Anti Money Laundring

7/24/2019 Anti Money Laundring

1/43

ANTI MONEY LAUNDERING


2/43

The goal of large number of criminal acts are, to generate a profit for the individual orgroup that carries out the act.Money laundering is the process of these criminal proceeds to disguise their illegalorigin.This process is of critical importance, as it enables the criminal to enjoy these profitswithout jeopardizing their source.

WHAT IS MONEY LAUNDERING


3/43

DIFFERENT STAGES OF MONEY LAUNDERING

Money Laundering can be explained in three stages for theconvenience of understanding.

PLACEMENT LAYERING INTEGRATION


4/43

The first time funds derived from criminal activities are used in a legitimatemoney transfer are referred to as Placement.

PLACEMENT

This stage poses

t this stage, the launderer inserts the dirty money into a legitimate financialinstitution. This is often in the form of cash ban!deposits. This is the ris!iest stage of

the laundering process because large amounts of cash are pretty conspicuous, andban!s are re"uired to report high#value transactions.
http://money.howstuffworks.com/bank.htmhttp://money.howstuffworks.com/bank.htm


5/43

The physical disposal of cash proceeds derived from illegal activity. The first time funds derivedfrom criminal activities are used in a legitimate money transfer is referred to as Placement.

This stage poses the greatest ris! to Money $ervices %usiness &'M$%s()*

Transactions may be structured to avoid recordkeeping or reporting

thresholds.False identification and / or information may be provided.


6/43


7/43

LAYE!"#

Layering involves sending the money through various financial transactions tochange its form and ma!e it difficult to follow.Layering may consist of several ban!#to#ban! transfers, wire transfers betweendifferent accounts in different names in different countries, ma!ing deposits andwithdrawals to continually vary the amount of money in the accounts, changingthe money+s currency, and purchasing high#value items &boats, houses, cars,

diamonds) to change the form of the money.This is the most complex step in any laundering scheme, and it+s all aboutma!ing the original dirty money as hard to trace as possible.

$eparating illegal proceeds from their source by creating complex layers offinancial transactions designed to disguise the audit trail and provide anonymity.

reating a series of transactions to hide the first transaction is referred to asLayering.
http://science.howstuffworks.com/diamond.htmhttp://science.howstuffworks.com/diamond.htm


8/43


9/43

!"TE#AT!$"

t the integration stage, the money re#enters the mainstream economy inlegitimate#loo!ing form # it appears to come from a legal transaction.This may involve a final ban! transfer into the account of a local business inwhich the launderer is -investing- in exchange for a cut of the profits, thesale of a yacht bought during the layering stage or the purchase of a /0million screwdriver from a company owned by the launderer.

t this point, the criminal can use the money without getting caught. 1t+svery difficult to catch a launderer during the integration stage if there is nodocumentation during the previous stages.

1f the layering process has succeeded, integration schemes place thelaundered proceeds bac! into the economy in such a way that they re#enter the financial system appearing to be normal business2legitimate

funds.

The return of funds to legitimate activities is referred to as !ntegration.


10/43


11/43


12/43

nti#money laundering &ML) is a term mainly used in the financial and legal

industries to describe the legal controls that re"uire financial institutions andother regulated entities to prevent or report money laundering activities.

nti Money Laundering processes and controls helps ban!s and financialinstitutions to protect themselves and their reputation from the criminals.


13/43

%ey elements of a sound Anti &oney Laundering programme

Minimum $tandards and Policies, approved by $enior Management, which clearly setout your philosophy on crime prevention and business re"uirements.

$trong -3now 4our ustomer- chec!s at customer ta!e#on to identify and exclude

!nown criminals but also to be sure you !now the real identity of the customers you dota!e on.

5obust training programmes for all staff.

Processes &very often automated) to monitor the activities on customer accounts toidentify suspicious activity and to chec! incoming and outgoing payments forunauthorised transactions and to enable reports to be made to relevant authorities.


14/43

67 7xchange 8 9$ ML ompliance Programme

nti Money Laundering &ML) 8 ombating of 9inancing ofTerrorism &9T) Policy 9ramewor! comprises of the following !ey elements.

/. ML 8 9T Procedures:. ppointment of Principal ;fficer and ompliance ;fficers. 5etention of records?. 1dentifying and 5eporting of $uspicious transactions@. 1ndependent review of nti#Money Laundering Program


15/43


16/43

P$L!'Y #(!)EL!"E* F$ F$E+

3A;B 4;65 6$T;M75 &34)

AT1 M;A74 L6AC751AD &ML)

;M%T1AD 91AA1AD ;9 T755;51$M &9T)


17/43

,hy money laundering

Terrorism 9inancing

Tax 7vasion


18/43

WHAT IS FINANCING OF TERRORISM

Terrorist financing means providing financial support to terrorists or terroristorganizations to enable them to carry out terrorist acts.

