AML and KYC (new)

8/3/2019 AML and KYC (new)

http://slidepdf.com/reader/full/aml-and-kyc-new 1/20

BASICS OF AML & KYCBASICS OF AML & KYCPresentation by

*** p.k.mukherjee



What is Money Laundering?What is Money Laundering? It is a process of making dirty money clean.

Money is moved around the financialsystem again and again in such manner that

its origin gets hidden.

Money generated from illegitimate source is

converted into that derived from legitimate

source



Money Laundering ProcessMoney Laundering Process PLACEMENT-

entry of funds in bankingsystem



Money Laundering ProcessMoney Laundering Process

LAYERINGdistancing of funds from

point of entry



Money Laundering ProcessMoney Laundering ProcessINTEGRATION

usage of funds



Engaging in transactionsinvolving property derivedfrom criminal activity

Helping to concealOrigin or ownershipof proceeds of criminal activity

Types of Money Laundering

activities

Structuring financialtransactions to avoid

reporting requirements

Handling

funds used

to finance terrorism

MoneyLaundering



Common sources of moneyCommon sources of money

launderinglaundering Corruption

Fraud

Illegal trafficking of drugs, weapons, people Contract killing, extortion, payment to political parties,

politicians

Terrorism

smuggling

== if unchecked ML could lead to shift of power to organisedcrime leading to eroding of political & social system===



Techniques used by money launderersTechniques used by money launderers

1. No. of cash deposits in same/numerous a/cs2. Cash deposits followed by TT

3. Increase in turnover in dormant a/cs

4. Receipt/Payment of cash from/to unrelated to business

5. Providing fictitious information6. Back to back loans

7. Remittance services/hawala

8. Credit /debit card

9. Internet banking10.International trade & finance

11.Shell companies



Techniques used by money launderersTechniques used by money launderers

12.Gold and diamond market13.Politically exposed persons/ corruption

14.Charities/ non profit organisations



CONSUMER DUE DELLIGENCECONSUMER DUE DELLIGENCE -- Guiding PrinciplesGuiding Principles

1. Do business only with reputable clients involved inlegitimate and lawful business activities.

2. Determine and record the identity, background and

business of all clients.

3. Identify and know the beneficial owners of allrelationships.

4. Understand the business purposes for which bank¶s

products and services are used.

5. Reasonably estimate types and levels of client¶santicipated transactions to regularly monitor for

unusual or suspicious activity and take appropriate

action when questions or inconsistencies arise.



RISK BASED PROCESSESRISK BASED PROCESSES

Identification of high risk areas such as:

cash intensive businesses,

import Export businesses,

Politically exposed persons (PEPs),

correspondent banking,

non face to face businesses,charitable institutions

Aim: identification of beneficial ownership of various

accounts



Components of AML programmeComponents of AML programme

Personal accountability at senior level

Culture, communication, staff training

Good understanding of regulation and global

initiatives

Enhanced account opening controls

Identification & investigation of high risk payments

Identification of suspicious activity

Record keeping



Monitoring of accountsMonitoring of accounts

(a) Geography & country (b) business & entity (c) product &

transaction

Linking of multiple accounts in multiple

jurisdictions with number of people.

Comparing account activity against transaction

history and comparison with peer accounts

<<<Tools>>>

AML transaction trend monitoring software + Link

Analysis software + good data base & name

recognition software



WAYS AVAILABLE FOR EXCHANGEWAYS AVAILABLE FOR EXCHANGE

OF INFORAMTIONOF INFORAMTION

1. Access of information from countries where

Mutual Legal Assistance Treaty is signed

2. Financial Intelligence Unit( FIU) MOU

3. Supervisory gateway



Criticism of AML ProgrammeCriticism of AML Programme Compliance overhead

No value addition

Delivers little Contributes little to bottom line

Increased compliance cost

Excessive regulation

Competitive disadvantage

Case of misplaced energies



Bank officersBank officers-- do¶s & don¶tsdo¶s & don¶ts Exercise constant vigilance right from opening of new accounts

Know your customer & know your colleagues

Separate legitimate business & illegitimate/irregular/ suspicious business

Always think of bank¶s reputation/clean image

Develop risk aware culture- ± a good customer today may not be good tomorrow

Do not exercise willful blindness

Involve in public awareness of KYC issues



What KYC means?What KYC means? Customer?

One who maintains an account, establishes businessrelationship, on who¶s behalf account is maintained, beneficiary of accounts maintained by intermediaries, andone who carries potential risk through one off transaction

Your

?W

ho should know? Branch manager, audit officer, monitoring officials, PO

Know?What you should know?

True identity and beneficial ownership of the accounts

Permanent address, registered & administrative address



What KYC means?What KYC means? Making reasonable efforts to determine the

true identity and beneficial ownership of

accounts;

Sources of funds

Nature of customers¶ business

What constitutes reasonable account

activity?

Who your customer¶s customer are?



KYC DOES NOT MEANKYC DOES NOT MEAN Denial of Service to the Common Person

Intrusive Behaviour

Use of information for cross selling

Harassment of customers- threatening to

close down the accounts arbitrarily



Thank You

Documents

AML and KYC (new)