Money Laundering is the process by which illegal funds & assets are converted into legitimate funds & assets.Money laundering is the generic term used to describe the process by which criminals disguise the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source.
The processes by which criminally derived property may be laundered are extensive. Though criminal money may be successfully laundered without the assistance of the financial sector, the reality is that hundreds of billions of dollars of criminally derived money is laundered through financial institutions, annually. The nature of the services and products offered by the financial services industry (namely managing, controlling and possessing money and property belonging to others) means that it is vulnerable to abuse by money launderers.
Money Laundering Risks
All risks are inter-related & together can potentially cause serious threat to the survival of the bank
• Reputational risk
• Legal risk
• Operational risk (failed internal processes, people & systems & technology)
• Concentration risk (either side of balance sheet)
Legislative & Regulatory Framework
– Prevention of Money Laundering Act, 2002 (PMLA, 2002)
– Recent Amendments in Prevention of Money Laundering Act (PMLA) & PML (Maintenance of Records) Rules
– Unlawful Activities (Prevention) Act, 1967
– Financial Action Task Force (FATF)
– Reserve Bank of India (RBI)
– Financial Intelligence Unit – India (FIU-IND)
– Indian Banks Association(IBA)
Prevent banks/FIs from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities.
In terms of the Rule 3 of the PML (Maintenance (Maintenance of Records) Records) Rules, 2005, Banks are required to furnish following to the Director, FIU-IND
– CashTransaction Report (CTR)
– Counterfeit Currency Report (CCR)
– Suspicious Transactions Report (STR)
– Not for Profit OrganizationTransaction Report (NTO)
– Cross Border WireTransfer (CBWT/EFT)
What is Money Laundering
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