AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (3) TMI 1621
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....cash transaction pertaining to 229 transactions in 2011-2012 and 87 transactions in 2012-13 (total 316 transactions) @ Rs. 10,000/-per transaction under Section 13 of the PMLA, 2002, thereby totalling up to Rs. 79,60,000/-. 2. As per the facts of the case, on May 13, 2013 onsite review of the bank was conducted by FIU-IND, which revealed as under: (1) The Bank did not file the CTRs for the year 2006-07 and 2007- 2008. (2) The Bank made considerable delay in filing the CTRS for the year 2008-09 and 2009-10 on 15.10.2010 and 19.10.2010. (3) The Bank failed to report the transaction in respect of certain accounts for the year 2011-12 and 2012-13. Accordingly, a Show Cause Notice dated 09.09.2014 was issued to the bank by FIU, calling upon it to show cause as to why penal action u/s. 13 of the Act should not be taken against it, for its failure to comply with the provisions of Section 12(1)(b) of the Act read with Rules 3(A), 3(B), 3(BA), 3(C), 3(D), 5(2), 7(3), 8(1), 8(2) & 8(3) of the Rules for: (i) Not filing the Cash Transactions Reports (CTRs) from March 2006-March 2008; delayed filing of CTRs for the period from March 2008 to March 2010; ....
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....Director FIU on the basis of material on record concluded that the bank did not give any reasons for its failure to report CTRs for the period March 2006 to March 2008. Further, the Bank admitted the delay in filing of the CTRs for the period March 2008 to March 2010, which clearly establishes that the Bank failed to have in place an internal mechanism for reporting prescribed transactions, as prescribed in Rule 7(3) of PML Rules, during 48 months from March 2006-March 2010. Hence, the Bank continued to fail in its responsibility year after year, for which a fine of Rs. 48 lakh was imposed. Further, for the subsequent period, including 2011-12 an 2012-13, the Bank filed CTRs for some transactions but not for all. The Director, FIUIND concluded that from 2010-11 onwards the Bank had evolved internal mechanism for filing the reports but failed its obligation to furnish all reportable transactions, including integrally connected transactions adding up to more than Rs. 10 lakh in a month, which is clear from reply (para 5.c) of 08.1.2024. The Bank failed to give any convincing reasons for the same. Thus, for non-reporting of 229 transactions in 22 accounts for the financial year 2011-1....
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....tted that w.r.t to 316 transactions (which actually is 311 as per the records maintained by the Appellant and the same were submitted to FIU-IND) which have been considered as non-reported transactions in the impugned order, except two accounts i.e. accounts no. CR-1779 (total 3 credit transaction in December 2012) and CR- 2089 (total 3 credit transaction in March, 2013) the aggregate value of integrally connected either debit cash transaction or credit cash transaction does not exceed Rs. 10 lakh in any given month for the rest of the accounts( copy of each account is in Annexure A-7). Thus, as per the RBI circular supra, out of any 316 transactions (in actual 311 transaction) the Appellant has been fined for, there were only six transactions in two accounts and CTR for two months were required to be reported. Charts for the transactions during 2011-12 and 2012-13 are enclosed as Annexure A-8A, A-8B & 8C. Hence, the Respondent's methodology for ascertaining the CTR and integrally connected cash transaction is erroneous and inconsistent with the norms laid down by the law. Further, it is submitted that as per the Rule 8 of PML (Maintenance of Records) Rules, 2005, it is evident ....
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....ten thousand rupees but may extend to one lakh rupees for 'each failure'. The word failure is qualified by word 'each'. It is submitted that FIU-IND has arbitrarily interpreted S/13(2)(d) and has imposed maximum monetary penalty of Rs 1,00,000/- and that too for every month stretching over a period of 48 months. Thus, the quantification of penalty is clearly unsustainable. It is further submitted that it is well-settled in law that the imposition of penalty would be justified only if an entity fails to discharge a statutory obligation and provided it is established that it had deliberately chosen to act in defiance of the law or was guilty of dishonest conduct. Without prejudice, not having an internal mechanism for reporting transactions in such case shall be taken as one failure and therefore as per Section 13(2)(d) of PMLA, 2005 maximum fine that can be imposed for such failure will not exceed one lakh rupee. In support of the same, reliance is placed on Paypal Payments Pvt Ltd v Financial Intelligence Unit W.P(c) 138/2021; 2023:DHC:5059 wherein the Hon'ble Court has held as following (Para 163): "163, Proceeding then to the issue of quantification, the Cour....
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.... It is, in fact, a constitutionally protected right which can be traced to Article 14 as well as Article 21 of the Constitution, The doctrine of proportionality is aimed at bringing out-proportional result or proportionality stricto sensu. It is a result-oriented test as it examines the result of the law in fact the proportionality achieves balancing between two competing interests: harm caused to the society by the infringer which gives justification for penalising the infringer on the one hand and the right of the infringer in not suffering the punishment which may be disproportionate to the seriousness of the Act." Further, the Appellant relied on the Judgment dated 04-09-2019 passed by the Hon'ble Delhi High court in the matter of Financial Intelleigence Unit-IND V Corporation Bank MANU/DE/2884/2019. The Hon'ble court while referring to the decision of the Hon'ble Supreme court in Commissioner of Tax v. Vatika Township Private Limited MANU/SC/0810/2014, noted that if a legislation confers the benefit on some person or where it appears that the intention of the legislature is to confer such benefit, the rule of purposive construction would be applicable and the sa....
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....e further submitted that Section 47A of the Banking Regulations Act,1949 gives power to the RBI to impose fine on banking entities if they fail to follow the directions/orders given by the RBI and thus, in present case, the Director has no jurisdiction to impose penalty on appellant Bank under Section 13(2)(d), however, this plea does not hold good as we agree with the submission of the respondent that the Director FIU-IND is a competent authority as per Section 13(2)(d) of PMLA read with the PMLA Rules. Further, the plea of the Appellant Section 12 of the Act did not and does not provide for maintaining of proper internal mechanism in place to detect and report suspicious transactions and consequently there is no non-compliance of Section 12 and thus, no penalty/fine can be levied under Section 13 of the Act is of no assistance to it as the provisions of PMLA, 2002 are to be read along with Rules framed thereunder. Attention is invited to the provisions of PMLA, 2002 and Rules namely sub rule C of rule 2(1), Rule 5(2) and 7(3) of Prevention of Money Laundering (Maintenance of record) Rules 2005) framed thereunder. It may be noted that in sub rule C of rule 2(1) of above said Rules....
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....the amount of fine certainly needs to be reduced, otherwise this co-operative bank will certainly collapse as is supported by the judgment in Financial Intelligence Unit-IND V Corporation Bank(supra) wherein it is held that it would be unfair to impose a higher punishment than as prescribed under statute as currently in force. Another contention of the appellant that the provision regarding imposition of fine for "each failure" as prescribed under Section 13(2)(d) has to be seen on month basis, instead of opting for penalising every unreported transaction. We do agree with this submission given the situation of the Bank as discussed above, in lieu of the judgments Paypal Payments Pvt Ltd v Financial Intelligence Unit(supra)as cited in para 3 above. In the present case, w.r.t to 316 transactions (which actually is 311 as per the records maintained by the Appellant and the same were submitted to FIU-IND) which have been considered as non- reported transactions in the impugned order, except two accounts i.e. accounts no. CR-1779 (total 3 credit transaction in December 2012) and CR- 2089 (total 3 credit transaction in March, 2013) the aggregate value of integrally connected either d....