Context: India’s Financial Intelligence Unit has issued show-cause notices to nine offshore crypto-currency operators, including Binance, for not complying with the Prevention of Money Laundering Act, 2002 (PMLA).

News:

• Show Cause Notices for compliance have been sent to nine offshore Virtual Digital Assets Service Providers (VDA SPs) under Section 13 of the Prevention of Money Laundering Act (PMLA). The list comprises Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex.
• The Ministry of Electronics and Information Technology has been instructed to block the URLs of these nine entities, as they have been conducting operations in India without adhering to the provisions of PMLA.

Virtual Digital Asset Service Providers (VDA SPs)

• They are involved in activities such as exchanging virtual digital assets for fiat currencies, transferring virtual digital assets, and safekeeping or administering virtual digital assets or instruments that enable control over them.
• In March 2023, they were brought under the Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework as per the provisions of the Prevention of Money Laundering (PML) Act, 2002.
• These entities must register with the Financial Intelligence Unit as Reporting Entities and comply with obligations outlined in the PML Act.
• The obligations are based on activities and are not dependent on physical presence in India. The regulations impose reporting, record-keeping, and other obligations on VDA SPs under the PML Act, and 31 VDA SPs have registered with the Financial Intelligence Unit so far.

The Financial Intelligence Unit (FIU)

It  is an independent body that directly reports to the Economic Intelligence Council (EIC), chaired by the Finance Minister.

• Its functions include receiving cash/suspicious transaction reports, analyzing them, and disseminating pertinent financial information to intelligence/enforcement agencies and regulatory authorities.
• The FIU serves as the primary point of contact for reports on the purchase or sale of immovable property, suspicious transaction reports, cross-border wire transfer reports, and cash transaction reports from various reporting institutions.
• It analyzes the received information to identify patterns of transactions indicative of money laundering and related crimes.
• The FIU shares information with national intelligence/law enforcement agencies, regulatory authorities, and foreign Financial Intelligence Units.
• It also establishes and maintains a national database on cash and suspicious transactions, coordinates financial intelligence collection and sharing on a national, regional, and global scale, and conducts research and analysis on money laundering trends.
• With a sanctioned strength of 75 personnel from various government departments, FIU members are inducted from organizations such as CBDT, CBEC, RBI, SEBI, the Department of Legal Affairs, and intelligence agencies.

 Prevention of Money Laundering Act (PMLA)

The Prevention of Money Laundering Act (PMLA), passed in 2002 in India, establishes a legal framework to prevent money laundering and ensure alignment with international standards for combating financial crimes.

Key Features of PMLA Act 2002:

• Definition of Money Laundering: Acquiring, possessing, or transferring any proceeds of a crime or knowingly entering into a transaction related to the proceeds of a crime constitutes money laundering under the Act.
•  
• Punishments and Penalties: Stringent penalties, including imprisonment and fines, are prescribed for individuals involved in money laundering.
•  
• Attachment and Confiscation of Property: The Act empowers authorities to attach and confiscate properties obtained through laundered money.
• Reporting Obligations: Financial institutions and other entities are mandated to maintain records and report high-value transactions and suspicious activities.
• Establishment of Adjudicating Authority:Authorities, such as the Adjudicating Authority, the Appellate Tribunal, and the Director (Financial Intelligence Unit), are established to enforce the Act's provisions.
• International Cooperation: The Act facilitates international cooperation in cross-border money laundering cases.

Context: The Centre has appointed Arvind Panagariya, a renowned trade economist and former Niti Aayog vice chairman, as the chairman of the Sixteenth Finance Commission.

 About Finance Commission

• The Finance Commission (FC) of India was established by the President in 1951 according to Article 280 of the Indian Constitution.
• Its primary purpose is to define and regulate the financial relations between the central government and the individual state governments.
• The Finance Commission (Miscellaneous Provisions) Act, 1951, further details the qualifications, appointment, disqualification, term, eligibility, and powers of the Finance Commission
• Comprising a chairman and four other members, the FC is appointed every five years
• Since its inception with the First FC, changes in India’s macroeconomic landscape have significantly influenced the Commission’s recommendations

Constitutional provisions:

• Article 268 enables the Centre to levy duties, with the collection and retention carried out by the States.
• Article 280 outlines the composition, member qualifications, and terms of reference of the Finance Commission (FC).
• Article 280 mandates the FC to recommend the distribution of net tax proceeds between the Union and States, as well as the allocation among States. It also addresses financial relations between the Union and States and the devolution of unplanned revenue Resources.

