PMLA

1. Context 

2. About PMLA

• The Anti-money laundering legislation was passed by the National Democratic Alliance government in 2002 and came into force on July 1, 2005.
• The PMLA was showcased as India's commitment to the Vienna Convention on combating money, drug trafficking and countering the financing of terror (CFT).
• The law was aimed at curbing the process of converting illegally earned money into legal cash.
• The Act empowered the Enforcement Directorate (ED) to control money laundering, confiscate property and punish offenders.
• ED recorded around 5,422 cases, attached proceeds to the tune of ₹ 1,04,702 crores (approx), filed Prosecution Complaints in 992 cases resulting in the confiscation of ₹ 869. 31 crores and convicted 23 accused persons under PMLA by the end of March 31, 2022.

3. Effect on crypto

• The gazette notification by the Ministry brings cryptocurrency transactions within the ambit of PMLA.
• This means that Indian crypto exchanges will have to report any suspicious activity related to buying or selling of cryptocurrency to the Financial Intelligence Unit-India (FIU-IND).
• This central agency is responsible for receiving, processing, analysing and disseminating information related to suspicious financial transactions to law enforcement agencies and overseas FIUs.
• In its analysis, if the FIU-IND finds wrongdoing, it will alert the ED.
• Under Sections 5 and 8 (4) of the Act, the ED has discretionary powers to search and seize suspected property without any judicial permission.

4. Reasons for tightening the digital trade

• For a little more than a decade, cryptocurrencies, non-fungible tokens (NFT) and other digital assets enjoyed a regulation-free environment.
• But, in the past couple of years, as the use of digital assets has gone mainstream, regulators have turned hawkish.
• The value of all existing cryptocurrencies is about $804 billion as of January 3, 2023.
• It is about twice the GDP of Singapore in 2021.
• In India, over 10 crore Indians have invested in cryptocurrencies.
• The illegal use of cryptocurrencies hit a record $ 20.1 billion last year. 
• Transactions associated with sanctioned entities jumped over 1, 00, 000-fold, making up 44 per cent of last year's illegal activity.

5. Tools used to track money laundering via crypto transactions

• Tracking money trail in cryptocurrency transactions may require new tools and approaches as such transfers differ fundamentally from traditional banking channels.
• FIUs may be familiar with Know Your Customer (KYC) or Customer Due Diligence (CDD) norms.
• But the technological nature of VDAs presents a new challenge in gathering information.
• This requires the intelligence unit to broaden its intelligence framework.

6. Regulations in other Countries

• The Global Crypto Regulations Report 2023 a large proportion of countries are at various stages of drafting regulations around crypto.
• Most countries have already brought digital assets under anti-money laundering laws.
• Singapore, Japan, Switzerland and Malaysia have legislation on the regulatory framework.
• The U.S., U.K., Australia and Canada have initiated plans for regulation.
• So far, China, Qatar and Saudi Arabia have issued a blanket ban on cryptocurrency.
• The EU is also preparing a cross-jurisdictional regulatory and supervisory framework for crypto-assets.
• The framework seeks to provide legal clarity, consumer and investor protection and market integrity while promoting innovation in digital assets.

7. The Changes imply

• The new clause in the rules for PMLA compliance defines "Politically Exposed Persons" as individuals who have been entrusted with prominent public functions by a foreign country, including the heads of State or Governments, Senior politicians, Senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials.
• The amendment is about foreign PEPs and not domestic ones.
• The move to define politically exposed persons under PMLA is to bring uniformity with a 2008 circular of the RBI for KYC norms/Anti-money laundering standards for banks and financial institutions, which had defined PEPs in line with FATF norms.
• PEP has already been in the RBI's master circular, in line with FATF.
• The definition has now been given in the PMLA rules so that the same definition is applicable everywhere.

8. Significance of the FATF-related changes

• The amendments assume significance ahead of India's proposed FATF assessment, which is expected to be undertaken later this year.
• India's assessment is likely to come up for discussion in the plenary discussion in June, while the possible onsite assessment is slated for November.
• Due to the pandemic and the pause in the FATF's assessment process, the fourth round of mutual evaluation of India had been postponed to 2023.
• Before this, the FATF had undertaken an evaluation for India in June 2010.
• The FATF, which is the global money laundering and terrorist financing watchdog, has 40 recommendations.
• In its recommendations, the FATF states that financial institutions should be required to have appropriate risk-management systems to determine whether a customer or beneficial owner is a domestic PEP or a person who is or has been entrusted with a prominent function by an international organisation.
• The broader objective is to bring in legal uniformity and remove ambiguities before the FATF assessment.
• The 40 recommendations cover seven areas and provide a framework of measures.
• This is to help countries tackle illicit financial flows through laws, regulations and operational measures to ensure authorities can take action to detect and disrupt financial flows that fuel crime and terrorism.

