source. and/or destination of illegally gained money by which the proceeds of crime are converted into assets which appear to have a legitimate origin. y In the United Kingdom the statutory definition is wider. It is common to refer to money legally obtained as ³clean´.y Money laundering is generally regarded as the practice of engaging in financial transactions to conceal the identity. and money illegally obtained as ³dirty´. .

.DEFINITION y Money laundering is the process by which large amounts of illegally obtained money (from drug trafficking. terrorist activity or other serious crimes) is given the appearance of having originated from a legitimate source.

y Layering. but they can also appear in well separable forms one by one as well.THE MONEY LAUNDERING PROCESS y Money laundering is not a single act but is in fact a process that is accomplished in three basic steps. These steps can be taken at the same time in the course of a single transaction. The steps are:y Placement. and y integration .

Three common factors identified in laundering operations are.There are also common factors regarding the wide range of methods used by money launderers when they attempt to launder their criminal proceeds. y the need to maintain control of the proceeds. y the need to change the form of the proceeds in order to shrink the huge volumes of cash generated by the initial criminal activity. . y the need to conceal the origin and true ownership of the proceeds.

the launderer inserts the dirty money into a legitimate financial institution.1) Placement At this stage. and banks are required to report high-value transactions. This is the riskiest stage of the laundering process because large amounts of cash are pretty conspicuous. This is often in the form of cash bank deposits. .

diamonds) to change the form of the money.Layering involves sending the money through various financial transactions to change its form and make it difficult to follow. changing the money's currency.2) Layering . cars. This is the most complex step in any laundering scheme. Layering may consist of several bank-to-bank transfers. . houses. and it's all about making the original dirty money as hard to trace as possible. making deposits and withdrawals to continually vary the amount of money in the accounts. and purchasing high-value items (boats. wire transfers between different accounts in different names in different countries.

the criminal can use the money without getting caught.At the integration stage.3) Integration . the money re-enters the mainstream economy in legitimate-looking form -. .it appears to come from a legal transaction. the sale of a yacht bought during the layering stage or the purchase of a $10 million screwdriver from a company owned by the launderer. It's very difficult to catch a launderer during the integration stage if there is no documentation during the previous stages. At this point. This may involve a final bank transfer into the account of a local business in which the launderer is "investing" in exchange for a cut of the profits.

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Section 3 of the Act makes the offense of moneylaundering cover those persons or entities who directly or indirectly attempt to indulge or knowingly assist or knowingly are party or are actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property. . y Section 4 of the Act prescribes punishment for money-laundering with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees and for the offences mentioned [elsewhere] the punishment shall be up to ten years. such person or entity shall be guilty of offense of money-laundering. 2002 came into effect on 1 July 2005.Legislation The Prevention of Money-Laundering Act.

Section 12 (2) prescribes that the records referred to in sub-section (1) as mentioned above.y Section 12 (1) prescribes the obligations on banks. y The recent activity in money laundering in India is through political parties corporate companies and share market. . financial institutions and intermediaries (a) to maintain records detailing the nature and value of transactions which may be prescribed. must be maintained for ten years after the transactions finished. and where such series of transactions take place within a month. (b) to furnish information of transactions referred to in clause (a) to the Director within such time as may be prescribed and t records of the identity of all its clients. y The provisions of the Act are frequently reviewed and various amendments have been passed from time to time. whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other.

traditional ways of knowing their customers must be supplemented by technology. or other indicators of laundering. unusual transactions. Knowing one's customers. . financial intermediaries will often be able to identify unusual or suspicious behavior. But for institutions with millions of customers and thousands of customercontact employees. changing behaviour. including false identities. Many Companies provide software and databases to help perform these processes. Bank and corporate security directors can also play an important role in fighting money laundering.Fighting money laundering y The first defense against money laundering is the requirement on financial intermediaries to know their customers²often termed KYC know your customer requirements.

That practice. In both the United States and Canada. known as "structuring." will also lead to flagged transactions.Anti-money laundering (AML) software y Anti-money laundering (AML) software is a type of computer program used by financial institutions to analyze customer data and detect suspicious transactions.000 or greater must be reported. Such anomalies would include any sudden and substantial increase in funds or a large withdrawal. a person who wants to avoid detection will sometimes deposit a large sum as multiple smaller sums within a brief period of time. all transactions of $10. classify it according to level of suspicion and inspect it for anomalies. Smaller transactions that meet certain criteria may be also be flagged as suspicious. For example. Anti-laundering systems filter customer data. .

Once the software has mined data and flagged suspect transactions. y Important aspects of AML software:y y y y y y y y Suspicious Activity Detection Know Your Customer (KYC) Management Caution / Watch List Management & Checking Of Customers / Prospects Customer Risk Categorization Link Tracing Large Cash Transaction Reporting Regulatory Reporting Online AML and List Check for Remittance Transactions . it generates a report.The software flags names that have been blacklisted and transactions involving countries that are thought to be hostile to the host nation.

y "If you want to steal. "Bertolt Brecht" . then buy a bank".

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