NISHKA Sept 2014 Volume V Issue 51

NISHKA September 2014, Volume V, Issue 51 A FINANCIAL NEWSLETTER ANTI-MONEY LAUNDERING Christ University Insttute of Management, Kengeri Campus

NISHKA Sept 2014 Volume V Issue 51 2 In this newsletter NISHKA Sept 2014 Volume V Issue 51 3 Introduction to Anti-Money Laundering Sudeshna Bhattacharya, F1 & Purnima Singh, F2 HawalaorMoneyLaunderinghasbecome synonymoustermsforBlackMoneytransactionsin ourcountry.Therearescoresofcaseswhereithas been found that banks had a nexus and was actively involved in money laundering. Money Laundering is not just used as a vehicle to stash black money but it also has repercussions like, finding its way to financ-ingterrorism.Thegovernmenthasbeenpro-active in this regard to stop money laundering; it has come upwithAnti-MoneyLaunderingAct,2005which collaborateswithFinancialActionTaskForce (FATF),theinter-countryorganisationthatcombats money laundering. It is an initiative of the G-7 coun-tries. Thestandardshavebeentheinternational benchmarkforAnti-MoneyLaunderingAct,2005 andithelpstocombatthefinancingofterrorismby theregulatoryauthorities.Itisnecessaryforthe banks,financialinstitutionsandNBFCstocomply withthesestandardsforinternationalfinancialrela-tionship.TheHawalaMechanismfacilitatestrans-ferringoutofthecountryandhidingunaccounted wealth.Blackmoneyreferstofundsearned,on whichtaxeshavenotbeenpaidandhenceunac-counted.Blackmoneyisearnedthroughlegallyor illegallytradedgoodsorserviceswhileWhitemon-eyisthemoneyearnedthroughlegalmeansandon which taxes have been paid. The different stages ofmoney laundering are as fol-lows: Placement: The first stage is about the physical dis-posal of cash. It introduces illegal profits of the laun-dererintothefinancialsystem.Thisplacementis accomplishedbydepositingthecashindomestic banks or in other types of formal and informal insti-tutions. Layering: The Second stage in money laundering is layering. It engages a series of conversions or move-ments of the funds to distance them from their source or origin. The funds might be channelized through the purchase and sale of investment instru-ments such as bonds, stocks, and travellers checks or the launderer might deposit the funds through a series of accounts at various banks across the globe, particularly to those jurisdictions that do not cooper-ate in anti-money laundering investigations. Integraton:Inthisstagethefundsarereturnedto thelegitimateeconomyforlaterextraction.Exam-ples include investing in a company, purchasing real estate, luxury goods, etc. Thelaunderermakestheill-gottenwealth appearasitappeartohavebeenlegallyearnedand accomplishesintegrationofthecleanedmoney into the economy. https://www.moneylaundering.ca/public/law/3_stages_ML.php NISHKA Sept 2014 Volume V Issue 51 4 Case Analysis: M/S Chinubhai Patel & Co. Aswathy Edison, F1 In 1995, M/s Chinubhai Patel & Co. was syn-onymouswiththemoneylaunderingoperationcon-ductedbyDirectorateofRevenueIntelligence (DRI),whichrevealedanumberoffictitiousac-countsopenedinbanksbyindividuals.Furtherin-vestigationsconductedopenedupthemajorrole played by Indian banks in such illegal transactions. At a Glance: M/sChinubhaiPatel& Co.wasthenameof thefictitiousbankaccountopenedinSouthIndian BanksNarimanPointBranch,Mumbai.Thebank accountwasopenedin1994bythethenbankman-agerMr.KasturiRangan.Thebankcreatedtheac-countwithoutobtainingandauthenticatingtheac-countholder or account operators photograph. What happened? This account was utilized for depositing cash ofRupees387,379,000andfromhisaccount;US$ 12,048,650wasremittedinfavourofM/sR.P.Im-portsandExports,HongKong.Theremittances weremadeonthebasisoffraudulentdocuments. FurtherinvestigationsconductedbytheDirectorate ofRevenueIntelligence(DRI)inIndiaandabroad, revealedthatfourmorefirmshavebeenoperating their accounts in a similar manner in the South Indi-an Bank Ltd., and these firms were identified as M/s RakeshInternational,M/sR.M.International,M/s P.M.InternationalandM/sDeePeeInternational. These firms werealso found to befictitious andnot existingatthegivenaddress.Theywereoperating theaccountwiththesaidbanksinceJune1992. Through this account, an amount equivalent to