What is money laundering?the general guideline on anti-money laundering with regard to KYC?

 

What is money laundering? List down the general guideline on anti-money laundering with regard to KYC.how KYC is help in AML?

Money laundering is the procedure of making large amount of money generating by a criminal activities such as drug trafficking terrorism funding and illegally safe tax appear to have come from a legitimate source

There are three stage in money laundering

·        Placement

·        Layering

·        Integration

Placement: placement is the first stage of money laundering at this stage that money that have come from illegal activity is enter into a legitimate financial system

Layering: Stage two of money laundering is the movement of money with the intent to mix it with legitimate funds and hide the dirty money’s illegal origin. Commonly, a money launder will go about layering by transferring funds both domestically and internationally through various bank accounts. Additionally, a money launder may also conduct layering by buying and reselling assets such as properties and other high-value goods.

Integration:- Once the above stages are complete, the money is considered ‘clean’. Therefore, the money returns to the money launder from a seemingly legitimate source.

Anti-money laundering

In simple terms anti money laundering or AML are the regulation and procedures that are designed to prevent money laundering. The increasing success of anti money laundering has been helped at the green roots level by the growth in credit card and the increasingly cashless society we now live in.

The basel principle suggested the following policy in order to curb money laundering:

Customer identification- RBI introduced the know your customer KYC compliance to make sensible plane for true identification of client and related measures to check the bonafire information provided by customer

Compliance with laws- the rule with regard to financial transactions are to be implement as put in banking statutes. Banking should father not allow any finance service if there is a specious that the money might be used for money laundering

Operation with low and forcement agencies-

Bank should interlined with the low enforcement authority and regulate the law for maintaining the privacy of its customer

KYC or other guideline

👉The RBI to has Play an important role in curbing the menace of money laundering. RBI issue the KYC guideline anti- money laundering standard 16 August 2005

 

👉The RBI has stress that banks can successfully  control  and decrease their risk only if they have an understanding  of the normal and practical activity of the customer so that they have the mean  spotting transaction that fall outside the standard model of activity

👉In the contacts of internet banking there is always a danger that been extremely mobile these transaction shell remaining and detected there by such Bank have been asked to open account only after proper physical introduction and substantiations of the customer the online banking system are always required to keep a record of all the transaction taken place with in a month the character and worth of which may be sent by the central government

👉As per standard, Bank must outline there KYC policy spotting in the following four key fundamentals

·        Customer acceptance policy

·        Customer identifications  procedures

·        Monitoring of transactions

·        Rick management