Lok Sabha Question No. 1242 (UNSTARRED), answered on 2017-12-22
Subject: Mutual Flow of Money Laundering Information
Ministry: FINANCE
Asked by: V. SATHYABAMA

## Government of India Ministry of Finance Department of Revenue ***

## Lok Sabha Unstarred Question No. † 1242

## TO BE ANSWERED ON FRIDAY, THE 22ND DECEMBER, 2017/ PAUSHA 1, 1939 (SAKA)

## MUTUAL FLOW OF MONEY LAUNDERING INFORMATION

## † 1242. SHRIMATI V. SATHYABAMA:

Will the Minister if FINANCE be pleased to state:

- (a) whether  the  Government  has  entered  with  an  agreement  with  other  countries particularly Singapore, Mauritius, Cayman Islands and other tax havens to share the mutual flow of information pertaining to money laundering and funding, etc. And if so, the details thereof;
- (b) the action plan being taken by the concerned countries in this regard;
- (c) whether money coming into India from foreign countries for various purposes as participatory notes were monitored/scanned/probed;
- (d) if so, the details thereof along with the agency-wise findings therefrom during the last three years; and
- (e) the action taken by the Government in this regard, so far?

## Answer

## Minister of State in Ministry of Finance (Sh. Shiv Pratap Shukla)

(a) and (b) -

Yes  Madam.  The  Government  of  India  has  entered  into  Double  Taxation  Avoidance Agreements (DTAAs), Tax Information Exchange Agreements (TIEAs) and Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) with over 130 countries  including  tax  havens.  These  agreements  allow  exchange  of  information between countries for tax purposes including information pertaining to  money laundering  and  funding.  On  request  made  by  Government  of  India  under  the  above agreements, these countries provide relevant information including information pertaining to money laundering and funding.

(c) and (d) -

Yes  Madam.  The  Foreign  Portfolio  Investors  (FPIs)  which  issue  Offshore  Derivative Instruments (ODIs) also known as Participatory Notes (PNs) are required to submit the details of their ODI/PN activity to Securities and Exchange Board of India (SEBI) in the prescribed format on monthly basis and the same is uploaded on the SEBI website. The reporting format for ODI activities were modified in terms of SEBI Circular dated June 10,  2016.  As  per  the  submissions  made  by  the  ODI  issuing  FPIs  the  outstanding Notional value of ODIs issued by them during last few years is given in the table as per Annexure - A.

(e) -

In  order  to  ensure  transparency  and  in  light  of  various  recommendations  of  Special Investigating Team (SIT) on black money, appointed by Honorable Supreme Court of India, SEBI has been constantly tightening norms for taking exposure in Indian Capital Markets  through  ODI/  PN  route.  Some  of  the  recent  steps  taken  by  SEBI  are  as follows:-

1.  In  terms  of  SEBI  (FPI)  Regulations,  2014,  ODIs/  PNs  can  be  issued  only  to those entities which are regulated by the appropriate regulatory authority in the countries of their incorporation, after compliance with 'Know Your Client' (KYC) norms. Further, only Category (I) and Category (II) FPIs can issue/subscribe or otherwise deal in ODIs/PNs whereas none of the Category (III) FPIs can deal in ODIs.
2.  In terms of SEBI (FPI) Regulations 2014, an FPI shall ensure that transfer of ODIs/PNs  are  done  to  persons  which  are  regulated  by  the  appropriate regulatory authority in the countries of their incorporation, after compliance with 'Know Your Client' (KYC) norms and prior consent of the FPI is obtained for such  transfer,  except  when  the  persons  to  whom  the  ODIs/PNs  are  to  be transferred to are pre-approved by the FPI itself.
3.  In  terms  of  SEBI  circular  dated  November  24,  2014  the  applicable  eligibility norms  between  Foreign  Portfolio  Investors  (FPI)  regime  and  subscription through the ODIs have been aligned.
4.  In terms of SEBI circular dated June 10, 2016 FPIs are required to maintain the BO information of its ODI subscribers in line with the Rule 9 of PMLA, i.e., BO information is to be furnished in case the holding of natural person(s) is above specified thresholds.