US $ 80million(Rupees2,500million)wereremitted from India to Hong Kong. ThepeopleassociatedwiththeactwereMr. RajeshMehtaandMr.Prakashwhousedthisac-counttosiphonofffundsinforeignexchangeto countriessuchasDubai,SingaporeandHongKong with the help of pseudo documents which resulted in a foreign exchange loss to India estimated at Rupees 2,500 million. ThefurtherinvestigationsconductedbyFor-eignExchangeEnforcementDirectorate(ED)re-vealedthattheseillegaltransactionsoccurredin numberofbanks,oneofthembeingUnitedCom-mercialBank,Bombay.Duringtheperiod1991-95, remittancesamountingtoRupees5,467.8million had been made through 12 different banks. In1990s,therewasamoneylaundering leagueoperatingwiththehelpofmiddlemenwho appointedfrontpersonstoopenfictitiousbankac-counts for the purpose of depositing cash and receiv-ingpayordersfromotherbanks.Thiswasalsouti-lized to reward bank officials who were aware of the transactions. Fraudulent Documents such as custom-erInvoice,BillsofEntry,PackingListsetc.,were createdtoshowthatimportshadtakenplaceand funds were required to be remitted from the accounts tothefictitiousexportingcountriessuchasHong Kong.ToobtaintheremittancesfromIndia,ficti-tiousaccountswerealsoopenedinbanksofHong Kong.33peoplewhowereassociatedwiththe leaguewerearrestedduringFebruary1996toJune 1998. DespitethemeasurestakenbytheGovern-mentofIndiaintheformofPreventionofMoney LaunderingAct,2002,moneylaunderingleagues stillthriveinthecountry.Though,Indiahasbeen compliantwiththeglobalintergovernmentalbody FinancialActionTaskForce(FATF)recommenda-tionsincombatingtheproblemofmoneylaunder-ing,thecountrystillhasntfullybeenabletopre-vent the problem. WhenwethinkofSwitzerland,besidestheir chocolatesandwatches,Indianscouldrelatetothe huge piles of black moneybelieved to be stashed in the accounts which isyet to be recovered. So, let us be optimistic about our Swiss counterparts whowill co-operate withIndia and return the black money to India. References: http://www.taxindiaonline.com/RC2/print_story.php?newsid=2600NISHKA Sept 2014 Volume V Issue 51 5 Case Analysis: Ketan Parekh Scam (2001) Challapalli Kalyana Karthik, F2 and Niharika Shadra, F1 Moneylaunderingistheconversionofille-gitimatemoneyintosuperficiallylegitimateassets ormoney.Moneyfromcrimessuchasextortion, terrorism&thelikeisdirtymoneywhichis cleaned to supposedly appear to arise from non-criminal activities.The global financial system as a wholehasbeenstrivinghardtocurbmoneylaun-deringbyputtinginplace,anumberoflegalpro-cesses. Instances of banks being fined by RBI or US FederalReservehavesharplyrisenoverthepast few years. A number of KYC norms and adherences arestrictlyfollowed,butloopholesstillexistand money laundering is still as common.AML(Anti-MoneyLaundering)isasystem inplacetoreducethemoneylaunderingactivities. Outof140countries,Indiahasbeenranked93rd and 70th in 2012 and 2013 respectively with a score of6.05in2012and5.95in2013,ascomparedto Norway, which has a score of 2.36 and ranks No. 1 intheAnti-MoneyLaundering(AML)BaselIndex 2013.Thisclearlyindicatestheimportance,we need to accord to AML norms in India.About the Case: AlloverworldinvestmentinICE (InformationTechnology,CommunicationandEn-tertainment) shares was the trend. Ketan Parekh col-ludedwithpromotersoftheneweconomy(ICE) sharesandchangedthecomplexionofthemarket by buying stock known as K-10 scrip. He succeeded inliftingscripssuchasHFCL,SatyamandGlobal to international P/E levels. Parekhsmodusoperandiwastorouteor-dersthroughhisthreebrokingoutfitsand40satel-lite brokers. He had contacts with brokers in Kolka-taandAhmedabad,whowererewardedwith Badlapayments.HissourcesoffundswereNon-ResidentIndians (NRIs)and the new private sector bankswhoacceptedsharesascollateral.Hewould pledge the shares with banks as collateral when the share prices were high.Mutual funds and foreign institutional inves-torsbyinvestingheavilyintechnologystocks helpedK-10scriptorisehigh.Heplacedsharesof Satyam at a premium of Rs 1,000 with UTI and the shares of HFCL for Rs 1,400 with mutual funds and foreigninstitutionalinvestors.Parekhwouldin-crease the liquidity of stock when there was a strong demandorhehimselfwouldbuyaggressivelyif