March 25, 2020

Money Muling,SCORES,Option

What is Money Muling? Money Mule is a term used to describe innocent victims who are duped by fraudsters into laundering stolen or illegal money via their bank account. Whether or not the account holders is aware of it,the account is used to fraudulently transfer money to fraudsters. The use of intermediaries makes it difficult to figure out the identity of the fraudsters.                       
Money Muling Concern: It is a serious customer service issue for the regulator. Such type issue highlight the failure of the banking system and the processes to monitor newly opened accounts. According to Reserve Bank of India , while the standard and the vigor of know your Customer is quite good at the time of opening of account, there is no continuity in terms of surveillance over the transactions in these accounts. Besides, banks have some alerts and exception transaction mechanism which are mostly primitive and generally ineffective.     SCORES: Securities and Exchange board of India has launched a centralized web based complaints name SCORES in June 2011 this provides a centralized database of all investor complaints. Online forwarding of complaints to the listed companies concerned and upload of their action taken reports are done through this mechanism. It also helps investors view, track and follow up the action taken on their grievances. The online SCORES has significantly helped in reducing the processing time of complaints.                                
Types of complaints under SCORE portal: Foreign institutional investor, Merchant Banker,Credit Rating, KYC Collective investment scheme, Listed companies, ragistar and transfer agents, Brokers, stock exchanges,Depository participants, Depository, Mutual funds, Portfolio Managers.                                       

What is  Option: It is a contract that provides a right but does not impose any obligation to buy or sell a financial instrument, say a share or security. It can be exercised by the owner. Options offer the buyers, profits from favourable movement of prices say of shares or foreign exchange. There are two components of options 

(I) Call option:- The buyer has the right to purchase and the seller has to obligation to sell, a specified number of instruments say shares at a specified price during the time prior to expiry date.   

(II) Put Option: The buyer has right to sell and the seller has the obligation to buy during a particular period.

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