Basics of Anti-Money Laundering & Know Your Customer. By M.RAVINDRAN JOINT DIRECTOR INDIAN INSTITUTE OF BANKING & FINANCE MUMBAI. What is Money Laundering?. Illegally obtained money. Appears to originate from legitimate source. Conversion. Criminal Activity.
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INDIAN INSTITUTE OF BANKING & FINANCE
Drugs / Arms Trafficking
'Any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources'.
In other words, it is the process used by criminals through which they make “dirty” money appear “clean”
“whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of the offence of money-laundering”
Money laundering generally refers to ‘washing’ of the proceeds or profits generated from:
“Soaping / Scrubbing”
The separation of illicit proceeds from their source by creating complex layers of financial transactions
These disguise the audit trail & provide anonymity
“Repatriation / Spin Dry”
Reinjecting laundered proceeds into economy so that they reenter financial system as normal business funds
Provides an apparently legitimate explanation to criminally derived wealth
What are the risks to banks?
(i) Reputational risk
(ii) Legal risk
(iii) Operational risk (failed internal processes, people and systems & technology)
(iv) Concentration risk (either side of balance sheet)
All risks are inter-related and together have the potential of causing serious threat to the survival of the bank
Observing Rules for
Irregular / Suspicious