one of the portfolio stocks fell.The Bull Run started in May 1999 and con-tinued up until November 1999 when Parekh started hisfirstmajorroundoftradingaggressivelyin HFCL, Global, Satyam, and Zee scrips. Sensex rose from 3,378 to 4,491 points. Sensex peaked to 6,100 before it started falling due to a global meltdown in ICE shares. There was a sharp decline in prices due tofactorssuchasglobaleconomicslowdown,sig-nificantmarketcapitalizationerosionatNASDAQ andotherleadingstockexchanges.Thesudden steep fall in prices of these scrips resulted in a huge depletioninthemarginsofsharesthatwereplaced assecuritieswiththebanks.Consequentlythe banks were obliged to ask Parekh and his associates toeitherpledgemoresharesascollateralorreturn someoftheborrowedmoney,andontheother hand,theyweredriventopropupthepricesby pumpingmoremoneyintothecapitalmarket.This resultedinafinancialcrunchforsomemajorbull operators,whichledtodisputesintheKolkata (Calcutta) Stock Exchange (CSE). The crisis snow-balledastheKolkatabrokerstookmorelongposi-tionsthanParekh.TradingatKolkatawas90per cent unofficial.It was acash Badla market where Rupees 1,500-2,000 crore was rolled every month at 21-30percent.Asthecircumstancesdeveloped, Badlaratesshotupto80percentattheKolkata Stock Exchange. So, Parekh defaulted on payments NISHKA Sept 2014 Volume V Issue 51 6 to Kolkata brokers which resulted in a payment crisis between March 12 to17, 2001. Seventy CSE brokers defaultedastheexchangeplungedintocrisis.ThebearcartelonBSE,whichwashammeringthemarket withinsideinformationwascaughtredhandedbySEBIwhosuspendedallthesevenmembersfromthe BSE governing board.Ketan Parekh desperately borrowed huge sums from the Ahmedabad based Madhavpura Mercantile Cooperative Bank (MMCB). The bank issued pay orders running into Crores of Rupees without receiving cash payment or collateral from Parekh. Pay orders are instruments whereby the issuing branch of a bank orders another branch of the same bank to pay the stated amount to the named payee. The issuing branch of the bank collect cash up front and hence have full collateral. Hence, the discounting bank is sure of collec-tion.AsParekhcolludedwithRameshParekh thechairmanofMMCB,thelatterissuedPay Orderswithouthavingthebalanceinthebanks accounts.TheBankofIndia(BOI)discounted Rupees137croresworthofPayOrderswhich bounced.KetanParekhpaidonlyRupees7 croresandBOIwenttoacriminalcourtagainst him. The Reserve bank specifically prohibits co-operativebankstoinvestinthestockmarketor tolendtostockbrokers.However,thelatterare freetolendtoindividualsagainstapledgeof sharesuptoRupees10lakhperborrowerifthe shares are in a physical form and up to Rupees 20 lakh if they are in dematerialized form. MMCB flouted the norms of the Reserve Bank to earn higher rates of return. KetanParekhtookmoneyfromtheNRIsandtheprivatebankswhichlentmoneyagainstshares and MMCB helped Ketan Parekh and all the NRIs to clean the dirty money so that they can claim it to be White. http://articles.economictimes.indiatimes.com/2009-01-24/news/29403716_1_satyam-fraud-audit-price-waterhouse,http://articles.economictimes.indiatimes.com/keyword/ketan-parekh/recent/3NISHKA Sept 2014 Volume V Issue 51 7Operation Red Spider by Co-brapost Niken Jain, F2 Cobrapostclaimedtohaveuneartheda vast,nationwidemoneylaunderingracketbeing run by three leading private sector banks of India, HDFC Bank, ICICI Bank and Axis Bank. Facts of the Case: The investigation found that the banks and their managements systematically and deliberately violated several provisions of the Income Tax Act, FEMA, RBI regulations, KYC norms, the Banking RegulationandPreventionofMoneylaundering Act(PMLA)withutterdisregardtotheconse-quences, driven by theirdesire to boostcheap de-posits and reap higher profits. Cobrapostcapturedthehugemoneylaun-deringracketbeingrunbythesebanksonvideo tapeswhichweresecretlyfilmed.Thesetapes showedthatmoneylaunderingserviceswere openlyofferedtoevenwalk-incustomerswho wish to launder their illicit money. How did it come out? ReportersatCobrapostwalkedintobanks andaskedthebankofficialsiftheycouldhelp launder a huge sum ofmoney belonging to politi-ciansand,surprisinglyfoundthatemployeesac-cepted