5.  In  terms  of  SEBI  (FPI)  Regulations,  2014  Resident  Indians/NRIs  or  to  the entities which are beneficially owned by Resident Indians/NRIs cannot subscribe to Offshore Derivative Instruments.
6.  In  terms  of  SEBI  (FPI)  Regulations,  2014,  an  ODI  issuing  FPI  is  required  to collect regulatory fee, as specified in Part C of the Second Schedule, from every subscriber of offshore derivative instrument (ODI), issued by it and deposit the same with the Board.
7.  In terms of SEBI circular dated July 7, 2017 the ODI issuing FPIs were advised that from the date of the circular, they shall not be allowed to issue ODIs with derivative as underlying, with the exception of those derivative positions that are taken by the ODI issuing FPI for hedging the equity shares held by it, on a one to one basis.

***

## Annexure - A

| Outstanding Notional Value of Offshore Derivative Instruments (ODIs) Vs Assets Under Custody (AUC) of FPIs/deemed FPIs   | Outstanding Notional Value of Offshore Derivative Instruments (ODIs) Vs Assets Under Custody (AUC) of FPIs/deemed FPIs   | Outstanding Notional Value of Offshore Derivative Instruments (ODIs) Vs Assets Under Custody (AUC) of FPIs/deemed FPIs   | Outstanding Notional Value of Offshore Derivative Instruments (ODIs) Vs Assets Under Custody (AUC) of FPIs/deemed FPIs   | Outstanding Notional Value of Offshore Derivative Instruments (ODIs) Vs Assets Under Custody (AUC) of FPIs/deemed FPIs   | Outstanding Notional Value of Offshore Derivative Instruments (ODIs) Vs Assets Under Custody (AUC) of FPIs/deemed FPIs   |
|--------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|
| As on the last day of the Month                                                                                          | Notional Value of outstanding PNs on Equity, & Debt and Derivatives * (INR cr.)                                          | Assets Under Custody of all FPIs # (INR cr.)                                                                             | Notional Value of outstanding PNs on Equity, Debt and Derivatives as %of B                                               | Notional value of ODIs on Equity & Debt excluding Derivatives * (INR cr.)                                                | Notional Value of outstanding PNs on Equity & Debt excludin g Derivatives as %of B                                       |
|                                                                                                                          | A                                                                                                                        | B                                                                                                                        | C                                                                                                                        | D                                                                                                                        | E                                                                                                                        |
| Jan-14                                                                                                                   | 163,348                                                                                                                  | 1,426,875                                                                                                                | 11.5                                                                                                                     | 111,646                                                                                                                  | 7.8                                                                                                                      |
| Feb-14                                                                                                                   | 172,738                                                                                                                  | 1,473,802                                                                                                                | 11.7                                                                                                                     | 113,600                                                                                                                  | 7.7                                                                                                                      |
| Mar-14                                                                                                                   | 207,639                                                                                                                  | 1,593,869                                                                                                                | 13.0                                                                                                                     | 135,821                                                                                                                  | 8.5                                                                                                                      |
| Apr-14                                                                                                                   | 187,486                                                                                                                  | 1,606,596                                                                                                                | 11.7                                                                                                                     | 127,627                                                                                                                  | 7.9                                                                                                                      |
| May-14                                                                                                                   | 211,740                                                                                                                  | 1,770,781                                                                                                                | 12.0                                                                                                                     | 145,258                                                                                                                  | 8.2                                                                                                                      |
| Jun-14                                                                                                                   | 224,248                                                                                                                  | 1,909,400                                                                                                                | 11.7                                                                                                                     | 158,532                                                                                                                  | 8.3                                                                                                                      |
| Jul-14                                                                                                                   | 208,284                                                                                                                  | 1,971,822                                                                                                                | 10.6                                                                                                                     | 158,303                                                                                                                  | 8.0                                                                                                                      |
| Aug-14                                                                                                                   | 211,499                                                                                                                  | 2,047,175                                                                                                                | 10.3                                                                                                                     | 161,682                                                                                                                  | 7.9                                                                                                                      |
| Sep-14                                                                                                                   | 222,394                                                                                                                  | 2,084,161                                                                                                                | 10.7                                                                                                                     | 168,322                                                                                                                  | 8.1                                                                                                                      |
| Oct-14                                                                                                                   | 265,675                                                                                                                  | 2,171,276                                                                                                                | 12.2                                                                                                                     | 186,496                                                                                                                  | 8.6                                                                                                                      |
| Nov-14                                                                                                                   | 249,210                                                                                                                  | 2,267,910                                                                                                                | 11.0                                                                                                                     | 187,039                                                                                                                  | 8.2                                                                                                                      |
| Dec-14                                                                                                                   | 236,677                                                                                                                  | 2,245,157                                                                                                                | 10.5                                                                                                                     | 190,595                                                                                                                  | 8.5                                                                                                                      |
| Jan-15                                                                                                                   | 268,033                                                                                                                  | 2,402,441                                                                                                                | 11.2                                                                                                                     | 208,783                                                                                                                  | 8.7                                                                                                                      |
