WIIFM?

1.Meaning Of Money Laundering

2.Stages In Money Laundering
3.Anti-money Laundering
4.Prevention Of Money Laundering
5.Anti-Money Laundering – Controls
Meaning of Money Laundering

• Money Laundering refers to converting illegally earned money into

legitimate money. So Money Laundering is a way to hide illegally
acquired money.

In the method of money laundering; money is invested in such a way

that even the investigating agencies can’t trace the main source of
wealth. The person who manipulates this money is called a
“launderer”.

So the black money invested into capital markets or other ventures

returns back to the real money holder as the legitimate money.
Stages In Money Laundering
1. PLACEMENT STAGE:- The Placement Stage is when the proceeds of the crime make
their initial entry into the financial system. This could be by smuggling cash, loans being
paid off with the illegal proceeds, or for use in casinos to gamble, etc.

2. LAYERING STAGE:- The Layering Stage is when criminals want to cut ties that could
link the crime with the money. By layering financial transactions, they try to obscure any
trail that the authorities could follow to find the origin of the money. They do this by
moving funds around multiple accounts, splitting them into smaller amounts as they go, and
transferring too many people and places.

3. INTEGRATION STAGE:- The Integration Stage is when the illegally obtained money

is returned to the criminal. Having traveled through a number of financial transactions, the
proceeds of the crime are now fully integrated into the financial system and can be used for
any purpose.
What Is Anti Money Laundering?

• Anti-money laundering refers to a set of laws, regulations, and

procedures intended to prevent criminals from disguising illegally
obtained funds as legitimate income.
Though anti-money-laundering (AML) laws cover a relatively limited
range of transactions and criminal behaviors, their implications are far-
reaching.

Anti-money-laundering laws and regulations target criminal activities

including market manipulation, trade in illegal goods, corruption of
public funds, and tax evasion, as well as the methods that are used to
conceal these crimes and the money derived from them.
Prevention
• Prevention of Money Laundering Act, 2002 is an Act of the Parliament of
India enacted by the NDA government to prevent money laundering and to provide for
confiscation of property derived from money laundering. PMLA and the Rules
notified there came into force with effect from July 1, 2005. The Act and Rules
notified there under imposing an obligation on banking companies, financial
institutions, and intermediaries to verify the identity of clients, maintain records and
furnish information in a prescribed form to Financial Intelligence Unit – India(FIU-
IND)

• The Role of the FATF is to set standards for AML compliance laws globally and also promote
effective implementation of anti-money laundering compliance. The FATF recommendations set
out a comprehensive framework of measures that most countries implement in order to combat
money laundering and terrorist financing.

Financial Action Task Force (FATF) recommends legal entities to conduct Know Your Customer
ID verification of clients by requesting and verifying the client’s Proof of Identity. It could be a
genuine photograph of the client’s official document such as a passport
Continued.
• Bank Secrecy Act (BSA) is legislation created in 1970 to prevent financial institutions from being used
as tools by criminals to hide or launder their ill-gotten gains. The law requires banks and
other financial institutions to provide documentation such as currency transaction reports to regulators

• Criminal Law Amendment Ordinance (XXXVII of 1944): Under this law, police can get the proceeds
of crime relating to bribing, breach of trust, and cheating confiscated by an order of attachment and on
completion of the criminal prosecution can get an order from court forfeiting the proceeds.

This ordinance was modified in 1946 and responsible for proof to the accused. In the event of crime
under the Prevention of Corruption Act, the implementation rests with the CBI. However, this law
covers proceeds of only certain crimes such as corruption, breach of trust, and cheating and not all the
crimes under the Indian Penal Code.

• The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976: According to
this law, there is a penalty of illegally acquired properties of smugglers and foreign exchange
manipulators and for matters connected therewith and incidental thereto. The application of this law is
restricted to the persons convicted under the Customs Act, 1962 or Sea Customs A
Anti-Money Laundering – Controls
1. Criminalization
Many governments, financial institutions, and businesses impose controls to prevent money
laundering. The first is criminalization by the government. The United Nations Convention Against
Transnational Organized Crime has set forth guidelines that help governments to prosecute individuals
involved in money laundering schemes.
 
2. Know Your Customers
Financial institutions must also have “know your customer” policies in place to help prevent
money laundering. This involves monitoring the activity of clients and understanding the types of
transactions that should raise red flags. Financial institutions are required to report suspicious activity
to a financial investigation unit.

3. Record Management and Software Filtering

Financial institutions and businesses also keep detailed records of transactions and implement
software that can flag suspicious activity. Customer data can be classified based on varying levels of
suspicion, and transactions denied if they meet certain criteria.
Continued.
4. Holding Period
Many banks require deposits to remain in an account for a designated number of days
(usually around five). This holding period helps manage risk associated with money being
moved through banks to launder money.

5. New Technology
The technology used to identify suspicious activity linked to money laundering
continues to evolve and become more accurate. Technologies, such as AI and Big Data
software, allow these systems to become more sophisticated.
Summary
• Anti-Money Laundering (AML) is a set of policies, procedures, and
technologies that prevents money laundering.

• There are three major steps in money laundering (placement, layering,

and integration), and various controls are put in place to monitor
suspicious activity that could be involved in money laundering.

• Some anti-money laundering controls include knowing your

customers, software filtering, and implementing holding periods.