those brazen offers. How do the banks do it? Youmustbewonderinghowabankcan indulgeinsuchanactivitywithsomuchofstrin-gentnormsputinplacebytheRBIonbanking industry. Following are a few of the ways suggest-ed by the bank officials: Accept huge amounts of cash and invest it in insurance products and gold. Open an account to route the cash into vari-ousinvestmentschemesofthebankanddo itevenwithoutthemandatoryPANcardor adheringtotheKYCnormslaiddownby RBI. Splitthemoneyintotranches(transaction valuethanRupees49,999)togetitintothe banking system without being detected. Use Benami accounts to facilitate the con-version of black money. Use accounts of other customers to channel-izetheblackmoneyintothesystemfora fee. Get demand drafts made for the client either from their own banks or from other banks to facilitateinvestmentwithoutitshowingup intheclientsaccount.Theywillkeepthe identity of the investor/depositor secret. Openmultipleaccountsandclosethemat willtofacilitatetheinvestmentofblack money. Investblackmoneyinmultipleinstruments inthenamesofdifferentindividuals,not necessarily hailing from the same family. Allot lockers for the safekeeping of the ille-gitimatecash,includingspeciallargesize lockers to accommodate crores of Rupees of hard cash. Bank officials were known to have personal-ly visiting residence ofclients to collect un-accounted or ill-gotten money which were to be later laundered.It was reported that they eventookalongwiththemcurrencycount-ing machines. Use Form 60 to deposit the illegitimate cash intoaccountswithnoPANandlaterroute monies so deposited into investments. OperationRedSpidermadeitclearthatthe RBI, the IT Department, the ED and various other institutionsentrustedunderthelawtokeepa watchonthebankshavebeeninefficientinun-earthing the misconduct, claimed Cobrapost. RBI did an investigation andfound that trans-gressionsfoundwereoperationalinnaturewith employeesnotadheringtonormsandguidelines. ItconcludedthatcurrentKYCnormsandAML guidelines were robust and does not need any revi-sions.RBIfornowhasfinedthebanksbutwhat remainstobeseenisthebanksfollowtheguide-lines and be more careful in future. NISHKA Sept 2014 Volume V Issue 51 8 RBI Column Pawanpreet Kaur, F2 RBIsliquiditymanagementtriggersvolatility:TheReser veBankofIndiahascr eatedmor e volatilityinthemoneymarketthanreducingit,makingsomebelieve,thatitis tighteningofinterest rate by stealth. Interbank rates which are supposed to be closer to the policy rates has gone widely off themarkinthepastthreemonths.Overnightratesshouldhavebeenbetween8.20%and7.80%in-stead of 9.16% and 7.4%. Addressing this problem being faced by all the banks in India, RBI governor said,RBIwantedbankstodobetterforecastingforfunds,cutthefundsavailableunderLAFto 0.25% of total deposits, from an unlimited amount. Though RBI is planning to sell bonds which will reduce liquidity in the system and not releasing funds through Repo agreement to compensate through reducingexportrefinancing,thisactioninspiteofloweringdownliquiditycrunchisconfusingthe system. RBIs initiative to be lenient while licensing small banks:Even afterRBIs fir st attempt in giv-ing differentiated licenses for small banks does not hold out many hopesfor scores of aspirants. The rules and policies include: Operational area of small banks will be restricted to contiguous districts and expansion plans for initial three years would need prior approval of RBI.MinimumcapitalofRupees100croreisrequiredtostartsmallbanksandinvolvesmorerisks for the new entrant. Professionals with 10 years of banking/finance experience can set up a small bank. NBFCs, MFIs, Local area banks can convert themselves into small banks. Small banks to follow all banking norms, including CRR and SLR maintenance. Minimum 50% loans should be Rupees 2.5 Million or less. Promotersinitialcontributiontobe40%ofcapitalandcannotexitorsellhissharebefore5 years. RBIsplantoendlazy banking:RBIgover nor Dr Raghur amRajanseemstohavemadeabe-ginning to end lazy banking in India. Reducing SLR by 100 basis points (22%) is an indication: More lending to productive sectors of the economy. Reduction in SLR will be compensated by payment