Money laundering and financing of terrorism has become a major issue in a global scale and threatens the stability, transparency and efficient function of a country’s financial system. They has emerged as a global threat for security of a nation and its financial system. Hence banks and financial institute across the world has implemented systems to prevent anti social elements from using the Financial Institution for money laundering and financing to terrorists. The Government of different countries has developed several legislation for combating Money Laundering and Financing of Terrorism. Also the Central Banks of different countries forms a committee to set principles and guidelines for combating Money Laundering and Financing of Terrorism,
What is Anti Money Laundering (AML):
The set of procedures, rules and regulations which are designed with a view to curtail the money laundering or criminal use of the financial institutions is called Anti Money laundering process. Many measures are developed across the globe to curtail money laundering and combating terrorist financing:
Anti Money Laundering measures taken at International Level:
- Basel Committee on Banking Supervision (BCBS) is an international committee for regulation of International Banking system setup by Central Banks of G – 10 countries (United States, Germany, France, Sweden, Belgium, Canada,Italy, Japan, Netherlands and Switzerland). The BCBS has issued a Basel Statement of Principle to prevent the criminal use of banking system for the purpose of money laundering.
- Customer Identification – KYC Norms
- Compliance with Law
- Cooperation with Law enforcement Authorities
- Adherence to the Statement
- Financial Action Task Force (FATF) is an inter-governmental body was established by G -7 countries ( United States, UK, Japan, France, Germany, Canada and Italy) to develop measures & policies to combat money laundering and terrorist financing both national and international level.
- FATF issued a policy containing 40 recommendations for Money Laundering, Most of the recommendation are recommending the countries to have AML measuring and taking stringent (strict) legal action against the money launders. It also includes customer due diligence, regulation reporting and record keeping etc,.
- 9 Special Recommendation for Terrorist Financing.
- They also issue FAFT Blacklist (List of countries which has not fully implemented anti money laundering measures and Anti terrorist financing measures,)
FATF is also known by its french name GAFI (Groupe d’action financiere). For detailed guidelines and more about the 40+9 recommendation visit www.fatfgafi.org
Anti Money Laundering Measures in India:
The Government of India in conjunction with RBI,SEBI,FEMA has set many rules & regulations, procedures for combating the money laundering and financing of terrorism.
Financial Intelligence Unit – India (FIU-IND):
It is Central national Agency set up by Government of India on 18.11.2004 to deal with matters related to suspicious financial transactions. FIU – IND is an independent body reporting to Economic Intelligence Council headed by the Finance Minister.
- It is responsible for coordinating, strengthening efforts, collecting and sharing information of national and international financial intelligence to combat money laundering and related crimes.
- For more information regarding FIU-IND visit the official website.
Prevention of Money Laundering Act (PMLA):
The PMLA Act, 2002 is enacted with the following aims
- Prevention, Controlling and Combating the money laundering actives,
- Seizing of properties involved with money laundering,
- Dealing matters related to money laundering.
This act was amended in 2005, 2009 and 2012.
Unlawful Activities (Prevention) Act, 1967:
This act is enacted to combat terrorist financing which has powers
- To prevent entry or transit of people and entities funds/ assets/resources to the benefit of individuals, entities that are suspected or engaged in terrorist activities into India,
- To freeze, seize or attach funds, financial assess which are engaged or suspected to be engaged in terrorism and
- To prohibit entry or transit of people, entities that are suspected or engaged in terrorist activities into India,
Guidelines issued by RBI
Many guidelines about KYC procedures and way of maintaining records related to suspicious transaction & above 10 lakhs cash transactions are given to Banks and Financial Institutions by RBI. The Banks and other FI should give the details of those transactions with in the stipulated time.
Apart from the above acts many, other related acts and Ordinances of India based on type of crime will apply. For Example: Financial transactions suspected to held based on the crime corruption comes under the purview of The Prevention of Corruption Act 1988.I hope that i have provided some insights on anti money laundering procedures. Please feel free to share your comments in the comments section below.