2. Money laundering is the process of concealing
the source of money obtained by illicit means.
two to five percent of the worldwide global
economy involved laundered money.
The Financial Action Task Force on Money
Laundering (FATF), an intergovernmental
body.
The Money Laundering Regulations 2007
came into force in December 2007.
3.
4. Placement;- cash is introduced into the
financial system by some means
Layering :- carrying out complex financial
transactions in order to camouflage the illegal
source.
Integration:- entails acquiring wealth
generated from the transactions of the illicit
funds
5. Placement Layering Integration
Stage Stage Stage
Cash paid into bank Wire transfers abroad False loan repayments or
(sometimes with staff (often using shell forged invoices used as
complicity or mixed with companies or funds cover for laundered money.
proceeds of legitimate disguised as proceeds of
business). legitimate business).
Cash exported Cash deposited in overseas Complex web of transfers
banking system. (both domestic and
international) makes tracing
original source of funds
virtually impossible
Cash used to buy high value Resale of goods/assets. Income from property or
goods, property or business legitimate business assets
assets. appears "clean".
6. Structuring:- Often known as "smurfing", is a method of
placement by which cash is broken into smaller deposits of
money, used to defeat suspicion of money laundering and to avoid
anti-money laundering reporting requirements.
Real estate ;- Real estate may be purchased with illegal
proceeds, then sold. The proceeds from the sale appear to
outsiders to be legitimate income. Alternatively, the price of
the property is manipulated; the seller will agree to a
contract that under-represents the value of the property, and
will receive criminal proceeds to make up the difference.
7. Bank capture:- Money launderers or criminals buy a
controlling interest in a bank, preferably in a jurisdiction with weak
money laundering controls, and then move money through the
bank without scrutiny.
Casinos:- An individual will walk in to a casino with cash and
buy chips, play for a while and then cash in his or her chips, for
which he or she will be issued a check. The money launderer will
then be able to deposit the check into his or her bank account, and
claim it as gambling winnings.
Black salaries:-Companies might have unregistered employees
without a written contract who are given cash salaries. Black cash
might be used to pay them.
8. The Legal Position:- These arise from the Money Laundering
Regulations 1993. The Regulations impose a number of statutory
obligations on all financial institutions.
To set up procedures for verifying the identity of clients
to set up record-keeping procedures for evidence of identity and
transactions
to set up internal reporting procedures for suspicions, including the
appointment of a Money Laundering Reporting Officer
to train relevant employees in their legal obligations
to train those employees in the procedures for recognizing and
reporting suspicions of money laundering.
If employers fail to do this, they are committing an offence, which is
punishable by a maximum of 2 years’ imprisonment, a fine, or both.
9. The Financial Position:- Because of the need to set up and maintain
various procedures in order to comply with their legal obligations'
businesses face compliance costs. The Regulations affect the financial
and professional services sector. Within this sector they apply to:
all banks, building societies and other credit institutions;
all individuals and firms authorised to conduct investment business
under the Financial Services Act 1986;
all insurance companies covered by the EC Life Directives, including
the life business of Lloyd’s of London;
all other undertakings carrying out any of the range of financial
activities in the annex to the Second Banking Supervision Directive.
This includes notably bureaux de change and money transmission
services.
10. Compliances Costs:- The Regulations require that financial
institutions put in place systems to deter money laundering, and to
assist the relevant authorities to detect money laundering
activities. In order to do this, it has meant that financial
institutions have had to incur additional costs and these costs are
most likely to increase in the areas of administration, training and
provision of storage space for records.
11. A set of procedures, laws or
regulations designed to stop
the practice of generating
income through illegal
actions. In most cases
money launderers hide their
actions through a series of
steps that make it look
like money coming from
illegal or unethical sources
was earned legitimately.
12. Bank Secrecy Act (1970)
Money Laundering Control Act (1986)
Anti-Drug Abuse Act of 1988
Annunzio-Wylie Anti-Money Laundering Act (1992)
Money Laundering Suppression Act (1994)
Money Laundering and Financial Crimes Strategy Act
(1998)
Uniting and Strengthening America by Providing
Appropriate Tools to Restrict, Intercept and Obstruct
Terrorism Act of 2001 (USA PATRIOT Act)
Intelligence Reform & Terrorism Prevention Act of
2004
13. The Prevention of Money Laundering Act, 2002
enacted to prevent the money laundering.
Enacted on 17thJan, 2003
Brought into force from 1st July, 2005
Administered by:
Financial Intelligence Unit for verification of
identity of client, maintenance of records and
reporting
Enforcement Directorate for investigation of and
prosecution for money laundering offences.
14. Various Rules comes into effect from July
2005
Rules detailing Power of Director FIU & ED
Rules detailing the method of attachment of
property, period of retention etc
Rules detailing the receipt& management of
confiscated assets
Rules relating to legal obligation of reporing
entities.
15. Rules detailing the legal obligation of reporing
entities:
Prevention of money laundering Rules, 2005
16. PMLA and the rules impose obligations on
Banking companies
Financial institution
Intermediaries of the securities market to
maintain records
Furnish information
Verify identity of client
17. to strengthen international co-operation on information
exchange and law enforcement;
proper mechanisms for handling suspicious reports;
to encourage financial supervisors to apply bank licensing
procedures strictly, exchange information, and train
practitioners;
to increase public awareness of the threat from money
laundering;
implementation on a world-wide basis of a consistent set of
policies. (e.g. FATF 40 Recommendations);
to share forfeited proceeds with law enforcement agencies.
Introduce measures that make the movement of money more
visible.
