Government sets up vigilance mechanism to prevent frauds in India's capital markets

India enhances financial alert system: Financial Intelligence Unit (FIU) has rolled out a new set of 'alert indicators' aimed at bolstering surveillance across capital markets, insurance firms, online payment gateways, and cryptocurrency service providers as part of the ongoing efforts to combat money laundering and counter-terrorism financing.

Issued under the Prevention of Money Laundering Act (PMLA) for the 2022–23 fiscal year, these guidelines, accessed by PTI, mandate enhanced vigilance by financial institutions and intermediaries to detect suspicious transactions and report them promptly to the FIU.

In a proactive approach, the FIU collaborates with sector regulators and entities to identify emerging risks, emphasising the need for immediate action to mitigate financial threats, as outlined in the agency's charter.

Specifically addressing the capital markets, the new guidelines signal a strategic shift, focusing on identifying potential risks such as manipulative trading practices and misuse of client funds by brokers, among others.

The FIU's initiative extends to diverse sectors, including insurance, online payment gateways, and virtual asset service providers, where revised protocols aim to streamline reporting mechanisms and enhance due diligence practices.

These comprehensive measures come following a thorough review by collaborative working groups involving regulatory bodies and market stakeholders, underscoring the commitment to fortify the country's AML/CFT framework.

The FIU's concerted efforts also encompass credit rating agencies, debenture trustees, and real estate agents, ensuring a broad-based approach to safeguard financial integrity and combat illicit activities in the evolving financial landscape.

(with PTI inputs)