If your financial dealings are inconsistent, they get reported to the regulators and other government authorities as “suspicious”. And you won’t even know about it until you land in trouble. In Financial Year (FY) 2016-17, reports of such instances touched the sky. Struck by the surprise move of demonetisation, many tax evaders resorted to misconduct in their financial dealings. Possibly, they left enough clues for the government authorities, which will continue to hound them in the future.
 

Huge rise in the suspicious transaction reports filed
(Source: Economic Times, PersonalFN)

Demonetisation effect were as follows:

• Cases reported by banks jumped from 61,361 in FY 2015-16 to 3,61,214 in FY 2016-17—a rise of 489%
   
• The number of suspicious transactions reported by eight RBI-regulated financial institutions such as insurance companies, housing finance institutions, and Non-Banking Financial Institutions (NBFCs), among others, rose by 135% in FY 2016-17 on a Year-on-Year (YoY) basis
   
• Intermediaries such as stock brokers, portfolio managers, merchant bankers, etc. reported 270% rise in suspicious transactions in FY 2016-17 as compared to those in FY 2015-16.
   

The Finance Minister, Mr Arun Jaitley, made a revelation in the parliament that the Government has discovered 18 lakh cases, where the income profile of a person was incongruent with his/her bank account profile.

So what’s makes a transaction suspicious?

In the case of banks:

• When the transaction value doesn’t match the financial profile of the client. Or, it’s just below the threshold limit where a transaction gets reported to the government authorities.
• If the recent account activity isn’t consistent with the past account activity, or any sudden activity of unprecedented magnitude, qualifies as the suspicious activity.
• Account activity inconsistent with the nature of business gets reported.
• Numerous accounts opened in the same name and/or with a common account holder or introducer or authorised signatory without sound justification gets reported as “suspicious”.
• When bank accounts are opened with names similar to those with already established business entities.
• Transfers made without any rationale between multiple accounts with the same or account holders also attract the attention of financial watchdogs.
• False documentation is another reason that banks are terming a transaction on the account as suspicious.
   

In case of other financial institutions and intermediaries, transactions are reported as suspicious under following scenarios:

• When there’s doubt over the real beneficiary of the account
• Apparent insider trading cases
• When sources of funds are in question
• High-value transactions, especially when they are inconsistent with the financial profile of a person
• Block deals happening at inflated prices
• Out-of-the-blue, inconsistent deals in an otherwise dormant account
• The account that appears to be part of a trading racket engaged in the stock price manipulation.
   

Merely depositing money earned through illegal activities or by dodging tax liabilities in the bank accounts doesn’t change its colour from black to white. If your financial deals often get reported as suspicious activity, sooner or later, tax authorities might knock your door. To avoid being in an uncomfortable and awkward position, pay all your tax dues and file income tax return on time.

Add Comments