1t is a closely related aspect of money laundering, where apparently legitimate fundsare used to finance terrorist activities.

1t is sometimes referred to as Ereverse money launderingF, since it involves source offunds for committing the crime as against the funds derived from crime.


19/43

,hat is Terrorism-

Terrorism is defined as the calculated use ofviolence &or the treat of violence) againstcivilians, in order to attain goals that arepolitical or religious or ideological in nature,which is done through intimidation or coercionor instilling fear.


20/43

,hat is financing of terrorism

Terrorist financing means providing financial support to terrorists or terroristorganizations to enable them to carry out terrorist acts.1t is a closely related aspect of money laundering, where apparently legitimate fundsare used to finance terrorist activities. 1t is sometimes referred to as Ereverse moneylaunderingF, since it involves source of funds for committing the crime as against the

funds derived from crime.


21/43

,hat is combating financing of terrorism 'FT-

1nitially, the focus of enforcement efforts for ombating 9inancing of Terrorism &9T)purposes were on charities, unregistered money service businesses &M$%s) & so calledunderground ban!ing or EGawalasF), and registered M$%s, that were unregulated for9T.

The 9inancial ction Tas! 9orce FATF),set up in /HIH by the D#@ summit in Paris,&wor!ing with 6$) brought in H special recommendations for 9T, which wererecommended standards applicable to all 9T9 members, who were expectedto upgrade their laws, regulations and enforcement efforts, including through9inancial 1ntelligence 6nits &916s) and cross#border sharing of information for 9Tpurposes.


22/43

FATF Public statement

Paris, :: ;ctober :0/0 # The 9inancial ction Tas! 9orce &9T9) is the globalstandard setting body for anti#money laundering and combating the financing ofterrorism &ML29T).

1n order to protect the international financial system from ML29T ris!s and toencourage greater compliance with the ML29T standards, the 9T9 identified

jurisdictions that have strategic deficiencies and, along with the 9T9#styleregional bodies &9$5%s), wor!s with them to address those deficiencies that posea ris! to the international financial system.

The 9T9 blac!#list & Aon# co#operative countries and territories &AT) list)mechanism was used to coerce countries to bring about change. ll these effortshave brought about a huge change to global 9T regulations and have ushered in anew era of information sharing.


23/43

Bhat is 916#1AC

9inancial 1ntelligence 6nit # 1ndia &916#1AC) is the central, national agencyresponsiblefor receiving, processing, analyzing and dissemainating informationrelating to suspect financial transactions to enforcement agencies and foreign916s.

1n their simplest forms, 916s are agencies that receive reports of suspicioustransactions from financial institutions and other persons and entities, analyze them,and disseminate the resulting intelligence to local law#enforcement agencies and916s to combat money laundering.

s government agencies, 916s must retain sufficient independence to accomplishtheir objectives without undue interference or influence.


24/43

Functions of F!(0!")

The main function of 916#1AC is to receive cash2suspicious transaction reports,analyse them and, as appropriate, disseminate valuable financial information tointelligence2enforcement agencies and regulatory authorities.

The functions of F!(0!") are1

'ollection of !nformation1ct as the central reception point for receiving ash Transaction reports&T5s) and $uspicious Transaction 5eports &$T5s) from various reporting entities.

Analysis of !nformation1nalyze received information in order to uncover patterns of transactionssuggesting suspicion of money laundering and related crimes.

*haring of !nformation1$hare information with national intelligence2law enforcement agencies, nationalregulatory authorities and foreign 9inancial 1ntelligence 6nits.

Act as 'entral epository1 7stablish and maintain national data base on cash transactions and suspicioustransactions on the basis of reports received from reporting entities.

'oordination1oordinate and strengthen collection and sharing of financial intelligence through aneffective national, regional and global networ! to combat money laundering and related crimes.

esearch and Analysis1Monitor and identify strategic !ey areas on money laundering trends, typologiesand developments.


25/43

eports to be sent F!(0!")/2!

$T5 *$uspicious Transaction 5eport s and when such transactions occur.

T5 *ash Transaction 5eport on a monthly basis.

5etention of 5ecords # /0 years.


26/43

E3amples of &oney Laundering and *uspicious !ndicators

;ne receiver collects transactions from multiple senders on the same daythat total more than local Large ash Transaction 5eporting thresholds inthe $end25eceive country.

