PRE-READ: e-RBC on AML-CFT

(Anti-Money Laundering /Combating of Financing of Terrorism)

With a view to strengthen AML CFT Compliance Culture amongst the staff and to prevent banks
from being used, intentionally or unintentionally by criminal elements for money laundering,
AML CFT Day is celebrated on 2nd Nov. each year.

A brief on basic guidelines on AML-CFT is as below:

Bullet PointS Detail

Underlying To ensure that Bank’s products & services and its channels are not
principle/Objective misused by unscrupulous persons for Money Laundering, Terror
of AML-CFT Financing and other related financial crimes.
AML CFT Cell of A centralized unit for transaction monitoring under PML Act 2002, is
Bank situated at Jaipur as AML CFT Cell headed by GM (AML-CFT).
Money Process of turning Black money into white money so that money derived
Laundering from illicit activities appear legitimate.
Prevention of • For creating Anti Money laundering framework in India.
Money • PMLA 2002, was brought into force w.e.f. 1st July 2005.
Laundering Act
2002 • Designated Director under PML Act 2002 is MD (R, C & SARG)
(PMLA-2002) • Section 12 of PMLA 2002 casts certain obligations on the banks (as
Reporting Entities), regarding preservation of records of transactions
(for a period of 5 years from the date of transaction) and reporting of
customer account information.
Unlawful Activities For prevention of certain unlawful activities of individuals and
Prevention Act associations and for dealing with terrorist activities
1967 (UAPA)
FIU-IND Financial Intelligence Unit-India. It was set up by the Govt. of India in
2004.
Financing of Solicitation of funds, Collection of funds and Providing funds
Terrorism
Stages of Money 1st Stage : Placement
Laundering 2nd Stage: Layering
3rd Stage: Integration
Placement Physical disposal of illegal funds by infusing them into the financial
(1st Stage) system using smurfing techniques that is breaking up large amount of
cash into smaller amount or purchasing of cheques / money orders for
crediting to different accounts at different locations.

1
 Layering Separation of illicit proceeds from their original sources and layering of
(2nd Stage) financial transactions through a series of conversions or movement of
funds with the intention to conceal the origin of the proceeds.
Integration Criminally derived assets which have been placed and layered are routed
(3rd Stage) back to legitimate economy For example invest the funds into real estate,
luxury assets or business ventures etc.
Principal Officer GM (AML-CFT) who reports the prescribed transactions to FIU-IND, on
in our Bank behalf of the Bank, as per section 12 of PMLA 2002
MLRO (Money- Designated Official for ensuring proper implementation of
Laundering KYC/AML/CFT and to report to principal officer (AML-CFT)
Reporting Official) • From Circle :MLRO - DGM & CFO (Now redisgnated as DGM
Compliance & Risk)
• From AO : Dy MLRO - DGM (B&O)
• From Regions :Asstt MLRO- AGM (Regions)
• Branches : Asstt. MLRO - Branch Heads
• CPCs :Asstt. MLRO -> Heads of the CPCs

Ministry of Home • Issues guidelines to all the Banks/Financial Institutions to attend the
affairs (MHA) complaints on 24 x 7 basis to provide swift resolution and to curb to
movement of funds immediately.
• MHA has also launched a national helpline number 155260 and
rolled out https://cybercrime.gov.in portal for reporting the Cyber
crimes.

TBML Process of Disguising the proceeds of crime and moving value (value and
(Trade Based goods) using trade transactions to legitimize their illicit origins.
Money- Commonly used techniques, wherein price of the good or service is
Laundering) misrepresented in the invoice by exporter/seller:
• Over Invoicing (Short Shipping) : By increasing the price above the fair
market price )
• Under-Invoicing (Over-Shipping): By decreasing the price below the
fair market price.
• Multiple Invoicing : By increasing the price above the fair
• Over or under shipment : both way possible
• False representation of quality : Spurious/counterfeit goods in the name
of better quality goods

OFAC • Office of Foreign Assets Control, US Deptt of Control.

• OFAC publishes specially Designated Nationals (SDN) and Blocked
Person's list.
MR (Mandatory • Cash Transaction Report (CTR) under Rule 3A & 3B
Reports U/S 3(1) of • Non-Profit Organizations Reports (NTRs) under Rule 3BA
PML Rules) • Counterfeit Currency Reports (CCRs) Rule 3C
• Suspicious Transaction Reports (STRs) under Rule 3D
• Cross Border Wire Transfer Report (CBWTRs) under Rule 3E

2
Penalty for
deficiency in
Minimum Rs.10000 to Rs. 100000/- per instance per day
filing MR
CTR If cash deposited in anyone account beyond the reporting threshold limit,
the Bank has obligation to report the transaction under CTR to FIU-IND
• Threshold limit :All cash transactions of > Rs.10 lac or its equivalent
in foreign currency
th
• Due Date : 15 day of the succeeding month
NTR All transactions involving receipts from NPOs
• Threshold limit : All cash transactions of > Rs.10 lac or its equivalent
in foreign currency
• Due Date : 15th day of the succeeding month
CBWTR All cross-border wire transfers
• Threshold limit: > Rs.5 lac rupee or its equivalent in foreign currency
th
• Due Date: 15 day of the succeeding month
CCR All cash transactions, where forged or counterfeit currency notes or bank
notes have been used as genuine or where any forgery of a valuable
security or a document has taken place facilitating the transactions.
• Threshold limit : All cash transactions of > Rs.10 lac or its equivalent
in foreign currency
th
• Due Date : 15 day of the succeeding month

STR Transactions of unusual or suspicious nature, made in cash or not.

