Money laundering involves disguising illegally obtained money to make it appear legitimate. It occurs in three stages: placement, layering, and integration. In India, money laundering is prevented by the Prevention of Money Laundering Act of 2002, which defines related offenses and allows for seizure of criminal proceeds. Financial institutions must implement anti-money laundering procedures like customer due diligence, suspicious transaction monitoring and reporting, and employee training to comply with regulatory requirements.

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