Money laundering, its impact and consequences

Money laundering, which is commonly known as washing “black money,” can be defined as the process of hiding the true origin of illegally made money and giving such proceeds a legitimate outlook.

The money laundering risk for financial institutions can be defined as the risk of non-detection of laundering of money through bank accounts or by using any products of the bank. Money laundering attorney It allows drug traffickers, smugglers and other criminals to expand their operations.

Anti money laundering test questions It has the potential to undermine the financial industry, due to the sheer magnitude of the sums involved. How to get away with money laundering The potential of corruption increases with the vast amounts of illegally made money which are in circulation.

Bankers are subject to compliance, legal and reputation risk owing to non-detection of their bank accounts, other banking products and delivery channels being misused by the criminals to launder money.

Bankers may be charged with gross negligence when carrying out banking business for non-detection of laundered money as per the international regulatory requirements. International standard for combating money laundering activities Allowing the banking systems to be misused by the money launderers and other criminals could lead towards aiding and abetting money laundering.

Examples: Buy real estate, consumables for cash; deposit into banks, finance companies; give on interest in the bazaar; buy bearer, negotiable instruments/CDs, etc.; buy gold, precious metal, etc.; buy single premium life assurance policies.

Layering can be defined as “moving the money around and distancing the gains from its illicit source” in order to make the life of the detectors more difficult in tracing the illegal source of such money.

Examples: Transfers between accounts which could even get extended to cross border transaction; use of internet-based “shell banks”; cross-border smuggling of physical cash; Hawala/Hundial; false import/export declarations

Integration can be defined as “turning the illegally made money into assets and bringing them back into mainstream circulation by realising such assets in order to give such illegal proceeds a legitimate outlook”.

Examples: Purchase and sale of property; encashment of bearer instruments; obtaining loans secured by criminally funded assets; deposit of bank drafts, traveller’s cheques obtained by using tainted money; profit taking from share market, capital gains on investments done by using illegally made money.

Terrorist financing is the financial support, in any form, towards terrorism or those who encourage, plan or engage in terrorism. First stage of money laundering The terrorist financing can be done by using illegally made money as well as legally made money.

The Anti-Money Laundering (AML) and Combatting Financing of Terrorism (CFT) global standards are based on the recommendations issued by the Financial Action Task Force (FATF) which is treated as the global regulator on Anti Money Laundering and Combating Terrorist Financing initiatives.

Through guidelines issued by FIU (Financial Intelligent Unit) which is the local regulator on AML/CFT initiatives. Anti money laundering meaning in hindi The FIU has been set up under the provisions of Financial Transaction Reporting Act.

As per Section 3(1) of the said act, any person who, a) engages directly or indirectly in any transaction in relation to any property which is derived from any unlawful activity or from proceeds of any unlawful activity or b) receives, possesses, conceals, disposes of or brings into Sri Lanka, transfers out of Sri Lanka or invest in Sri Lanka, any property which is derived from any unlawful activity or from proceeds of any unlawful activity shall be guilty of an offence of money laundering

As per the law prevailing in sri lanka, the offence of money laundering relates to engaging in any transaction in relation to any property derived/realised from any “unlawful activity”, whilst knowing or having reasons to know that said property had been derived from such unlawful activity.

Under the act, the term “unlawful activity” has been defined as any act which constitutes an offence under any of the following laws, which are known as “predicate offences”.

Persons who commit a predicate offence and thereby come into possession or control of the property derived through commission of such predicate offence

Persons who transact with or receive, possess or come into control of property derived from the commission of a predicate offence, knowing or having reasons to believe the true nature of such property

(i) to a fine not less than the value of the property in respect of which the offence was committed and not more than three times of the said value

Further, assets of the person convicted including the assets derived from the commission of the offence of money laundering shall be liable to be forfeited.

In the event, the offence of money laundering is committed by a body of corporate or an entity, the directors, partners, office bearers as the case may be, together with the relevant officers (employees) who were involved, shall be deemed to be guilty of such offence.

Identification of customers: This refers to carrying out KYC (Know Your Customer) requirements. Latest news on money laundering Under this requirement banks and FIs are obliged to identify all customers including occasional customers. Money laundering facts Identification of beneficial owner is important whilst checking against black list and watch list are also required.

Monitoring/ongoing due diligence: This includes reviewing customer transactions to ensure that they are consistent with the declared/available information particularly in relation to source of funds. Money laundering nigeria In the event activity level of the customer significantly exceeds the declared threshold, the bank should verify the sources of such increase and sources of funds received.

Record keeping: All transactions and the relevant account opening documents need to be retained for future verifications. Money laundering defined The extent of such retention period is six years.

Reporting: Any suspicious transactions identified must be reported to FIU. Money laundering for dummies In addition, there are statutory reporting requirements to be fulfilled by bank and FIs on a fortnightly basis. Money laundering meaning in hindi This refers to the reporting of all cash and electronic fund transfers of Rs. Money laundering statute 1 m and above.

Besides the above key activities, the banks and FIs are required to comply with several other regulatory requirements as per the provisions of Financial Transaction Reporting Act and other applicable laws and regulations. Why is money laundering illegal Carrying out sufficient training activities to create awareness among staff members on AML/CFT initiatives is one of them.

(The writer is a senior banker who has vast experience in the industry of banking. What is anti money laundering compliance He is a Fellow Member of the Institute of Bankers, Sri Lanka and holds two Masters Degrees, one from the University of Manipal on Business Administration and the other from University of Colombo on Financial Economics. Us money laundering laws He was the Past President of Association of Compliance Officers of Banks, Sri Lanka and presently holds the position of Vice President of Association of Professional Bankers, Sri Lanka. Money laundering convictions He also holds the Fellowship of Institute of Certified Professional Managers. Primary money laundering offences He can be contacted on e-mail via