NSEL challenges Financial Intelligence Unit penalty

KR Srivats | | Updated on: Dec 06, 2021

National Spot Exchange moves Appellate Authority under anti-money laundering law

The beleaguered National Spot Exchange Ltd (NSEL) has challenged the ₹1.66-crore penalty order slapped by the Financial Intelligence Unit-India (FIU), terming it as flawed and bad in law.

‘Deemed intermediary’ NSEL has appealed before the designated Appellate Authority under the Prevention of Money Laundering Act (PMLA).

FIU is a nodal agency that tracks flow of black money and takes steps to curb money laundering. A hearing on the appeal took place a few days ago and FIU was asked to respond to NSEL’s contention that it was not a “deemed intermediary” for it to be considered a reporting entity and was, therefore, not required to comply with PMLA provisions, sources said.

The next hearing is slated to be held on March 17.

The FIU had, in November last year, passed an order requiring NSEL to cough up a penalty of ₹1.66 crore for violation of certain provisions of the PMLA. The violations cited include NSEL not getting registered under PMLA as a ‘reporting entity’ and allegedly not furnishing reports prescribed under the law.

The FIU order had also held that NSEL was wilfully avoiding the obligations of a reporting entity by choosing not to be registered under the Forward Contracts (Regulation) Act, 1952.

Once registered with FIU, NSEL would have been required to report to it the details of transactions put through its platform

Significantly, the ongoing proceedings under PMLA come at a time when the Corporate Affairs Ministry is looking at a proposal to merge the crisis-ridden NSEL with its cash-rich parent, Financial Technologies (India) Limited. Meanwhile, an NSEL statement said the FIU order was bad in law and was against the principles of natural justice. “We have appealed against the said impugned order in the Appellate Tribunal. We are happy to have received a favourable response from the Appellate Authority. The matter is pending for further hearing,” NSEL said in a statement.

The statement also said that FIU India had coined a new term “Deemed Intermediary”, and based on this hitherto unknown term, it wrongly assumed NSEL to be a “Reporting Entity”, according to FCRA.

Published on January 24, 2016
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