109
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Dark 1
185
175
164
Accent 3
255
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255
Light 1
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75
7
Accent 4
131
56
155
Dark 2
193
187
0
Accent 5
0
99
190
Light 2
255
221
62
Accent 6
85
165
28
Accent 1
255
255
255
Hyperlink
203
215
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179
149
197
Purple 50 %
212
195
223
Purple 25 %
229
205
186
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241
235
180
213
154
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231
200
Brown 50 %
Brown 25 %
Green 50 %
Green 25 %
255
242
171
Yellow 50 %
241
240
202
214
73
42
Accent 2
236
137
29
Followed
Hyperlink
255
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Yellow 25 %
251
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Agenda
Money Laundering
Regulations
TCS Business Domain Academy
2
Money Laundering
Money Laundering
Money Laundering involves taking criminal proceeds and disguising their
illegal source in anticipation of using the criminal proceeds (illegal arms sales,
narcotics trafficking, smuggling, bribery, embezzlement etc.
Why? Hide Wealth, Evade Taxes, Finance for illegal activities etc.,
Economic & Social Consequences Finances Terrorism, Expands
Crime and Corruption, Economic Distortion and Instability, Loss of Tax
Revenue, Damage to Reputation, Undermining the Legitimate Private
Sector, Social Costs
Insuranc e
Firms
9%
Credit
Cards
5%
Money
Services
4%
Source: Celent
Banks
55%
Brokerage
&
Investm ent
Firm s
27%
TCS Business Domain Academy
Stages Explained!
Placement:
Breaking up large amounts of cash into smaller sums and depositing them directly into bank account
Transporting cash across borders to deposit in Foreign FIs, or to buy high-value goods artwork,
antiques, precious metals and stones etc., that can be resold later for payment by check or bank
transfer
Layering:
Sending wire transfers of funds from one account to another, sometimes to or from other institutions
or jurisdictions.
Converting deposited cash into monetary instruments (e.g. travelers checks).
Reselling high-value goods and prepaid access/stored value products.
Investing in real estate and legitimate businesses.
Placing money in investments such as stocks, bonds or life insurance
Using Shell Companies to obscure the ownership of assets
Integration:
Re-entry of the funds into the economy in what appears to be normal business or personal
transactions.
Invest funds in real estate, financial ventures or luxury assets
Integration is difficult to spot
TCS Business Domain Academy
A law suite filed by Hong Kong investor group in 2004 accused the NY
branch of ABN AMRO of allowing First Merchant Bank, of the Turkish
Republic of Northern Cyprus, to defraud the group
Correspondent Banking
Contd..,
Mario Villanueva, the corrupt governor of the Mexican state of
Quintana Roo, according to the U.S. Drug Enforcement Agency,
facilitated the smuggling of 200 tons of cocaine in US
Maintained Private
Mario Ruiz Massieu, the former deputy attorney general of Mexico in Maintained a private banking account at Texas Commerce Bank in Houston in the mid-1990s, where
he deposited drug traffickers bribes of $9 million in currency over a 13-month period.
Issac Kattan (Travel Agent) and The Great American Bank of Dede Using Structuring - laundered an estimated $500 m per year in drug money
- How foreign money brokers conduct Structuring?
Contd5
Structuring:
Designing a transaction to evade triggering a reporting or
recordkeeping requirement is called structuring.
Most commonly known Money Laundering method
The individuals engaged in structuring are runners, hired by the
launderers
Examples:
A customer breaks a large transaction into two or more smaller ones
A large transaction is broken into two or more smaller transactions
conducted by two or more people
There is also an another form called Micro Structuring
In 2000, Lucy Edwards and former vice president of BNYs EE
Division, and her husband, Peter Berlin ML because of Bank Complicity(KYE)
TCS Business Domain Academy
Contd..,
Money Laundering through Insurance:
Laundering through early policy redemption
Cash payments to purchase insurance
Laundering by cancelling contracts within Cooling Off period
Laundering through third party payment of premiums
Real Life Cases:
A Customer contracted a life insurance for a period of 10 years with
some insurance company. The amount deposited by the customer
was $400, 000.
In the year 1990 British sales agent was convicted for violating ML
rules and regulations.
Custom Officials investigation - The total money that was laundered
this way amounted to $29 million by the year 2004 itself, out of which
some $9 million were traced out in the same year.
TCS Business Domain Academy
Factors to
determine
risk
Types of
Customers
Elements
of AML
Program
Continuous
training
Products and
Services
offered
Independent
audit function
for AML
Hawala System
White Hawala
Black Hawala
Why Hawala? Cost
effective, Fast, Lack
of proper records, No
KYC
requirement,
Evade Taxes.
