Money Laundering

What is Money Laundering?The process in which large amounts of money obtained from illegal activities conducted are created to be appeared as legitimate.

Ex: crimes such as drug trafficking, terrorist activities etc.

It is proved that billions of dollars are laundered through financial institutions on an annual basis.

Why Money Laundering is considered as a growing concern?

Why is it difficult to track of Money Laundering activities?

01. PlacementRelated to moving of cash from its source.

i.e: Smuggling currency out of a country Getting the bank involved Blend funds via hiding cash among other Asset purchase

02. Layering Activities done in making the money and laundering

activities difficult in detecting. i.e: Conversion of cash in to monetary instruments via

banker’s drafts, money order etc, Buying of material assets

Stages in the process of a typical money laundering activity

03. Integration

Moving laundered money in to the economy via the banking system, ensuring that they seem to be via normal earnings.

i.e.- Selling off of properties to integrate money back in to the economy- Implementing front companies and falsify loans- Off shore account maintenance- Usage of false export or import invoices

Impacts on economy due to Money Laundering Undermining the legitimate private sector Undermining the integrity of financial markets Loss of control across economic policy Distortion of the economy and instability Revenue losses Risks faced in privatization efforts Reputation risk

How to identify money laundering?

Financial Institutions should have close watch on:

• Insufficient and suspicious behavior

• Maintenance of records

• Observing of changing business activities

• Changes in transaction patterns

AML Software system used to address the issues:

• Transaction monitoring systems• Currency transaction reporting (CTR) systems• Customer identity management systems• Compliance management software

ConclusionThe country should have a vigorous AML regulatory framework in

collaboration with its financial firms implemented in order successfully manage the money laundering status and mitigate such

illegal activities.

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