1. Policies and coordination;
2. Money laundering and confiscation;
3. Terrorist financing and financing of proliferation;
4. Preventive measures;
5. Transparency and beneficial ownership of legal persons and arrangements
6. Powers and responsibilities of competent authorities and other institutional measures and
7. International cooperation.

9. Other Changes in the PMLA rules

• The Amended rules have also lowered the threshold for identifying beneficial owners by reporting entities, where the client is acting on behalf of its beneficial owner, in line with the Companies Act and Income-tax Act.
• The term "beneficial owner" was defined to mean ownership of or entitlement to more than 25 per cent of shares or capital or profit of the company, which has now been reduced to 10 per cent, thereby bringing more indirect participants within the reporting net.
• Also, reporting entities are now required to register details of the client if it's a non-profit organisation on the DARPAN portal of NITI Aayog.
• Every Banking Company or Financial Institution or intermediary, as the case may be, shall register the details of the client, in case of the client is a non-profit organisation, on the DARPAN portal of NITI Aayog, if not already registered and maintain such registration records for five years after the business relationship between a client and a reporting entity has ended or the account has been closed, whichever is later.
• The definition of a non-profit organisation has also been amended and linked to the definition of charitable purpose provided under Section 2 (15) of the Income-tax Act 1961 to include any entity or organisation, constituted for religious or charitable purposes under I-T Act, that is registered as a trust or society under the Societies Registration Act or any similar state legislation or a company registered under the Companies Act.
• The due diligence documentation requirements, which were until now limited to obtaining the basic KYCs of clients such as registration certificates PAN copies and documents of officers holding an attorney to transact on behalf of the client have now been extended.
• It now includes the submission of details such as names of persons holding senior management positions, names of partners, names of beneficiaries, trustees, settlors and authors, as the case may be, depending upon the legal form of the organisation.
• Also, the details of the registered office address and principal place of business are now required to be submitted by clients to financial institutions, banking companies or intermediaries.

For Prelims & Mains

CAST CENSUS

 

1. Context

In a setback to the Bihar government, the Patna High Court Thursday stayed the ongoing caste-based survey in Bihar with immediate effect, saying the state government had “no power” to conduct the same as it would “infringe on the legislative powers” of Parliament. The interim order came days before the census was to be completed by May 15 2023

2. Cast Census

• The socio-economic and caste census (SECC) was conducted in 2011 for the first time since 1931.
• SECC is meant to canvass every Indian Family, both in rural and urban India, and ask about their economic status to allow central and state authorities to come up with a range of indicators of deprivation, permutations, and combinations that could be used by each authority to define a poor or deprived person.
• It is also meant to ask every person their specific caste name to allow the government to re-evaluate which caste groups were economically worse off and which were better off.
• SECC has the potential to allow for a mapping of inequalities at a broader level.

3. History of Caste Census

The caste census is the demand to include the caste-wise tabulation of India's population in the upcoming exercise.

3.1 Caste census in Colonial Era:

• The First Census conducted in 1871 included questions about caste. This data was then used to divide and conquer India.
• It first privileged Brahmins are interpreters of Indian culture and then targeted them as the root of caste-based oppression and inequality.
• This classification was also a source of anti-Brahmin movements of the 20th century.
• Every census until 1931 had data on caste.
• The practice was stopped by the British with the 1941 Census, citing financial constraints. The Indian government did not pick up the dropped parameter.

3.2 Caste data published in the Census post-independence:

• Since the first exercise in independent India in 1951, India has published separate data on Scheduled Castes (SC) and Scheduled Tribes (ST).
• The Census does not include data on other castes.
• The Government of India had decided on the policy of official discouragement of Caste.
• It was decided that in general, no race/caste/tribe inquiries should be made and such enquires should be restricted to the Scheduled Castes and Tribes notified by the President of India in pursuance of Articles 341 and 342 of the Constitution.