banks as they will grow in size. Meetingthefiscaldeficittargetof4.1%ofGDP.Itwillbedonewhenfundswithgovernment will be reduced. Unproductive banks will be penalised by putting an end to them. RBIs step to put restriction on wilful defaulter from investing in capital market:TheRBIhasforwardedaproposaltoSEBIsuggestingbarringwilfuldefaultersofbankloansfrom raising funds through capital markets. RBI will be sharing details of these defaulters on real time ba-sis. Information about wilful defaulters is shared with SEBI and CIBIL, and is inviting other agencies to share the information to bring more credibility and efficiency in the market. http://www.rbi.org.in/scripts/bs_pressreleasedisplay.aspx NISHKA Sept 2014 Volume V Issue 51 9 Corporate Column Sai Nanthini R.K, F2 To gain insights on Anti-Money Laundering in India, we interviewed Mr. Arthanari, Retd. Bank Manager, Canara Bank, Chennai. 1. What is the Prevention of Money Laundering Act?

A: The Pr evention of Money Launder ing Act, 2002 (PMLA) for ms the cor e of the legal fr ame-work put in place by India to combat money laundering. This came into force in July 2005. This Act imposes obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information to the designatedgovernment agency.It defines money laundering offence and provides for the freezing, seizure andconfiscation of the proceeds of crime. It makes it obligatory for all intermediaries including banks, HFCs to follow 'Know Your Cus-tomer' norms which basically defines the customer identification process. As per the KYC, intermedi-aries have to collect documents before entering into any transaction with the customers. This process is basically to know thetrue identity, the sourcefrom where the funds have been brought, natureof customer's occupation or business, etc.2. What is the biggest challenge in complying with AML regulations? A: The challenges ar e faced in thr ee phases: Implementation, Inter pr etation and Repor ting. In eachphasetheroleofthemanagementdifferswhichactuallyshowsthelevelofdifficulty. These challenges may be due to legacy data or operational difficulties, and hence, designing and exe-cuting an effective implementation program remains the biggest impediment. Perceptions of the mid-dlemanagementdomatterinthis.Tomeetthesechallenges,allareasofAMLfunctionrequirean equalfocus.Thebudgethastobedividedproportionatelyonactivitiessuchastraining,technology and operations. 3. What are the key operational challenges that every organisation faces with respect to AML? A:Fewcommonoper ationalchallengesar e:Changingr egulationsinAML infrastructure and technology, skilled staff, no standardized process for complying. When we closely look at it, AML has not reached the level of stability compared to normal operation-alprocess,whereproceduresarestrictlycodifiedandconcernedpeoplearefullytrainedtofollow them. 4. How does PMLA helps in combating financing of illegal activity? A:Indiahasconsistentlymaintainedar obustAMLsystem.Our str ictfor eign-exchangelaws and transaction reporting requirements, together with the banking industrys KYC policy, make it dif-ficultforcriminalstousebanksorotherfinancialinstitutionstolaundermoney.Largeportionsof illegal proceeds are laundered through the alternative remittance system known as Havala. Under the Havala system, individuals transfer value from one location to another, often without the actualmovementofcurrency.Thisiswhy,manyIndiansdonottrustbanksandweprefertoavoid lengthy paperwork. But, Havala dealers provide the same remittance service as a bank with little or sometimes no documentation and at rates less than those charged by banks.Topreventthis,theBillwasamendedin2002.Thislegislationcriminalizesmoneylaundering,es-tablishedfinesandsentencesformoneylaunderingoffenses,imposesreportingandrecordkeeping NISHKA Sept 2014 Volume V Issue 51 10 Finance Buzz Vyom Goel, F2 Racketeering: It r efer s to a cr iminal activity that is per for med to benefit an or ganization, such as a crime syndicate. Examples include Money Laundering, Loan Sharking, Obstruction of Justice and Bribery. Black Economy: The segment of a countr y' s economic activity that is der ived fr