Money Laundering(3) Final

8/9/2019 Money Laundering(3) Final

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Paul Lower and Henry Hardoon 2010

FRAUD DETECTION & CONTROL

MONEY LAUNDERING


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Money Laundering

Henry Hardoon ACA, FCCA, FAIA, CMC, APM, MIIT

Chartered Accountant & Chartered Management Consultant


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MONEY LAUNDERING

By

Henry Hardoon


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Every year, huge amounts of funds are generated fromillegal activities. These funds are mostly in the form ofcash.

The criminals who generate these funds need to bring theminto the legitimate financial system.

Money Laundering - Intro


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Money Laundering Modus Operandi

It is a process of making dirty money clean.

Money is moved around the financial system again andagain in such manner that its origin gets hidden.

Money generated from illegitimate source is converted intothat derived from legitimate source


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Hide Wealth

Avoid

Prosecution

Evade Taxes

Increase

ProfitsBecome

Legitimate

Over $1.5 trillion of illegal funds are laundered each year


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Consequences of Money Laundering

Finances Terrorism: Money laundering provides terrorists withfunds to carry out their activities.

Undermines rule of law and governance: Rule of Law is aprecondition for economic development - Clear and certainrules applicable for all

Affects macro economy :Money launderers put money intounproductive assets to avoid detection


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Consequences of Money Laundering

Cont

Affects the integrity of the financial system : Financialsystem advancing criminal purposes undermines the function

and integrity of the financial system.

Reduces Revenue and Control : Money launderingdiminishes government tax revenue and weakens governmentcontrol over the economy.


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Money Laundering - The Legal

FrameworkWhosoever directly or indirectly attempts to indulge or

knowingly assists or knowingly is a party or is actually

involved in any process or activity connected with the

proceeds of crime and projecting it as untainted property

shall be guilty of offence of money-laundering - Sec 3


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Laws Indian Context

Prevention of Money Laundering Act (PMLA)

incorporated on 1st July 2005

Offence of money laundering (section 3 of PMLA)

Proceeds of crime (section 2(1)(u) of PMLA)

Scheduled offences

Financial Intelligence Unit India (FIU-IND)establishedin Nov 2004.


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Money Laundering Process PLACEMENT: Entry of funds in banking system. For e.g.

Deposits, Money transfers, bank cheques or money orders,foreign currency conversions etc.

LAYERING: Distancing of funds from point of entry. Manytransactions and conversions take place to blur the trail back tothe original crime.

For e.g. investments, using several smaller cheques topurchase a bank wire etc.


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Money Laundering Process Cont INTEGRATION: Usage of funds. The criminal re-introduces

the funds into the legitimate economy with an apparentlylegitimate origin. For e.g. investing in a company, purchasingreal estate, luxury goods, etc.


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General Steps in any money

laundering process


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Suspicious Transactions

Number of cash deposits into same account

Substantial increase in turnover in a dormant A/c

Receipt or payment of large cash sums with no obviouspurpose or relationship to Account holder / his business

Reluctance to provide normal information when opening anAccount or providing minimal or fictitious information

Deposit of third party cheques

Sudden increase in cash deposit in a/c from abroad


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Why is it a Problem for Countries?

Money laundering may look like a polite form of white collar

crime, but it is the companion of brutality, deceit and

corruption.

Money laundering deprives governments of some tax

revenues, thereby raising the relative burden of honest

citizens.


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Why is it a Problem for Countries?

cont

Because of rapid movements of large amounts of money,

normally stable financial institutions become destabilized,

threatening savings accounts and retirement funds of innocent

citizens.

Estimates of the size of the money laundering problem totals

more than $500 billion annually world - wide


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Summary: Prevention of Money

Laundering

Money

Laundering

Prevention

Observing Rules forBankers

Compliance withLaws

IdentifyingIrregular / Suspicious

Transactions

Customerdue Diligence


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Thank you !Thank you !

Money Laundering(3) Final

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