What is Difference between FIU & FAIU

The Financial Intelligence Unit (FIU) and the Foreign Assets Investigation Unit (FAIU) serve distinct roles in India’s financial and tax enforcement system. FIU is centered on suspicious financial transactions within the country and ensuring compliance against financial crimes. FAIU specifically deals with foreign assets, focusing on investigating unreported foreign income, properties, and bank accounts, and enforcing penalties for non-disclosure of these assets. Here’s a comparison based on their functions:

• FIU: Focuses on combating financial crimes like money laundering, terrorist financing, and tax evasion by collecting and analyzing financial intelligence. It reports to the Economic Intelligence Council (EIC) led by the Finance Minister and is set up under the Directorate of Income Tax Investigations.
• FAIU: Specializes in investigating undisclosed foreign assets and income, particularly regarding violations of tax and financial laws. It works on tracking and investigating foreign financial transactions.

Key Focus between Financial Intelligence Unit (FIU) & Foreign Assets Investigation Unit (FAIU) 

• FIU: Primarily handles Suspicious Financial Transactions (SFTs), such as high-value cash transactions, unusual fund flows, and non-compliant activities flagged by financial institutions. It focuses on tracking financial activities that raise concerns about illegal activities like money laundering and terrorism financing.
• FAIU: Focuses on unreported foreign assets or income held by Indian taxpayers, such as foreign bank accounts, offshore investments, and properties. It investigates cases of tax evasion linked to these foreign assets.

Scope of Activities between Financial Intelligence Unit & Foreign Assets Investigation Unit

• FIU:
  • Collects Suspicious Transaction Reports (STRs) from financial institutions, including banks, regarding potentially illicit financial activities.
  • Shares intelligence with enforcement agencies like the Enforcement Directorate (ED), Central Bureau of Investigation (CBI), tax agencies, and foreign FIUs to combat financial crimes.
  • Plays a key role in tracking financial transactions within the country and internationally that might involve illegal activities.
• FAIU:
  • Investigates shell companies or accounts in tax havens that are used to conceal foreign assets or income.
  • Assists in tax enforcement by identifying and addressing tax evasion involving foreign assets.
  • Imposes penalties under the Black Money Act (BMA), 2015, in addition to those under the Income Tax Act, 1961.
  • Takes action to seize assets that are located in India but linked to foreign entities or hidden offshore.
  • Works with international organizations such as the OECD and FATF to strengthen global efforts against tax evasion and financial crimes.