Functions:

• Tax Devolution: The Finance Commission recommends the distribution of net tax proceeds between the Center and States.
• Grants-in-Aid: The Commission establishes principles for grants to States.
• Augmenting State Funds: It advises on measures to increase the Consolidated Funds of States to support local bodies and panchayats, aligning with recommendations from State Finance Commissions.
• Other Financial Functions: The Commission addresses additional financial matters referred by the President.

Members of Finance Commission

• Structure and Standards: The Finance Commission (Miscellaneous Provisions) Act, 1951, establishes a structured format and adheres to global standards for the Finance Commission.
• Qualifications and Powers: The Act outlines rules regarding members' qualifications, disqualification, appointment, term, eligibility, and powers.
• Composition: The Chairman is selected for their expertise in public affairs, while other members are chosen based on their judicial experience, knowledge of government finances, administrative and financial expertise, or special economic knowledge.

Challenges of 16th Finance Commission:

• Overlap with GST Council: The presence of the GST Council, a permanent constitutional body, poses a challenge for the 16th Finance Commission.
• Conflict of Interest: The decisions made by the GST Council regarding tax rates may affect the revenue-sharing calculations of the Finance Commission, creating a potential conflict of interest.
• Feasibility of Recommendations: Although the Central government frequently adopts the Finance Commission's recommendations on tax devolution and fiscal targets, other proposed measures may not receive the same level of consideration.

Context: U.S. Navy helicopters sank three vessels operated by Yemen’s Iran-backed Houthi rebels that had attacked a container ship in the Red Sea, the military said on Sunday.

News:

• The U.S. Navy’s actions came in response to a request for assistance from the ship. Maersk suspended the passage of vessels through the Bab al-Mandab Strait in the Red Sea for 48 hours.
• While transiting the strait, the vessel was targeted with two anti-ship ballistic missiles that were shot down by the U.S. military.

About:

Maersk Hangzhou, a Singapore-flagged and Denmark-owned and -operated container ship, came under attack for a second time in 24 hours while transiting the Red Sea. 

Who is attacking ships in the Red Sea

Since December 15th, four of the most significant container-shipping firms globally—CMA CGM, Hapag-Lloyd, Maersk, and MSC—have halted their operations in the Red Sea due to assaults on commercial vessels by Yemen's Houthi militants, who are backed by Iran.

Reasons of attacks:

• The Houthi attacks on ships in the Red Sea are believed to be driven by their support for Hamas and their opposition to Israel.
• The attacks are seen as part of their efforts to express solidarity with Hamas and target vessels heading to Israel.
• The Houthis have escalated their use of drones and rockets against foreign-owned ships and have also launched such attacks toward Israel.

The Houthi attacks on ships in the Red Sea have potential implications and impacts:

1. Risk of Military Escalation in the Middle East:

• The attacks increase the risk of military escalation in the Middle East.
• Western countries are working to restore order, potentially leading to increased naval activities and, in extreme cases, military actions against the Houthis to ensure free passage.

2. Impact on Egypt:

• Egypt heavily relies on revenue from the Suez Canal, a major income SOURCE.
• The country, already facing a financial crisis, may experience economic challenges if the canal faces prolonged disruptions.

3. Economic Impacts:

• A sustained closure of the Suez route could elevate trade costs as shipping is diverted around Africa, resulting in longer transit times and higher insurance premiums.

4. Short-term Supply-chain Threats:

• The attacks may prompt widespread rerouting of trade, causing short-term disruptions to global supply chains.
• - The incident with the Ever Given in 2021, which blocked the Suez Canal for six days, exemplifies how such disruptions can amplify global supply-chain challenges.

Context: Recent studies by NITI Aayog show that the levy of 20-30% health tax on food high in sugar, salt, and fat. The study by Niti Aayog, studied the impact of imposing health taxes and warning labels on food products to encourage healthy eating practices.