4. Importance of Caste Census

4.1 Promote Rational Decision Making

• A caste census, which will generate exhaustive data will allow policymakers to develop better policies, and implementation strategies, and will also enable a more rational debate on sensitive issues.

4.2 Promotes Democratic Policymaking

• Advocates of its inclusion believe that the activity will be a pro-poor exercise that will help plan better and more targeted welfare schemes in the country.
• A caste census would bring forward a large number of issues that any democratic country needs to pay attention to.
• For instance, this census will reveal information regarding caste-based marginalization, deprivation, the kind of jobs pursued by a caste, etc.
• So, the caste census is nothing but the collection of data that is necessary for any democratic policymaking.

4.3 The rationale for the Reservation Policy

• Some proponents also suggest that a Caste Census will also help reservation policymakers have a more accurate idea of the affirmative action needed.
• While this data is currently available for SC and ST populations, the OBC population is estimated widely as per the number noted by the Mandal Commission at 52%.
• The Justice Rohini Committee was appointed in 2017 to look into the sub-categorization of the OBC communities; however, in the absence of data, there can be no data bank or any proper sub-categorization.
• All commissions have had to rely on data from the last caste census (1931). There have been substantive demographic changes since then and therefore, the data has to be updated.

4.4 Constitutional Mandate

• Indian Constitution also favors conducting a caste census.
• Article 340 mandates for appointment of a commission to investigate the conditions of socially and educationally backward classes and make recommendations as to the steps that should be taken by the governments.

5. Last Cast Census and redundancy

• A separate Socio-Economic and Caste Census (SECC) was conducted by the Ministry of Rural Development in rural areas and the Ministry of Housing & Urban Poverty Alleviation in urban areas in 2011.
• It was the largest exercise of the listing of castes and has the potential of finding inequalities at a broader level.
• SECC was a tool to identify beneficiaries of state support and it is open for use by Government departments to grant and/ or restrict benefits to households.
• However, the SECC data excluded caste data and was published by the two ministries in 2016.
• The raw caste data was handed over to the Ministry of Social Justice and Empowerment.
• The ministry formed an Expert Group under the Former NITI Aayog Vice-Chairperson Arvind Pangaria for the classification and categorization of data.
• The Pubic data eventually released gave numbers of different castes in India but not the population-wise data as was the demand.
• Only the details of the economic conditions of the people in rural and urban households were released. The caste data has not been released till now.
• The Centre says that an analysis of the data showed "that the caste enumeration...was fraught with mistakes and inaccuracies" and "is not reliable".

6. Way Forward

• A Caste census without data integrity would be much worse. Instead of going behind the caste bases census, the government can subclassify the Backward classes like in Tamilnadu, Andhra Pradesh, West Bengal, etc. This will provide the benefit to intended beneficiaries.
• Since the government has already appointed Justice G Rohini's panel on the sub-categorization of OBCs. The panel has to fast-pace the sub-classification process.
• The Government can use technologies like Artificial Intelligence and machine learning to assess the SECC data and condense them into meaningful categories and some important caste-based information. This will provide the necessary time to analyze the need for a caste census.

For prelims & Mains

For Prelims: Socio-economic and caste census (SECC), Mandal Commission, Justice G Rohini's Commission, NITI Aayog, Article 341 and Article 342. For Mains: 1. Caste census is a must for governance in a heterogeneous Indian society. Discuss? (250 Words)

 

Source: The Hindu

INDIA-UAE

1. Context 

H.E. Shri Piyush Goyal, India’s Minister of Commerce and Industry, Consumer Affairs, Food, and Public Distribution and Textiles, and H.E. Dr. Thani bin Ahmed Al Zeyoudi, United Arab Emirates Minister of State for Foreign Trade, have formally launched negotiations on the India-United Arab Emirates Comprehensive Economic Partnership Agreement (CEPA).

2. Key points

• India, the world's second-largest food producer, is an essential partner in the UAE's ambition to strengthen food security.
• The India-UAE food security partnership stands to benefit from multiple points of convergence.