| Feb-15                                                                                                                   | 271,752                                                                                                                  | 2,456,321                                                                                                                | 11.1                                                                                                                     | 208,447                                                                                                                  | 8.5                                                                                                                      |
| Mar-15                                                                                                                   | 272,078                                                                                                                  | 2,411,810                                                                                                                | 11.3                                                                                                                     | 211,605                                                                                                                  | 8.8                                                                                                                      |
| Apr-15                                                                                                                   | 268,168                                                                                                                  | 2,355,308                                                                                                                | 11.4                                                                                                                     | 206,374                                                                                                                  | 8.8                                                                                                                      |
| May-15                                                                                                                   | 284,826                                                                                                                  | 2,413,049                                                                                                                | 11.8                                                                                                                     | 213,163                                                                                                                  | 8.8                                                                                                                      |
| Jun-15                                                                                                                   | 275,436                                                                                                                  | 2,386,457                                                                                                                | 11.5                                                                                                                     | 208,578                                                                                                                  | 8.7                                                                                                                      |
| Jul-15                                                                                                                   | 272,053                                                                                                                  | 2,453,014                                                                                                                | 11.1                                                                                                                     | 205,444                                                                                                                  | 8.4                                                                                                                      |
| Aug-15                                                                                                                   | 253,310                                                                                                                  | 2,313,548                                                                                                                | 10.9                                                                                                                     | 188,027                                                                                                                  | 8.1                                                                                                                      |
| Sep-15                                                                                                                   | 253,875                                                                                                                  | 2,303,513                                                                                                                | 11.0                                                                                                                     | 186,849                                                                                                                  | 8.1                                                                                                                      |
| Oct-15                                                                                                                   | 258,287                                                                                                                  | 2,344,179                                                                                                                | 11.0                                                                                                                     | 192,630                                                                                                                  | 8.2                                                                                                                      |
| Nov-15                                                                                                                   | 254,600                                                                                                                  | 2,308,769                                                                                                                | 11.0                                                                                                                     | 191,190                                                                                                                  | 8.3                                                                                                                      |
| Dec-15                                                                                                                   | 235,534                                                                                                                  | 2,320,539                                                                                                                | 10.1                                                                                                                     | 180,072                                                                                                                  | 7.8                                                                                                                      |
| Jan-16                                                                                                                   | 231,317                                                                                                                  | 2,200,837                                                                                                                | 10.5                                                                                                                     | 171,732                                                                                                                  | 7.8                                                                                                                      |
| Feb-16                                                                                                                   | 217,740                                                                                                                  | 2,043,139                                                                                                                | 10.7                                                                                                                     | 160,946                                                                                                                  | 7.9                                                                                                                      |
| Mar-16                                                                                                                   | 223,077                                                                                                                  | 2,224,537                                                                                                                | 10.0                                                                                                                     | 169,470                                                                                                                  | 7.6                                                                                                                      |
| Apr-16                                                                                                                   | 212,132 215,338                                                                                                          | 2,281,346                                                                                                                | 9.3                                                                                                                      | 161,280                                                                                                                  | 7.1                                                                                                                      |
| May-16                                                                                                                   |                                                                                                                          | 2,348,618                                                                                                                | 9.2                                                                                                                      | 160,867                                                                                                                  | 6.8                                                                                                                      |
| Jun-16                                                                                                                   | 210,731                                                                                                                  | 2,387,685                                                                                                                | 8.8                                                                                                                      | 161,379                                                                                                                  | 6.8                                                                                                                      |
| Jul-16                                                                                                                   | 212,179                                                                                                                  | 2,514,038                                                                                                                | 8.4                                                                                                                      | 162,921                                                                                                                  | 6.5                                                                                                                      |