• Threshold limit : Any suspicious transaction irrespective of amount
• Due Date: As and when detected basis within 7 working days
• Format: In one pager STR through online app in CBS path
• STR is classified into 2 broad categories based on the source of alert.
a) System Generated Alerts (Online Alerts)
b) Subjective STRs (Off line Alerts)

ATR Banks are not obliged to submit ATR to FIU-IND under PMLA-2002
(Action taken
Report)
Customer Risk Periodicity: Not less than once in six months
Categorization • High Risk: Every 2 years
(CRC) • Medium Risk :Every 8 years
• Low Risk: Every 10 years
Red-Flag Any adverse feature monitored in CDD (Customer Due diligence),
Indicators (RFI) EDD(Enhanced Due diligence) and TDD(Transaction Due Diligence).
Based on these features RFIs, suspicious transactions or attempted
suspicious transactions are reported to FIU-IND.

80 Offline RFIs have been issued by FIU-IND. Out of which, 74 Red flag
indicators have been issued for Due Diligence at operating level.

3
Off line Alerts Based on alerts/information from branches/staff/media report or law
enforcement agencies as mentioned below:
• Customer Verification (CV): Detected through Customer Due
Diligence
• Law Enforcement Agency (LEA) : Query recd. from Enforcement
Agencies
• Media Reports (MR): Adverse media reports about customer
• Employee initiated (EI): Employee raised alert during transaction
dealing out
• Public complaint (PC): Complaint received from public
• Business Associates (BC): Information received from other
institutions or Business associates.

Name Screening • Process by which name of a person or entity is screened against various
negative lists circulated by various regulations, agencies and the
institution itself.
• It reduces the risk of misuse of Bank’s Channels and facilities by
unscrupulous elements for money laundering and or terrorist financing,
by filtering out persons of criminal and dubious background at the on
boarding stage itself.
Money-Mule Transactions where account(s) of any individual / entity is/ are misused by
Transactions unscrupulous elements to receive money and subsequently transfer the
funds to accounts controlled by these elements.
Tip-Off Whenever any information is sought by AML-CFT Deptt., through
(Disclosure) email/Phone/fax, it should be provided promptly without tip off
(disclosure) to customer
Beneficial A natural person who ultimately controls a client and/or the person on
Owner whose behalf the transactions are being conducted and includes a person
who exercises effective control over an entity.

Effective control means in case of Company : >25%

and in case of Partnership and Trust : >15 %

NGO and Non- These are considered as a significant risk for terrorist financing,
Profit corruption and money laundering due to following reasons:
Organizations • Access to significant funding sources,
• Generally have a presence worldwide
• In some jurisdictions are subject to little regulation i.e. scrutiny of
the account by the operating staff at all levels.

Global Institutions • FATF (Financial Action Task force)

in AML CFT • FSRBs (FATF styles Regional Bodies)
• The Wolfsberg Group
• The Egmont Group

4
FATF (Financial • It’s an Inter-Governmental body to set standards and promote effective
Action Task force) implementation of legal, regulatory and operational measures for
combating money laundering, terrorist financing and other related
threats to the integrity of the International financial system.
• It has issued 40 Recommendations.

FSRBs For disseminating international standards of FATF, 9 FSRBs have been

established throughout the world.

The Wolfsberg An association of 13 global Banks for management of financial crime and
Group risk.
Egmont Group A united body of Financial Intelligence Units (FIUs) of different countries
Shell Companies Companies without physical presence, with hidden owners and
sometimes project the image of being a real, normal business entity.
KYC Policy Backbone of an effective and responsible AML-CFT system, by which
Customer profile of the Bank is provided to AML-CFT Cell. KYC
Compliance and Fraud Prevention Day is observed on 1st August.
Key Elements of KYC policy for a Regulator Entity (Banks) :
• Ist element of KYC Policy: Customer Acceptance Policy
• IInd element of KYC Policy: Customer Identification Procedure
• IIIrd element of KYC Policy: Monitoring of Transactions
• IVth element of KYC Policy: Risk Management
Important Customer On boarding : For new Customers, all relevant information
Directions for of customer’s profile be filled complete and correctly. For legacy (Old
operating staff existing) Customers, customer’s profile be updated on an ongoing basis.
Monitoring of transactions in newly opened accounts : Any unusual
or complex pattern of transaction, inconsistent with customer’s profile be
investigated and diligently enquired upon.
Filing of one page STR: Wherever, there is any suspicion is established
on any transaction / pattern of transactions / offline scenario, one page
STR be submitted to AML-CFT cell through CBS Tab icons.

Compiled and Prepared by:

Manju Gupta (PF 6925243)
Chief Manager (Faculty)
SBILD Ajmer (Jaipur Circle)
Mob. 9414014007
5