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Have any of you who have not experienced giving bribe directly or indirectly?
How do you think that the money earned out of corruption, bribery etc is utilised by Criminals?
As many as 62% of all citizens think that corruption is real and they have in fact have had first hand experience of paying a bribe or using a contact to get a job done in a public office India Corruption Study 2005 by Transparency International. In the book 'Corruption in India: The DNA and RNA' authored by Professors Bibek Debroy and Laveesh Bhandari say that the public officials in India may be cornering as much as Rs.92,122 crore ($18.42 billion), or 1.26 per cent of the GDP, through corruption. The books estimates that corruption has virtually enveloped India growing annually by over 100 percent (Source : Economic Times Dated December 11, 2011)
Result.
Process by which illegal funds and assets are converted into legitimate funds and assets.
The Process
Open a restaurant.
Deposit proceeds from ongoing drug business along with proceeds from the restaurant every month into a legitimate bank account. Dont add too much illegal money, just enough to make it look as though your restaurant is doing a good, healthy business.
Pay all of your taxes on the restaurant deposits, so the tax authorities dont start an investigation.
2.
3.
The Prevention of Money Laundering Act, 2002 Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005. Guidelines on Anti Money Laundering Standards/KYC norms/customer identification process issued by SEBI/RBI/IRDA
Director of Enforcement
Powers relating to investigation of and prosecution for moneylaundering offences Power of attachment of property, survey, search & seizure and retention of property and document Power regarding summons, production of document and recording of statement .
PMLA impose obligations on Banking Companies Financial Institutions Intermediaries in respect of Maintenance of Records Furnishing of information Verification of identity of the clients.
Public sector banks Private sector banks Private foreign banks Co-operative banks Regional rural banks
Intermediary includes
Stock Brokers Sub-brokers Share-transfer agents Bankers to an issue Trustees to trust deed Registrar to an Issue Merchant Bankers.
Furnishing of Information
Reporting of cash and suspicious transactions Reporting on the appointment/change in the principal officer etc.
False Identification documents Identification documents which could not be verified within reasonable time Multiple Demat Accounts Multiple Trading Account with the broker Sudden increase in the transaction of client Huge off-market deals
Multiple Bank accounts Huge withdrawals/deposits Nature of transactions inconsistent with what would be expected from declared business Foreclosure of home loan accounts by substantial cash payments
Frequent purchases of drafts or other negotiable instruments with cash Large number of accounts with common account holders , introducer or authorised signatory Unexplained transfers between multiple accounts with no rationale
Collection of Information 30.36 million Cash Transaction Reports (CTRs) received 99.62 % CTRs received in electronic format 46,409 Suspicious Transaction Reports (STRs) received 5.26 lakh Counterfeit Currency Reports (CCR) of face value of Rs.446 million Analysis and Dissemination of Information 41,934 STRs processed 28,210 STRs disseminated
2008-09
2,826 841 742 4,409
Total
24,127 9,878 3,902 37,907
KYC norms issued by RBI,SEBI & IRDA covers Customer Acceptance Customer Identification Transaction Monitoring Risk Management
International efforts
1985- The United Nations- Started efforts with the recognition that drug traffickingand associated money launderingwere truly international problems and could be addressed effectively only on a multinational basis 1988 Basel Committee on Banking Supervision - issued a statement on Prevention of Criminal use of Banking System for the purpose of ML 1989 Financial Action Taskforce (FATF)- Set up to ensure global action to combat money laundering ( subsequently included terrorist financing ) 1995 - Egmont Group- Set up to stimulate international cooperation and develop best Practices for exchange of information amongst FIUs 1997- Asia/Pacific Group on money laundering (APG)- FATF-style regional body (FSRB)-set up to create awareness and encourage adoption of AML measures in the region. World Bank and International Monetary Fund- have evolved a comprehensive AML/CFT assessment methodology for evaluating countrys compliance with FATF Standards and provide technical support
FATF
Mandate :
Establish, revise and clarify global standards and measures for combating ML/TF; Promote global implementation of the standards; Identify and respond to new money laundering and terrorist financing threats; Engage with stakeholders and partners throughout the world.
Forty Recommendations - Complete set of counter-measures against money laundering Nine Special Recommendations on Terrorist Financing
Self-assessment exercise based on a standard questionnaire designed by FATF and used by its members to report on their anti-money laundering system on an annual basis and Mutual evaluation process in which each country is evaluated by a team of experts drawn from other member countries to give ratings with respect to each recommendation of FATF
FATF Recommendations
Criminalization: To criminalize money laundering and terrorist financing. The definition of money laundering offenses has now expanded to include all serious offenses. Provisional Measures and Confiscation: To put in place measures to identify, trace, freeze, or seize and finally to confiscate the illegal proceeds. Customer due diligence: To impose duties on financial institutions to know their customers and to abolish the use of anonymous accounts. Record keeping: Financial institutions to keep records on all the transactions that they conduct. Suspicious transactions reporting: Financial institutions to report all transactions that raise their suspicion, without alerting the clients. Internal controls: Financial institutions adopt internal mechanisms that allow them to comply with the regulatory requirements. Implementation: To create regulatory and supervisory agencies that are capable of implementing the international standards set by the Recommendations. International cooperation: To put in place a system that allows it to cooperate with other countries on all aspects of law enforcement including exchange of information, preservation and confiscation of assets and extradition.
Increased focus on money laundering risk by the Senior Management 1. 76% Discuss the AML profile on at least a monthly or quarterly basis 2. 41% Integrate AML in the business strategy of new products/services. 3. 35% Publicize the AML compliance programme internally
FATF: Membership comes with increased responsibilities 84% -Regulatory scrutiny has become more stringent post FATF membership 90% -Regulatory scrutiny is high in the area of Know Your Customer policy and processes 81% - Agree that scrutiny will remain high in the area of Transaction Monitoring / Reporting
Laying the foundation: Money laundering risk assessment 65%Conduct an AML risk assessment on at least a half yearly or yearly basis 32%Conduct an AML risk assessment on the basis of an event 51% AML policies and procedures are based on local regulations and benchmarked against global best practices
Drilling down to unearth the core 86% -Institution follows a risk based approach in relation to account opening 84%-Beneficial owner identified at the time of opening an account 83% -Have procedures for monitoring sanctions lists before account opening 81% -Customer documents are collected and verified before opening an account 77%-Have specific procedures in place for identifying politically exposed persons
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