Al Qaeda moved much of its money by hawala before September 11, 2001. Al Qaeda
used about a dozen trusted hawaldars, who almost certainly knew of the source and
purpose of the money
Terrorist Financing
After the terrorist attacks of September 11, 2001, the finance ministers
of the Group of Seven (G-7) industrialized nations met on October 7,
2001, in Washington, D.C., and urged all nations to freeze the assets
of known terrorists
SDN List published by OFAC
Difference between Money Laundering & Terrorist Financing
In 2004 Monograph on Terrorist Financing the National Commission
on Terrorist Attacks commented about September 11 hijackers
Real-Life Case:
The September 11 hijackers used U.S. and foreign financial institutions to hold, move and retrieve
their money. They deposited money into U.S. accounts, primarily by wire transfers and deposits of
cash or travelers checks brought from overseas. Several of them kept funds in foreign accounts,
which they accessed in the United States through ATM and credit card transactions. The hijackers
received funds from facilitators in Germany and the United Arab Emirates as they transited Pakistan
before coming to the United States. The plot cost al Qaeda somewhere in the range of $400,000
$500,000, of which approximately $300,000 passed through the hijackers bank accounts in the
United States. While in the United States, the hijackers spent money primarily for flight training,
travel and living expenses.
TCS Business Domain Academy
Terrorist Financing
Customer
For the purpose of KYC policy, a Customer is defined as:
a person or entity that maintains an account and/or has a business
relationship with the bank;
one on whose behalf the account is maintained (i.e. the beneficial
owner);
beneficiaries of transactions conducted by professional intermediaries,
such as Stock Brokers, Chartered Accountants, Solicitors etc. as
permitted under the law, and
any person or entity connected with a financial transaction which can
pose significant reputational or other risks to the bank, say, a wire
transfer or issue of a high value demand draft as a single transaction.
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The sole objective of KYC norms is to identify bad customers and prevent
them from involving into various kinds of fraudulent activities and thereby
protecting the good/loyal customers which in turn reduces the reputational
risk of a bank/FI
TCS Business Domain Academy
Customer
Acceptance
Policy
Customer
Identification
Procedure
Elements
of KYC
Monitoring of
transactions in
customer
accounts
CTRs
STRs
Risk
Management
Framework &
Information
Sharing
In 2000, Lucy Edwards and former vice president of BNYs EE Division, and her
husband, Peter Berlin ML because of Bank Complicity
Full identification of customer and business entities, including source of funds and wealth when
appropriate.
Definition and acceptance of the customer in the context of specific products and services.
Assessment and grading of risks that the customer or the account present.
Documentation of findings.
TCS Business Domain Academy
Transaction
Monitoring
Rules
Engine
Watch List
Filtering
Generally written as
SQL commands
Monitor
Transactions and
Group of
Transactions
Reporting
Transaction
Monitoring
Pattern
Profiling
Recognition
Technology Peer group
Comprehensive AML
Solutions
Neural Networks
Watch List
Filtering
Built in
Lists
Custom
Lists
Hybrid
Vendors
ACI Worldwide (ACI Proactive Risk Manager) USA Transaction Monitoring Solution
Nice / Actimize (AML Solution) NY Transaction Monitoring Solution
Americas Software (ASSIST) Miami Transaction Monitoring & Watch List Filtering
Solution
Regulations
Regulations
Regulations in US:
USA PATRIOT ACT
Deter and Punish Terrorist Acts in US and around the world. Prevent,
Detect and Prosecute international ML and financing of terrorism
Regulations in UK:
Proceeds of Crime Act (1995), Criminal Justice Act (1995), Drug
Trafficking Offenses (1998), Criminal Justice Act (1998)
Regulations Contd.
Regulations in India:
PMLA 2002 Imposes
RBI
KYC Standards
CAP, CIP
Monitoring of Transactions
RM and Customers Education
SEBI
CDD
Record Keeping and retention
Monitoring of transactions
Designation of officer
IRDA
Regulations Contd.
Financial Action Task Force (FATF):
Paris based Inter-governmental body established in 1989 by G7
nations.
Policy-making Body. Developed 40 Recommendations on ML and 9
Special Recommendations on TF
Combating ML, TF and other related threats to the integrity of the
international financial system.
Issued in 1990 and revised in - 1996, 2001, 2003 and 2012
36 members & 25 observers
Panel meets three times per year
TCS Business Domain Academy
185
175
164
Accent 3
Thank127
You
175
221
Tata Blue 50%
255
255
255
Light 1
151
75
7
Accent 4
203
215
238
Tata Blue 25%
131
56
155
Dark 2
193
187
0
Accent 5
179
149
197
Purple 50 %
0
99
190
Light 2
255
221
62
Accent 6
212
195
223
Purple 25 %
229
205
186
248
241
235
180
213
154
214
231
200
Brown 50 %
Brown 25 %
Green 50 %
Green 25 %
85
165
28
Accent 1
255
255
255
Hyperlink
255
242
171
Yellow 50 %
241
240
202
214
73
42
Accent 2
236
137
29
Followed
Hyperlink
255
249
213
Yellow 25 %
251
251
241