| Aug-16                                                                                                                          | 216,232                                                                                                                         | 2,565,304                                                                                                                       | 8.4                                                                                                                             | 158,848                                                                                                                         | 6.2                                                                                                                             |
|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
| Sep-16                                                                                                                          | 212,509                                                                                                                         | 2,556,450                                                                                                                       | 8.3                                                                                                                             | 152,624                                                                                                                         | 6.0                                                                                                                             |
| Oct-16                                                                                                                          | 199,987                                                                                                                         | 2,577,073                                                                                                                       | 7.8                                                                                                                             | 143,235                                                                                                                         | 5.6                                                                                                                             |
| Nov-16                                                                                                                          | 179,648                                                                                                                         | 2,409,042                                                                                                                       | 7.5                                                                                                                             | 126,596                                                                                                                         | 5.3                                                                                                                             |
| Dec-16                                                                                                                          | 157,306                                                                                                                         | 2,348,007                                                                                                                       | 6.7                                                                                                                             | 112,243                                                                                                                         | 4.8                                                                                                                             |
| Jan-17                                                                                                                          | 175,088                                                                                                                         | 2,456,716                                                                                                                       | 7.1                                                                                                                             | 119,309                                                                                                                         | 4.9                                                                                                                             |
| Feb-17                                                                                                                          | 170,191                                                                                                                         | 2,563,431                                                                                                                       | 6.6                                                                                                                             | 115,413                                                                                                                         | 4.5                                                                                                                             |
| Mar-17                                                                                                                          | 178,437                                                                                                                         | 2,705,729                                                                                                                       | 6.6                                                                                                                             | 124,277                                                                                                                         | 4.6                                                                                                                             |
| Apr-17                                                                                                                          | 168,545                                                                                                                         | 2,786,083                                                                                                                       | 6.0                                                                                                                             | 128,380                                                                                                                         | 4.6                                                                                                                             |
| May-17                                                                                                                          | 180,718                                                                                                                         | 2,856,637                                                                                                                       | 6.3                                                                                                                             | 133,045                                                                                                                         | 4.7                                                                                                                             |
| June-17                                                                                                                         | 165,241                                                                                                                         | 2,883,104                                                                                                                       | 5.7                                                                                                                             | 132,785                                                                                                                         | 4.6                                                                                                                             |
| July-17                                                                                                                         | 135,297                                                                                                                         | 3,055,984                                                                                                                       | 4.4                                                                                                                             | 127,075                                                                                                                         | 4.2                                                                                                                             |
| Aug-17                                                                                                                          | 125,037                                                                                                                         | 3,035,509                                                                                                                       | 4.1                                                                                                                             | 116,393                                                                                                                         | 3.8                                                                                                                             |
| Sep-17                                                                                                                          | 122,684                                                                                                                         | 3,003,476                                                                                                                       | 4.1                                                                                                                             | 113,706                                                                                                                         | 3.8                                                                                                                             |
| Oct-17                                                                                                                          | 131,006                                                                                                                         | 3,170,194                                                                                                                       | 4.1                                                                                                                             | 120,629                                                                                                                         | 3.8                                                                                                                             |
| * Figures compiled based on reports submitted by FPIs issuing PNs.                                                              | * Figures compiled based on reports submitted by FPIs issuing PNs.                                                              | * Figures compiled based on reports submitted by FPIs issuing PNs.                                                              | * Figures compiled based on reports submitted by FPIs issuing PNs.                                                              | * Figures compiled based on reports submitted by FPIs issuing PNs.                                                              | * Figures compiled based on reports submitted by FPIs issuing PNs.                                                              |
| # AUC figures are compiled based on reports submitted by custodians & does not includes positions taken by FPIs in derivatives. | # AUC figures are compiled based on reports submitted by custodians & does not includes positions taken by FPIs in derivatives. | # AUC figures are compiled based on reports submitted by custodians & does not includes positions taken by FPIs in derivatives. | # AUC figures are compiled based on reports submitted by custodians & does not includes positions taken by FPIs in derivatives. | # AUC figures are compiled based on reports submitted by custodians & does not includes positions taken by FPIs in derivatives. | # AUC figures are compiled based on reports submitted by custodians & does not includes positions taken by FPIs in derivatives. |