Money laundering involves disguising illegally obtained money to make it appear legitimate. It occurs in three stages: placement, layering, and integration. In India, the Prevention of Money Laundering Act of 2002 established the Financial Intelligence Unit and requires financial institutions to implement anti-money laundering procedures like customer due diligence, suspicious transaction monitoring and reporting, and employee training. Regulated entities like I-Sec must comply with these regulatory requirements to prevent money laundering and financing of terrorist activities.

1. Anti Money Laundering &
Combating Financing of
Terrorism

2. What is Money Laundering ?
• Activity connected with the proceeds of crime &
projecting it as untainted property
• Involves disguising the true origin of illegitimate
funds
• Converts illegally obtained income into other forms
to appear it as a legitimate income
• Mode to insert dirty money in the financial system.

3. Activities generating illegal money
Kidnapping
Corruption Forgery
Smuggling
Extortion
Gambling
Fraud
Tax Evasion
Criminal /
Illegal
Activity
Drug Trafficking

4. Stages of Money Laundering
• Placement : Initial stage in which cash proceeds from
criminal activities is placed in financial institutions.

5. Stages of Money Laundering
• Layering : Process of conducting a complex series of
financial transactions, with the purpose of hiding the
origin of the money from the criminal activities

6. Stages of Money Laundering
• Integration : Final stage in the re-injection of the
laundered proceeds back into the economy in such a
way that they re-enter the financial system as normal
business funds

7. What is Money Laundering?

8. Prevention of Money Laundering Act,
2002
• PMLA came into force with effect July 01, 2005
• PMLA defines money laundering offence and provides
for the freezing, seizure and confiscation of the
proceeds of crime
• Financial Intelligence Unit–India(FIU-IND) established
in 2004
• Financial Action Task Force (FATF) membership
granted to India in 2010

9. 9
Regulatory Requirements
• Obligations under the Circular:
 Written AML Policy & Procedures
 Customer Due Diligence
 Risk categorization of clients
 Record Keeping
 Suspicious Transaction Monitoring & Reporting
 Freezing of funds
 Employee Training
 Investor Education
Reporting of Designated Director / Principal officer
to FIU

10. 10
Implementation at I-Sec
• AML Policy (reviewed periodically)
• Client Due Diligence (KYC)
• Enhanced Due Diligence (EDD)
• Identification of PEP (Politically Exposed Person)
• Risk categorization of client (High/Low)
• Periodic updation of client detail (income/contact)
• Record Retention
• Risk based monitoring, action as required
• Reporting suspicion (STR)

11. 11
AML requirement
• Clients might be required to submit documents
evidencing source of funds/income tax returns/bank
records etc.
• The above requirements are the ones emanating from
AML and CFT framework.

12. 12
Anti Money Laundering Team
• Daily Transaction monitoring - Alert generation and
analysis
• MIS preparation/ circulation
• Seeking explanation (Income doc./ trade specific)
• RM/Advisor feedback about client/ transaction
• EDD for High Risk clients and approval for account
opening