3. India's Role in Global food security

• India has built its status as a global agri-export powerhouse using its vast tracts of arable land, a highly favourable climate and a large and growing food production and processing sector.
• Along with serving global markets with its diversified agri-produce, India has, in recent years, acted as a humanitarian provider of food to developing countries, demonstrating awareness of its evolving role in advancing regional and global food security.
• India has also made major budgetary outlays towards setting up massive food parks, with due emphasis on modern supply chain management spanning farm gates to retail outlets.
• These investments, complemented by how India has placed its food sector to benefit from bilateral trade agreements, reflect the country's strong and sustained intent to make the most of its agri-capabilities in the global food marketplace.
• In parallel, India runs the Public Distribution System, the world's largest food subsidy programme, providing nearly 800 million citizens with subsidised grains and reassuring its people of daily, affordable meals.
• Equally laudable is India's Prime Minister's Overarching Scheme for Holistic Nutrition (POSHAN) Abhiyaan', the world's largest nutrition programme for children and women.
• As part of its G-20 presidency, India is promoting the consumption and farming of millets nutritious, drought-resistant, sustainable, crops that demonstrate the resilience focus that India offers to the global food security dialogue.
• In the realm of food security, India's G-20 presidency seeks to address the three Cs, of "Covid, Conflict and Climate", issues pernicious to food security in India and across the globe.

4. Strengthening the India-UAE food security partnership

• Seen together, India brings to the table an incredible wealth of food sector experience and the ability to operationalise the world's largest food supply chains' formidable capabilities that are strengthening the India-UAE food security partnership in a variety of ways.
• During the I2U2 (India, Israel, the United Arab Emirates and the United States) summit in July last year, the UAE committed $2 billion in investment towards constructing food parks in India (in Madhya Pradesh and Gujarat), while the signing of a food security corridor on the Comprehensive Economic Partnership Agreement (CEPA)'s sidelines (with logistics partner DP World) has taken forward India's envisioned presence on the global food value chain, beyond the UAE.
• The corridor could potentially commence a route for foods made and processed in India, beginning their outbound journey on the Indian coast of the Arabian Sea, passing through the UAE and towards major international markets.
• With its ability to establish high volume trade of foods, the corridor stands to emerge as a world-class template of successful agri-trade for India, while also unlocking greater productivity, efficiency and growth for its millions of workers and employees.
• For the UAE, the benefits go beyond maintaining and diversifying its food reserves and trade linkages could enable the Emirates to leverage its strategically placed location between Asia and Europe to serve as India's food export gateway to West Asia and the African region and further beyond.
• Given the food corridor's incredible commercial potential, several UAE-based companies have expressed interest in constructing a supporting logistics and infrastructure pipeline to accelerate trade and reinforce the food corridor.
• The Dubai Multi Commodities Centre, the UAE's largest free trade zone, launched Agriota an agri-trading and commodity platform to link Indian farmers to food companies in the UAE.
• Agriota allows millions of Indian farmers to directly reach out to the entirety of the UAE's food ecosystem (processing companies, traders, wholesalers) and stock their products in Emirati stores.
• Alongside this initiative, a consortium of UAE-based entities is investing up to $7 billion in mega food parks, contract farming and sourcing agro-commodities in India.
• The initiative will include mega food parks, logistics and warehouse hubs and fruits and vegetable hubs.

5. The benefits 

• There is much that India stands to gain from the UAE's private sector projects spanning its agricultural and food processing sector.
• Those projects will generate lakhs of non-fram agri-jobs while enabling farmers to discover better prices for their products.
• Bolstered by the UAE's infrastructural capabilities, India's agricultural products will have more resilient and diversified pathways to the global marketplace.
• India's G-20 presidency offers an opportune moment for both India and the UAE to showcase viable strategies and frameworks that can forge the basis of food security in the Global South.
• As it sets the global developmental agenda, India can take to leverage and strengthen trade pathways with the UAE to forge a sustainable, inclusive, efficient and resilient future of food.