About NITI Aayog:

• Establishment: Formed in 2015.
• Headquarters: Located in New Delhi.

Objectives:

1. Develop a shared vision of national development priorities, sectors, and strategies involving active State participation.
2. Promote cooperative federalism through structured support initiatives and mechanisms with the States on an ongoing basis.
3. Create mechanisms for formulating credible plans at the village level and aggregating them progressively at higher government levels.
4. Ensure the incorporation of national security interests in economic strategy and policy, particularly in specified areas.
5. Focus on technology upgradation and capacity building for effective program implementation.
6. Actively monitor and evaluate the implementation of programs and initiatives.

Salient Features:

• Established through a Union Cabinet resolution on January 1, 2015.
• Replaced the Planning Commission, a non-constitutional body formed in 1950.
• Equipped as a state-of-the-art Resource center with necessary knowledge and skills.
• Aims to act swiftly, promote research and innovation, provide strategic policy vision, and handle contingent issues.
• Supported by attached offices, including Development Monitoring and Evaluation Organisation (DMEO), Atal Innovation Mission (AIM), and an autonomous body, the National Institute of Labour Economics Research and Development (NILERD).

Structure:

• The Governing Council is the primary body responsible for developing a shared vision of national priorities and strategies.
• The Governing Council includes Chief Ministers of all States, Union Territories with legislatures, and Lt Governors of other Union Territories.

Functions and Activities:

NITI Aayog's activities encompass four main areas:

1. Policy and Programme Framework
2. Cooperative Federalism
3. Monitoring and Evaluation
4. Think Tank, Knowledge, and Innovation Hub

Taxation on High Fat Sugar Salt (HFSS) Foods:

Definition of HFSS Foods:

As per the Ministry of Women and Child Development, High Fat Sugar Salt (HFSS) foods encompass any packaged or non-packaged food or drink. These items are characterized by low levels of proteins, vitamins, phytochemicals, minerals, and dietary fiber, while being high in fat (saturated fatty acids), salt, sugar, and overall energy (calories). Regular or excessive consumption of these foods is known to have adverse effects on health.

Recommendations by WHO and ICRIER:

The World Health Organization (WHO) and the Indian Council for Research on International Economic Relations (ICRIER) advocate that the Food Safety and Standards Authority of India (FSSAI) should clearly delineate High Fat Sugar Salt foods, ensuring transparency. They propose the adoption of a nutrient-based tax model.

Reasons for Taxation on HFSS Foods:

1. Health Risks: These foods pose significant health risks.
2. Economic Burden of Obesity: The economic burden of obesity in India was $23 billion in 2017.
3. Increasing Consumption: There is a rising trend in the consumption of such foods in India.

Benefits of Taxing HFSS Foods:

1. Promotion of Healthier Choices: Taxation encourages the selection of healthier food options.
2. Improved Public Health Outcomes: It contributes to better public health outcomes.
3. Reduction of Healthcare Burden: By discouraging the consumption of HFSS foods, the burden on the healthcare system is reduced.

Context: Recently, Small finance bank (SFB) campaigns were launched.The initiative aims to showcase the achievements of Small Finance Banks (SFBs) in terms of their business models to various stakeholders.

About Small Finance Bank (SFB):

Small Finance Banks are financial institutions dedicated to providing financial services in regions that are underserved and unbanked.

• They are incorporated as public limited companies under the Companies Act, 2013.
• The minimum paid-up capital required is ₹100 crore.
• Capital adequacy ratio must be 15% of risk-weighted assets.
• Foreign shareholding is capped at 74% of paid capital.
• Foreign Portfolio Investment (FPIs) is limited to 24%.
• They need to fulfill a priority sector lending requirement of 75% of total adjusted net bank credit.

Eligibility Criteria:

• Resident individuals/professionals with at least 10 years of banking and finance experience can establish Small Finance Banks with RBI approval.
• Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) in the private sector are eligible.
• Indian residents with a successful track record of running businesses for a minimum of five years must be in control.
• Joint ventures for setting up Small Finance Banks are not allowed, as per revised Priority Sector Lending Guidelines.

