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Insider trading may face money laundering penalty

The government is planning to strengthen the SEBI Act to include insider trading as money laundering, reports Arun Kumar.
Hindustan Times | By Arun Kumar, New Delhi
UPDATED ON OCT 01, 2007 09:41 PM IST

The government is planning to strengthen the Securities and Exchange Board of India Act to include insider trading as money laundering, so that the stock market regulator can take sterner action.

Insider trading is one of the easy ways to bring unaccounted money into the system. "As of now, we do not know of any such instance, but one cannot rule it out. The inclusion of insider trading as money laundering will work as a big deterrent and will help smoothen the functioning of the exchange," said government sources.

It is proposed to include Section 24 of the SEBI Act, relating to insider trading, within the ambit of the Prevention of Money Laundering Act. Sources said the initiative was taken after the recommendations of the financial action task force, which suggested various measures to curb money laundering.

The task force is a body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing.

Money laundering is one of the biggest concerns of the financial services industry across the world. Although there was no indication that unaccounted money was routed through the Indian stock market, there was need for preventive measures to deal with the situation stringently, said a senior government official on condition of anonymity. Lack of standard practices and inadequacy of data has led to systemic weaknesses that allow money laundering.

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