For Prelims: India-UAE, Global food security, G20, I2U2, Public Distribution System, POSHAN Abhiyaan, Covid, Conflict and Climate, Comprehensive Economic Partnership Agreement,  For Mains:  1. Discuss India's role in ensuring global food security during the pandemic and post-pandemic times. (250 Words)

 

Previous Year Questions   1. With reference to the international trade of India at present, which of the following statements is/are correct? (UPSC 2020)  1. India's merchandise exports are less than its merchandise imports. 2. India's imports of iron and steel, chemicals, fertilizers, and machinery have decreased in recent years. 3. India's exports of services are more than its imports of services. 4. India suffers from an overall trade/current deficit. Select the correct answer using the code given below: A. 1 and 2 only       B.  2 and 4 only      C. 3 only        D.  1, 3 and 4 only   Answer: D   2. Consider the following countries: (UPSC 2018) Australia Canada China India Japan USA Which of the above are among the ‘free-trade partners’ of ASEAN? (a) 1, 2, 4 and 5     (b) 3, 4, 5 and 6      (c) 1, 3, 4 and 5     (d) 2, 3, 4 and 6 Answer: C 3. The term ‘Regional Comprehensive Economic Partnership’ often appears in the news in the context of the affairs of a group of countries known as (UPSC 2016) (a) G20           (b) ASEAN          (c) SCO         (d) SAARC Answer: B 4. The area known as ‘Golan Heights’ sometimes appears in the news in the context of the events related to ( UPSC 2015) (a) Central Asia   (b) Middle East   (c) South-East Asia    (d) Central Africa Answer: B 5. Which of the following are the objectives of ‘National Nutrition Mission’? (UPSC 2017) To create awareness relating to malnutrition among pregnant women and lactating mothers. To reduce the incidence of anaemia among young children, adolescent girls and women. To promote the consumption of millets, coarse cereals and unpolished rice. To promote the consumption of poultry eggs. Select the correct answer using the code given below: (a) 1 and 2 only    (b) 1, 2 and 3 only    (c) 1, 2 and 4 only    (d) 3 and 4 only Answer: A

Source: The Hindu

LAUNDROMAT COUNTRIES

 

 

1. Context

The Ministry of Petroleum and Natural Gas, on Wednesday, has denied a report by the Centre for Research on Energy and Clean Air (CREA) on India purchasing cheap Russian crude oil, saying it is misleading and a deceptive effort to tarnish India’s image, the 4th largest oil refining country globally.

 

2. About Laundromat Countries

• Laundromat Countries are countries that buy Russian oil and sell processed products to European countries, thus sidestepping European Sanctions against Russian oil
• India leads five countries named as the “Laundromat” countries that buy Russian oil and sell processed products to European countries, thus sidestepping European sanctions against Russia, says a Helsinki-based group that cited the latest figures for the first quarter of 2023
• India, China, Turkey, the UAE and Singapore are identified as 'Laundromat' countries by Centre for Research on Energy and Clean Air (CREA) for European countries
• The five countries are responsible for 70 percent of Russia's crude oil exports, the study highlighted

3. Findings of CREA report

• Report by international agency Bloomberg that showed how European Union (EU) countries, which are all part of the “price cap coalition” that bars trade and insurance for any oil purchased above a certain price from Russia, are in fact increasing their intake of oil from India, China, Turkey, the UAE and Singapore
• The report accused Indian sellers and European buyers of possibly “circumventing sanctions” by selling crude products from a refinery in Gujarat that is co-owned by Russian oil company Rosneft.

• Price cap coalition countries have increased imports of refined oil products from countries that have become the largest importers of Russian crude
• This is a major loophole that can undermine the impact of the sanctions on Russia
• European countries are simply substituting oil products they previously bought directly from Russia, with the same products now “whitewashed” in third countries and bought from them at a premium
• Of the so-called “laundromat” countries, India, which in April remained the highest global consumer of seaborne Russian crude for a fifth month, is ahead of all others in the export of crude products to the coalition countries, exporting nearly 3.8 million tonnes of oil products to price cap coalition countries, which include the EU, G-7 countries, Australia and Japan

• India’s exports of diesel, for example, tripled to about 1,60,000 barrels per day in March 2023, compared with the period before the Russian war in Ukraine, making diesel one of the largest components of India-EU trade at present
• The CREA report said the most oil products were being exported from two ports in Gujarat: the Sikka port that services the Reliance-owned Jamnagar refinery, and the Vadinar port that ships oil products from Nayara energies, which is partly owned (49.13%) by Rosneft, alleging that this could constitute “circumventing sanctions” imposed unilaterally by the U.S. and Europe
• From less than 1% of its total oil intake pre-February 2022, India imported about a third or 35% of its oil imports from Russia in March 2023, buying about 1.6 million barrels per day from Russia over the past year

 

 

Source: The Hindu