Understanding-AML-and-KYC
- 1. Understanding AML and KYC This presentation provides an in-depth look at Anti-Money Laundering (AML) and Know Your Customer (KYC) practices, exploring the stages involved in money laundering and illegal sources of money. by MANEPALLI YASHASWI
- 2. MONEY LAUNDERING Definition Stages of Money laundering It is set of process/activites designed to hide the orginal Illegaitimate source of money and making it appear as legitimate source of money 1: Placement: Placing the dirty money into financial institutions, They are two types a: Smurfing: Opening multiple genuine or fake accounts controlled by same persons. b: Structuring: Deposting money into FI below threshold limits 2: Layering: In this stage, the funds are moved through multiple transactions and accounts to further obscure their origin, making it difficult to trace them back to their illegal source. 3: Integration: In this final stage, the funds are reintroduced into the legitimate economy, typically through legitimate businesses or investments, making them appear as though they were earned legally. Examples: Purchasing Luxurious Assets, Financial Assets, Small scale business.
- 3. Illegal Sources of Money 1. Gambling 2. Terriorist Activities 3. Corruptions 4. Tax evasion 5. Smugglings 6. Hacking 7. Crimes- Kidnappings 8. Counterfeit notes 9. Bribes 10. Human/drugs/arms Traffickings
- 4. ANTI-MONEY LAUNDERING It is a set of rules/regualations/policies/procedures/guidelines designed by Regulatory Bodies. WHY ANTI MONEY LAUNDERING 1. 1: To prevent Money Laundering Activities. 2. To defect/Identify the Money Laundering Activities. 3. To Monitor the Money Laundering Activities. 4. To report the Money Laundering Activities. 5. To freeze/ confiscate the money acquired through illegal activities. 6. To prosecute the guilty. 7. To punish the guilty.
- 5. KNOW YOUR CUSTOMER/CLIENT KYC means Know Your Customer and sometimes Know Your Client. KYC or KYC check is the mandatory process of identifying and verifying the client's identity when opening an account and periodically over time.
- 6. Client Due Diligence 1 Client Identification Policy Establish strong policies for accurately identifying clients, ensuring legality and compliance. 2 Client Verification Procedures Implement robust procedures and controls to verify the identities of clients and confirm the accuracy of information provided. 3 Customer Risk Rating Consider various factors to assess the risk posed by customers and assign risk ratings accordingly.
- 7. Types of Due Diligence High-Risk Customers Thoroughly investigate clients with higher inherent risks due to their nature of business or geographical location. Conduct Enchance due diligence measures for high risk customers Example : Politically exposed persons, Film stars, Sports stars. Professional intermediaries- Hedge funds, Private equity funds etc Cash business- Real estates, Jewellery, Bars & Restaurant / Hospitals/ Mining. Medium-Risk Customers Conduct standard due diligence measures for clients with average level risks. Example : Professionals- Lawyers/Doctors/CAsMedium Enterprises, Medium Network Individuals Low-Risk Customers Implement basic due diligence to verify the identity and legitimacy of clients with lower risks. Conduct Simplified Due Diligence for low Risk customers Examples : Salaried Employees, Low income people, small business, statutory bodies, students etc.
- 8. Cash Transaction Reporting 1 Monitoring Large Cash Transactions Understand the procedures for reporting cash transactions above specified thresholds to regulatory bodies. 2 Regulations and Compliance Explore the legal obligations for businesses to detect and report cash transactions that may indicate money laundering.
- 9. Financial Action Task Force (FATF) FATF Overview Learn about the international organization combatting money laundering and terrorist financing. White, Grey, and Black List Understand the different categories of countries based on their compliance with international AML and CTF standards. Suspicious Activity Reporting Discover the importance of reporting unusual or suspicious financial activities to authorities.
- 10. Sanctioned List Military Sanctioned List Learn about the list of individuals and entities restricted by governments due to involvement in military activities. Industry Sanctioned List Discover the list of individuals and organizations subject to sanctions for their involvement in specific sectors or industries.