Anti-money laundering

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Anti-money laundering ("AML") is a term mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent or report money laundering activities. Anti-money laundering guidelines came into prominence globally after the September 11, 2001 attacks and the subsequent enactment of the USA PATRIOT Act.

Today, all financial institutions globally are required to monitor, investigate and report transactions of a suspicious nature to the financial intelligence unit of the central bank in the respective country. For example, a bank must perform due diligence by having proof of a customer's identity and that the use, source and destination of funds do not involve money laundering. United States federal law related to money laundering is implemented under the Bank Secrecy Act of 1970 as amended by anti-money laundering acts up to the present. Many people have confused Anti-Money Laundering ("AML") with Anti-Terrorist Financing ("ATF"). Under the Bank Secrecy Act of USA, Money Laundering and Terrorist Financing are classified into two different categories when financial institutions file Suspicious Activities Reports ("SAR") to Financial Crimes Enforcement Network ("FinCEN") which is a US government agency. To effectively implement AML and ATF measures, The US government encourages financial institutions to work together for AML and ATF purposes in accordance with Section 314(b) of the USA PATRIOT Act. However, since financial institutions are required by law to protect the privacy of their clients, section 314(b) cooperation has not been generally adopted by financial institutions. To overcome this obstacle, the United Crimes Elimination Network (UCEN) has been established by AML and ATF professionals to achieve this global cooperation goal in compliance with the privacy laws of most countries.


Contents

[edit] Steps in Money Laundering

Money laundering involves three independent stpes that offten occur simeultaneously. They are:

1. Placement - Physically placing bulk cash proceeds. 2.Layering - Seperating the proceeds from criminal activity from their origins through layers of complex financial transactions. 3. Integration. - Providing an apparently legitinmate explanation for the illicit proceeds.

[edit] Additional information

An entire industry has developed around providing software to analyze transactions in an attempt to identify transactions or patterns of transactions, that may constitute illegal financial activity. Financial institutions face penalties for failing to properly file CTR (Cash Transaction Report) and SAR (Suspicious Activity Report) reports, including heavy fines and regulatory restrictions, even to the point of charter revocation. These software applications effectively monitor bank customer transactions on a daily basis and, using customer historical information and account profile, provide a "whole picture" to the bank management. Transaction monitoring can include cash deposits and withdrawals, wire transfers, credit card activity, cheques (checks), share (securities) dealing and ACH activity. In the bank circles, these applications are known as "BSA software" or "AML software".

Different standards exist in different countries and dependent on the activity demand, different action. For example; in the US a deposit of US$10,000 or more requires a CTR, in Europe it is EUR 15,000, in Switzerland it is CHF 25,000 in many countries there is no CTR requirement. The suspicion of AML activity in the US requires the submittance of a SAR, in Switzerland a SAR will only get filed if that activity can be proved. These two examples are why in the USA thousands of SARs are filed daily. In Switzerland it is more like one or two a year..

[edit] See also

Prevention of Money Laundering Act, 2002 (Indian Statute)

[edit] External links

Retrieved from "http://india.smashits.com/wikipedia/Anti-money_laundering"
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