-6#turn- transactions, e.g. money passes from one person or company toanother, and then bac! to the original person or company


27/43

Ceposits followed within a short period of time by wiretransfers of funds

ustomer refuses, or is unwilling, to provide explanation of financial activity,or provides explanation assessed to be untrue

ustomer provides suspicious identification document that may have beenaltered or do not fit the person presenting it

ustomer has an unusual or excessively nervous demeanor


28/43

Customer discusses your record-keeping or reporting duties with an

apparent intention of avoiding them

Customer threatens your employee attempting to deter a recordkeeping or

reporting duty


29/43

Customer makes large cash transaction without counting the cash

Employees frequently overrides internal controls or establishedapproval authority or circumvents policy

Transactions where customers make frequent large overseasremittances within a short period of time, unless they are foundrational in view of their occupation, business details and otherfactors


30/43

Punishment for money laundering

Bhoever commits the offence of money#laundering shall be punishablewith rigorous imprisonment for a term which shall not be less than three years butwhich may extend to ten years and shall also be liable to fine which may extend tofive la!hs rupees*


31/43

2ALA"'!"# A&L '$&PL!A"'E A") 2(*!"E**


32/43

&easures to prevent money laundering 4 combating of terrorism

/. ppointment of Principal ;fficer:. Bell framed an ML policy for the company.. $T5,T5,5 are being submitted to 916, centrally.?. Maintenance of records for all transactions.@. ustomer Cue Ciligence carried out at all branches.


33/43

P!"'!PAL $FF!'E A") '$&PL!A"'E $FF!'E

As per RBI Guide lines one senior most ofcial o the company must beappointed as Principal Ofcer.

All Branch Heads are by deault the Compliance Ofcers.


34/43

evised policy guidelines on %Y'/A&L/'FT

There are to sets o boo!lets on re"ised policy #uidelines on$%C&A'(&C)T * one on )ore+ and other on 'oney Transer.

This need to be presented at the time o RBI inspection or"eri,cation* i as!ed.

P;L14 D61C7L1A7$ 9;5 9;57J and MT$$

3A;B 4;65 6$T;M75 &34)

AT1 M;A74 L6AC751AD &ML);M%T1AD 91AA1AD ;9 T755;51$M &9T)


35/43

Which are the circulars of RBI governing the applicability of PMLA forMoney Changing/Money Transfer business?

5%1 has published detailed guidelines on 342ML29T vide its P&C15.$eries) irculars /@ and /I both dated :@.//.:00H for moneychanging2money transfer business. The said irculars also mandated alluthorized Persons to*

Gave a revised Policy framewor! on 342ML29T

Prepare ustomer cceptance Policy2ustomer 1dentification procedure

ppoint Principal ;fficer in place of ML5;

Place before the %oard of Cirectors compliances on lapses, if any,reported by the oncurrent uditors.


36/43

Co you categorise the transactions2customers and on what basisK

On the basis o the -ue -ili#ence i.e $%C orms stipulated by the RBI. Customer Acceptance Policy. Customer Identi,cation Pro#ram. 'onitorin# o Transactions. Ris! 'ana#ement.

Type

Type of the Custoer Ris!

/i0 Re#ular customers ho ha"e been dealin# ith us or lon# time (o

/ii0Those introduced by our e+istin# customers* 1ub2A#ents*Commission&Reerral A#ents* Tra"el A#ents* #eneral al! in customers

'edium

/iii0General 3al!2in customers rom countries hich are yet to complyith )AT) re4uirements* Politically 5+posed Persons.

Hi#h

AML Training Report Model


37/43

g


38/43

Please note the follo5ing

%Y' does not mean*

Cenial of service to the common man

Garassment of customers

5ude behavior

Putting up a body language2"uestions as if the customer is a suspect


39/43

Co not refuse transactions at the face of it without analyzing theris!s involved, except if it is related to sanctions filtering.

1f you are not sure of conducting a transaction, please consult withyour ompliance ;fficer2%ranch Gead before refusing thetransaction.

Bhen re"uesting for information or documents from customer, alwaysbe polite in your conversation and frame the "uestions in such a waythat it will the ma!e the customer to share the re"uired information.

1f a customer approaches the counter for a transaction, who is foundto be suspicious, please do not display your suspicion openly, by

whispering to one another behind the counter.


40/43

1f a transaction is not possible through certain mode, always give alternativesuggestions to the customer for conducting the transaction which are in linewith the ML ompliance policy and procedures. 7g. Trade transactions to1ndia through 5C is restricted to 1A5 :00,0002#. %ut if the customer wants

to send a higher amount, you can always advise the customer to send in 6$Cthrough $B19T.

%ut this does not mean that you can compromise with the guidelines.


41/43

ML8T9 Policy 8 Procedures is not intended for hindering the D5;BTGof the business.

1t is not to ma!e us defensive in our business approachML8T9 guidelines have been implemented to protect and prevent ourbusiness from being misused for money laundering and terroristfinancing.

The policy of being too cautious is the greatest risk of all.


42/43

Please 'ontact1

atnakumar6 6 hief ompliance ;fficer # nti#money Laundering &1ndia)

(AE E3change 4 Financial *ervices Ltd7!!! Floor7 Airlines 2uilding7 &.#. oad7 %ochi 0 89: ; ?;>99> ?;>9@


43/43

Tan! Yo"#$$

Anti Money Laundring

Documents

Transcript of Anti Money Laundring