om sour ces that fall outside the country's rules and regulations regarding commerce. The activities can be either legal or illegal depending on what goods and/or services are involved. Perpetrator Walk: A slang ter m that descr ibes the pr actice sometimes employed by law enfor ce-ment authorities, notably in the U.S., of parading an arrested suspect in public, with members of the media usually in attendance. The alleged suspect is usually a white-collar or high-profile criminal. Suspicious Activity Report (SAR): Suspicious Activity Repor ts can coveralmost any activity that is out of the ordinary, if that activity gives rise to a suspicion that the account holder is attempting to hide something or avoid reporting under the Bank Secrecy Act (BSA). The Indian version of SAR is Suspicious Financial Crimes Enforcement Network (FinCEN): A networ k administer ed by the United States Department of Treasury whose goal is to prevent and punish criminals and criminal networks that participate in money laundering. Wire Fraud: A situation wher e a per son concocts a scheme to defr aud orobtain money based on false representation or promises. This criminal act is done using electronic communications or an inter-state communications facility.NISHKA Sept 2014 Volume V Issue 51 11Market Round-up K.Alekhya, F2 & B. Suma Sravya, F1 Public sector banks' NPAs have piled up enormously andsoar ed to a stagger ing Rupees 25,809 crore for the financial year ended March 31 pushing thetotal gross NPA ratio to 4.03 per cent in 2013-14 from 3.42 per cent in 2012-13 and 2.94 per cent in 2011- 12- 02/08/2014 (BS). No change in interest rates as RBI looks ahead: Reduced SLR by half-a-percentage point to 22% tofreeupfundsofaboutRupees40,000croreinthebankingsystem,givenitstotaldepositbaseof about Rupees 80 trillion. - 05/08/2014 (ET). FIPB clears 14FDI proposals worth Rupees 1,528 Crores:Of the pr oposals appr oved, phar ma companyLaurusLabs will invest Rupees 600 Crores; ACME- Rupees 275 Crores; Sinclair Hotels- Rupees 41.52 Crores and Golden Agri Resources (India) Rupees 485.9 Crores - 06/08/2014 (ET). SEBIclearsnormsforRealEstateInvestmentTrusts:Toboostther ealestateandinfr astr uc-ture sector with inflows of over US $20 Billion investment from both foreign and domestic investors, SEBIonSunday,approvedtheSEBI(RealEstateInvestmentTrusts)Regulations,2014,andSEBI (Infrastructure Investment Trusts) Regulations, 2014- 11/08/2014 (The Hindu). RBI to transfer Rupees 52,679 Crores surplus profit to government: This amount would pr ovide some help to the government, which proposes to bring down the fiscal deficit to 4.1 per cent of GDP this fiscal from 4.5 per cent last year - 11/08/2014 (BS). Factoryoutputslipsto3.4percentinJune:Showingsignsofsluggishnessintheeconomy, growth rate of industrial production slowed to 3.4 per cent in June, as against 5 per cent in May, main-ly due to lower output of consumer goods - 12/08/2014 (ET). Noforeignequityinmulti-brandretail.Nar endr aModi' sgover nmentwillnotper mitfor eign equity in multi-brand retail trade, which was an assurance in the party's election manifesto and as per theextantFDIpolicy,FDIupto100percentispermittedinsinglebrandretailtrading.Thepresent draft of the policy does not permit retail trading in any form, by means of e-commerce, for companies with FDI engaged in the activity of single/multi brand retail trading - 13/08/2014(BS). Trade deficit rises to $12.22 Billion as July exports growth slows down:Expor ts gr owth slipped to 7.33 per cent in Julyafter witnessingagrowth of 10.22 percent and12.4 per cent respectivelyin June and May. Gems and jewellery and electronics continue to be a cause of concern as their negative growth is pulling down overall exports growth - 14/08/2014(ET). USImmigrationBillisallfor significantlycuttingdownonoutsour cingofwor kfor cer tain kinds of visas that were mostly used by Indian firms and professionals. If the Bill becomes a law, then India'sGDPcouldbeadverselyimpactedbyaboutUS$30billionayear.Directimpactwillbe,10 millionIndianITProfessionalsdomesticallyand500,000intheUSwillnolongerhaveanywork-15/08/2014(BS). FIIspulloutRupees5,300CroresfrombondssofarinAugustfr