspicion and repetitive penalty for lack of internal mechanism?

Analysis: For suspicious transaction reporting, the statutory scheme required prompt reporting and proper particulars. The delay in reporting STRs was found to be established, and the explanation based on shortage of staff or the date of internal approval was rejected. As regards the refiling of STRs, the absence of a time limit supplied by the regulator was considered relevant, but incomplete and inaccurate grounds of suspicion were treated as a substantive defect amounting to non-filing. The separate penalty imposed again for lack of an effective internal mechanism was considered repetitive where the same deficiency had already been addressed elsewhere.

Conclusion: The penalty for delayed STR reporting and for incomplete STRs was sustained, while the penalty attributable to the repeated internal-mechanism lapse was set aside.

Issue (iii): Whether the penalties for delayed or non-filed NTRs and CBWTRs, and the penalty under section 12A, were justified?

Analysis: The findings on delayed filing of NTRs and the non-reporting of a substantial number of reportable NPO transactions were accepted. The delay in CBWTR reporting was also upheld because furnishing of generic or incorrect information did not satisfy the reporting obligation, and the technology-based filing system did not excuse non-compliance. The separate penalty under section 12A for failure to submit correct data relating to FCRA-registered accounts was also supported by the record. However, the additional penalty for an effective internal mechanism was dispensed with where it duplicated earlier sanctions.

Conclusion: The penalties for delayed or non-filed NTRs, delayed CBWTRs, and the section 12A violation were sustained, while the repeated internal-mechanism penalty was set aside.

Final Conclusion: The appeal succeeded only in part, with the total penalty being reduced by deleting the unsustainable and duplicative components while maintaining the penalties for the established substantive reporting defaults.

Ratio Decidendi: In proceedings under the reporting-compliance provisions of the Prevention of Money Laundering Act, 2002, a monetary penalty may be sustained for each established failure to furnish accurate and timely reports, but repetitive punishment for the same internal-mechanism lapse is not justified where it duplicates an already imposed sanction.

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