What is Money laundering?
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| money laundering |
Any financial transaction which generates an asset or a value as the result of an illegal act.
It called Money laundering.
It is a process to convert black money into white money through the
banking system.
The money Launderer's use the banking system for cleansing (black money or dirty money) earn from criminal activities with the objective of hiding/disguising its source.
A web of financial transactions created so as to hide the origin and true nature of these funds.
It
also covers financial transactions where the end-use of funds is for Terrorist
Financing irrespective of the source of the funds
•Complicated financial transactions are done to hide the origin of the money which is then re-injected into the financial system as legitimate funds
• Done by people involved in illegal
activities like drug trafficking, arms deals, smuggling, and tax evasion
when RBI found so many money laundering cases in banking system than RBI introduced Anti Money Laundering Act 2005.
1. India joined the global war against money laundering by enacting the prevention of money laundering act, 2002 (PMLA) in early 2003 and the act was brought into force from 1st July 2005.
2. Objectives of PMLA is to prevent Money laundering and to provide for confiscation of property derived from or involved in money laundering.
3. The PMLA provides for disclosure of information to other officers, authority or body.
Legislation & Regulations in india
1. Reserve Bank of India 2. Financial Intelligence Unit-india (FIU-IND)
3. Insurance Regulatory and Development Authority.
4. Securities and Exchange Board of India.
Legislation & Regulation in india
Obligations for maintenance of records under PMLA 2002.
1. Every banking company, financial institution, and intermediary shall maintain records of identification documents and transactions, the nature and value of which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other and where such series of transactions take place within a month.
2. The records are required to be maintained for a period of 5 years from the date of cessation of the transaction/relationship between a customer and the bank for KYC.
What is KYC?
Introductions of Know Your Customer.
Banks Open accounts for individuals and Non-individual entities.
The documentation for opening the account depends on the entity and or the type of account being opened.
It is important that we open accounts judiciously after complying with the KYC norms laid down by the regulator.
The documents collected from the customer and proper profiling of the client will help us to ensure that we are sourcing the right customer.
What is KYC - As par RBI
* KYC stands for ( Know Your Customer), a term used for customer identification process.
* it involves making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, the nature of customer's business, the reasonableness of operations in the account in relation to the customer's business, etc. which in turn helps the banks to manage their risks prudently.
* It is a procedure to enable banks to know/understand their customers and their financial delings better which in turn help them manage their risks prudently.
* Know your customer (KYC) is the guiding principle behind the Anti Money laundering Measures(AML)
* RBI guidelines require the banks in India to ensure the following steps towards preventing money laundering:
1. Customer Acceptance policy 2. Customer identification procedures
3. monitoring of transactions 3. Risk Management
The Customer acceptance policy must ensure that explicit guidelines are in palce n the following aspects of customer relationship in the bank.
• No
account is opened in anonymous or fictitious / Benami name(s).
• The
Customer is categorized as per their risk perception based on their profile.
• Not
to open an account or close an existing account where the bank is unable to
apply appropriate customer due diligence (CDD) measures.
• Circumstances,
in which a customer is permitted to act on behalf of another person/entity,
should be clearly spelled out in conformity with the established law and practice
of banking.
Necessary
checks before opening a new account so as to ensure that the identity of the
customer does not match with any person with
known criminal background or with banned entities such as individual
terrorists or terrorist organization etc
WHY KYC - Objective of KYC
The Objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering.
How You Can Know About Your customer.
• Confirm
the identity of the customer
• Location
of the customer & his clients
• Identify
the nature of business or profession of the customer
• Expected
modes of payments/receipts
• Volume
of the turnover over and if it is in line with the nature of business
• Types
of clients, the customer deals in his / her business
• Social
and financial status of the customer
• Identify
the beneficial owner
KYC Documents list
1. Passport
2. Voter ID Card
3. PAN Card
4. Government ID Card
5. ID Card of reputed employers
6. Driving License
7. Photo ID cards issued by Central or State Govt. ETC.
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