omtheIndiandebtmar ket. ForeigninvestorsweregrossbuyersofdebtsecuritiesworthRupees9,175croretillAugust14,and sellers to the tune of Rupees 14,448 Crores - a net outflow of Rupees 5,273 Crores. There are several reasons such as geo-political unrest in Ukraine, Iraq and Gaza along with global economic issues like the defaults in Argentina and Portugal, and the recent SLR (Statutory Liquidity Ratio) cut by the Re-serve Bank of India (RBI) -18/08/2014 (ET). NISHKA Sept 2014 Volume V Issue 51 12 Stock Market Analysis Sooraj Kumar, F1 Sensex crossed 27000 points in August-September from 25894.97 points in July, 2014. Stock markets averaged 6329.06 Index points from the time of inception till 2014, reaching an all-time high of 27000 points. Since July 2014 the monthlygrowth has been 2.87%. Cautious sentiment may pre-vail as the Supreme Court will decide the fate of coal blocks. Improved performance of mining, manufacturing and services sector pushed India's economic growth rate to two-and-half year high of 5.7 per cent in the April-June quarter, a development which the Finance Ministry expects to continue for rest of the fiscal. But, focus will largely shift on the Su-preme Courts verdict. Historically, September has been a weak month for equity markets. But, Dalal Street participants seem to be thinking otherwise this year. As the September contracts take the center stageonexpiryoftheAugustcontractsonThursday,tradersaresittingonbullishbetsonNiftyfu-tures. Stock futures of technology, pharma, oil & gas and automobile sectors have also seen a rollover of long positions to the September series from August.The top gainers for the month of august areBharat Petroleum (20.33%),M&M (20.07%), Tata Mo-tors (19.32%), Godrej Consumer Products (17.49%), Cipla (16.23%) followed by Nestle India, Dabur India, HPCL, etc. The top Losers for the month are Jai Prakash associates (21.66%), Reliance Power (17.66%),AdaniPower(14.84%),IDBIBankLtd(14.78%)followedbyUnitech,JindalSteeland Power, Reliance Communication and others. Stock of the Month - Bharat Petroleum Face Value: Rupees 10 Traded Volume (Shares): 33, 87,252 Traded Value (Lacs of Rupees): 23,496 Market Cap (Lacs of Rupees): 17,942 NISHKA Sept 2014 Volume V Issue 51 13Economic Rollers Simmy Kumari, F2 Source: Finance Ministry, Office of Economic Advisory, HDFC Securities Report, Ministry Of Commerce,RBI, http://www.tradingeconomics.com/india/ RatesRates as on 1st August, 2013 Rates as on 15th August, 2014 Repo Rate7.25%8% Reverse Repo Rate6.25%7% CRR4%4% SLR23%22% MSF10.25%9% Base Rate9.70/10.25%10.00/10.25% Call Money Rate (Weighted average)9.30%7.97% 91 days T-Bill (Primary) Yield10.92%8.65% 364-Day Treasury Bill (Primary) Yield9.88%8.74% 10 years Govt. Securities Yield7.97%8.65% Bank Rate10.25%9% CBLO(weighted average)8.50%9.19% Savings Deposit Rate4.00%4.00% Forward Premia of US$ 1-month10.01%8.77% NISHKA Sept 2014 Volume V Issue 51 14Finance Quiz Srinivas Rahul Chaganti, F2 1.TheprovisionsofPMLA(PreventionofMoneylaunderingAct,2002) have come into effect from __________. 2.WhichBankannouncesEMIfacilityondebitcards,whichtiesupwith Samsung? 3.IndiasignsMoUwith_____________todevelopinfraforsemihigh-speed trains. 4.Who is the new CEO of Mahindra Retail who replaced K. Venkataraman? 5._____ Power bought Lanco Infratechs Udipi power plant for 6000 crores. 6.WhoistheIndianoriginmathematicianwhohasbeenawardedprestig-ious 2014 Field Medal at International Mathematician Union (IMU)? 7.Tata-Singapore joint venture is branded as __________. 8.SEBIimposes13crorepenaltyon____fornon-disclosureofdiluted earnings. 9.Which bank has been emerged as most valued bank in India with a brand value of US $ 9.4 Billion? 10._________Steel Ltd. Indias steel maker has agreed to buy Welspun Max Steel for Rupees 1000 crore. NISHKA Sept 2014 Volume V Issue 51 15Photo-Find Nilanjana Chatterjee, F2 1)2) 3)4) 5)6) NISHKA Sept 2014 Volume V Issue 51 16Crossword Samyuktha P Reddy, F2 Vertical: 1.------------ confirmed Wednesday that it faces fresh US fines over alleged breaches in its anti-money laundering systems, two years after it paid massive penalties for violating American sanctions. 