Functions:

• SFBs are authorized to accept small deposits and grant loans.
• They can distribute mutual funds, insurance products, and other simple third-party financial products.
• 75% of their total adjusted net bank credit must be allocated to the priority sector.
• The maximum loan size is limited to 10% of capital funds for a single borrower and 15% for a group.
• A minimum of 50% of loans should be up to ₹25 lakhs.

Context: The Supreme Court has struck down the Gujarat government’s remission orders that allowed the early release of 11 men convicted in the Bilkis Bano gangrape case of 2002. A Bench of Justices B V Nagarathna and Ujjal Bhuyan on Monday (January 8) said the Gujarat government’s August 10, 2022 decision to remit the convicts’ sentences was “illegal”.

Background:

The Bilkis Bano case is related to the gang-rape of a 21-year-old Muslim woman, Bilkis Bano, during the communal riots that broke out in Gujarat in 2002.She was five months pregnant at the time of the incident. The case has been marked by several key milestones and controversies, including the conviction of 11 accused, their release on remission, and challenges to the premature release in the Supreme Court

• The incident occurred on March 3, 2002, in the district of Dahod, Gujarat, during the Godhra riots
• Bilkis Bano and her family were fleeing from the violence when they were captured by a mob of 20-30 Hindus
• She was raped, and 14 of her family members were killed
• Bilkis was taken to the Limkheda police station, where an FIR was registered, but the fact that she was raped was not stated, and the accused were not named

Trial and Conviction:

• The local police repeatedly rejected Bilkis Bano's case, citing insufficient evidence
• However, the CBI, after a thorough investigation, gathered all the evidence and arrested all the accused against whom the complaint was filed
• In December 2003, Bilkis Bano approached the Supreme Court, where she filed a guilty plea
• The National Human Rights Commission (NHRC) and Supreme Court took up the case and directed a CBI investigation
• In January 2004, the CBI filed a chargesheet against 20 accused
• In May 2017, the Bombay High Court upheld the conviction and life imprisonment of 11 convicts

Premature Release and Challenges:

• In February 2020, the Gujarat government granted remission to the 11 convicts, allowing their release
• Bilkis Bano and several other petitioners challenged the premature release of the convicts in the Supreme Court
• The Supreme Court reserved its verdict on the pleas challenging the premature release of the 11 convicts and asked the Centre and Gujarat to produce records

On what grounds did the Supreme Court strike down the remission given by the Gujarat government in 2022?

• The Gujarat government lacked the authority to consider remission applications for convicts seeking a reduced sentence, according to Justices B V Nagarathna and Ujjal Bhuyan.
• The Supreme Court emphasized that, according to Section 432 of the CrPC, an application for remission should be submitted to the government within the territorial jurisdiction where the applicant was convicted, in this case, Maharashtra.
• Despite the power of state governments under Section 432 to suspend or remit a sentence, Section 7(b) specifies that the appropriate government is the one within whose jurisdiction the offender is sentenced.
• The court accused the state of Gujarat of exceeding its powers by considering remission applications that should have been handled by Maharashtra.

Can the convicts apply for remission again? If so, before whom, and under what rules?

• The criminal justice system includes provisions for remission or reduction of sentences, acknowledging the potential for a person's reformation.
• The Supreme Court emphasized the existence of competing interests, balancing the rights of the victim or their family to justice against the convict's claim to a second chance.
• The court expressed skepticism about granting a second chance, especially for heinous offences, stating that it is not an indefeasible right of a convict.
• Convicts can seek remission from the Maharashtra government in the future, with the decision depending on various factors, including the state's remission policy.
• The judge referred to the Government Resolution (GR) dated April 11, 2008, which mandates a minimum imprisonment of 28 years for convicts guilty of crimes against women and minors with exceptional violence before applying for remission.

After the remission has been quashed, should the convicts be sent back to prison, or given the benefit of liberty?

Despite the careful consideration, the court concluded that the rule of law must take precedence over individual liberty.Consequently, the court decided to set aside the remission orders under scrutiny, leading to the natural consequence of the convicts being directed to report to the relevant jail authorities.