Anti Money Laundering &

Combating Financing of
Terrorism
What is Money Laundering ?
• Activity connected with the proceeds of crime &
projecting it as untainted property
• Involves disguising the true origin of illegitimate funds
• Converts illegally obtained income into other forms to
appear it as a legitimate income
• Mode to insert dirty money in the financial system.
 Activities generating illegal money
Drug Trafficking Corruption Forgery

Kidnapping
Smuggling
Criminal /
Illegal
Activity
Tax Evasion

Gambling

Extortion

Fraud
Stages of Money Laundering
• Placement : Initial stage in which cash proceeds from
criminal activities is placed in financial institutions.
Stages of Money Laundering
• Layering : Process of conducting a complex series of
financial transactions, with the purpose of hiding the origin
of the money from the criminal activities
Stages of Money Laundering
• Integration : Final stage in the re-injection of the laundered
proceeds back into the economy in such a way that they re-
enter the financial system as normal business funds
What is Money Laundering?
 Prevention of Money Laundering Act,
2002
• PMLA came into force with effect July 01, 2005
• PMLA defines money laundering offence and provides for
the freezing, seizure and confiscation of the proceeds of
crime
• Financial Intelligence Unit–India(FIU-IND) established in
2004
• Financial Action Task Force (FATF) membership granted to
India in 2010
 Regulatory Requirements

• Obligations under the Circular:

 Written AML Policy & Procedures
 Customer Due Diligence
 Risk categorization of clients
 Record Keeping
 Suspicious Transaction Monitoring & Reporting
 Freezing of funds
 Employee Training
 Investor Education
Reporting of Designated Director / Principal officer to
FIU
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 Implementation at I-Sec
• AML Policy (reviewed periodically)
• Client Due Diligence (KYC)
• Enhanced Due Diligence (EDD)
• Identification of PEP (Politically Exposed Person)
• Risk categorization of client (High/Low)
• Periodic updation of client detail (income/contact)
• Record Retention
• Risk based monitoring, action as required
• Reporting suspicion (STR)

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 AML requirement
• Clients might be required to submit documents evidencing
source of funds/income tax returns/bank records etc.

• The above requirements are the ones emanating from AML

and CFT framework.

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 Anti Money Laundering Team
• Daily Transaction monitoring - Alert generation and
analysis
• MIS preparation/ circulation
• Seeking explanation (Income doc./ trade specific)
• RM/Advisor feedback about client/ transaction
• EDD for High Risk clients and approval for account
opening

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