2.A special anti-money laundering court here has attached assets worth over Rs 37.86 crore belonging to former Karnataka minister and mining baron --------- and his wife in connection with an alleged multi-crore iron ore mining scam. 3.US regulators are investigating Charles Schwab Corp and Bank of America Corp's -------brokerage over whether they are doing enough to learn about their clients' identities, sources said, the latest sign a crackdown on money laundering is expanding. 4.To safeguard Indian markets from money laundering risks, brokers and other intermediaries would need to have designated director for ---------------- compliance by the end of this month.5.----- which has a score of 2.36 and ranks No. 1 in the Anti Money Laundering (AML) Basel Index 2013. Horizontal: 6.In which year the Parliament of India passed an act called the Prevention of Money Laundering Act. 7.This type of money laundering is a process that disguises a legitimate source of funds that are to be used for illegal purposes 8.In December 2012, ---- : paid a record $1.9 Billion fines for money-laundering hundreds of millions of dollars for drug traffickers, terrorists and sanctioned governments such as Iran.The money-laundering occurred throughout the 2000s. 9.---- was a major international bank founded in 1972 by Agha Hasan Abedi, a Pakistani financier. The bank it finally came out was being used to fund criminals and dictators, the CIA of USA was using it to fund the Af-ghan Mujahedeen and Contras. It was laundering proceeds from trafficking heroin grown in Pakistan-Afghanistan, boosting the flow of narcotics to European and U.S markets. 10.Formed in 1989 by the G7 countries, the ---- is an intergovernmental body whose purpose is to develop and promote an international response to combat money laundering.1. 3. 2. 7. 8. 5. 9. 10.4. 6. NISHKA Sept 2014 Volume V Issue 51 17Answers Answers to Quiz: 1.2005 2.ICICI 3.Czech Republic Railways 4.Prakash Wankankar 5.Adani 6.Manjul Bhargava 7.Vistara 8.RIL 9.HDFC 10. JSWAnswers to Crossword: 1.Standard Chartered 2.Gali Janardhana Reddy 3.Merrill Lynch4.PMLA ( Prevention of Money Laundering Act)5.Norway 6.2002 7.Reverse 8.HSBC 9.BCCI - The Bank of Credit and Commerce International10.FATF ANSWERS TO PHOTO FIND: 1.Logo of Standard Chartered which has been in news recently for having faced a hefty money laundering fine. 2.Jeffrey Preston "Jeff" Bezos, technology entrepreneur who has played a key role in the growth of e-commerce as the founder and CEO of Amazon.com 3.Lloyd Craig Blankfein, CEO and Chair man of Goldman Sachs. 4.Manjul Bhargava, the fir st per son of Indian or igin to win the Fields Medal, which is awarded every four years to mathematicians who are 40 years old or younger and is often described as a Nobel Prize for mathematics.5.Logo of HSBC (Hongkong and Shanghai Banking Cor por ation), wor ld' s sec-ond largest bank.6.Arundhati Bhattacharya, the fir st woman to be the Chairperson of State Bank of India. In 2014, she was listed as the 36th most power ful woman in the world by Forbes. NISHKA Sept 2014 Volume V Issue 51 18NISHKA TEAM NishkaisamonthlyfnancenewsleterbroughtbythestudentsofthefnanceclubofChrist University Insttute of Management, Kengeri Campus. The idea behind coining this issue of the magazineistoestablishalearningamongthestudents,whichhelpsthemtogainaninsight about the world of fnance. Faculty Coordinator Prof Shrikanth Rao Coordinators Niharika Shadra, F1 Niken Jain, F2 EditorsRBI ColumnCrossword Gerorge P Job, F2Pawanpreet Kaur, F2Samyuktha P Reddy, F2 Neha Mishra, F2 Introducton Finance BuzzQuizUpasana Gurung, F1Vyom Goel, F2Rahul Srinivas, F2Srijita Mukherjee, F2 Artcle CoordinatorsMarketRound UpPhoto Find Aswathy Edison, F1B.S Sravya, F1Nilanjana Chaterjee, F2Sudeshna Bhatacharya, F2Katepalli Alekhya, F2 Artcle Writng byEconomic RollersCorporate Interview Kalyan Karthik, F2Simmy Kumari, F2Sai Nanthini R K, F2Purnima Singh, F2 Stock Analysis Designing Sooraj Kumar, F1Sharan Kumar G, F2 CHRIST UNIVERSITY INSTITUTE OF MANAGEMENT, KENGERI CAMPUS Please mail your valuable feedback/reviews to nishka@mba.christuniversity.in (for private circulaton only)