The government is pushing for making it mandatory for recipients of funds from abroad to clearly identify themselves.
The reason: intelligence agencies caution that some small money transmission agents are funneling funds for terror activities.
As recording all recipients’ photographs has been found cumbersome, the authorities, on the RBI’s advice, may demand Aadhar unique ID numbers — after the numbers are made available — even from individuals receiving less than Rs 50,000 through the Money Transfer Service Scheme (MTSS).
The MTSS, a quick and easy way of transferring personal remittances, has come into focus because of a sharp rise in “suspicious transaction reports (STRs)” filed by banks and financial intermediaries from 10,067 in 2009-10 to 29,968 in 2010-11.
MTSS involves a tie-up between money transfer companies abroad and agents in India. Agents are allowed to open a special rupee account in a bank through which all the remittances disbursed are to be routed.
The agents pay the beneficiaries on instructions from the overseas principal. They are reimbursed in a day or two through normal banking channels. A full-fledged money changer, a registered non-banking financial company or even an authorised travel agent can act as agents.
“It has been found that in almost all cases of terror financing, a significant portion of foreign inflows were routed through organized banking channels, primarily using the MTSS route. Capturing the photograph of a recipient, therefore, is critical,” said a finance ministry official.
The latest annual report of the financial intelligence unit, created by the finance ministry in 2004 to monitor money laundering, has prepared a list of thousands of cases of doubtful remittances.
Intelligence agencies, tax authorities and regulators are now analysing the end-use of these transactions, many of which might have been invested in stock markets, real estate deals, insurance premiums or terrorist financing.
But although the Intelligence Bureau proposed changes in the Prevention of Money Laundering Act to make it mandatory for recording the photographs of recipients, the RBI said it could inconvenience genuine users of MTSS.
“The RBI, instead, advised using the Aadhar number,” the official said.