This document provides an overview of anti-money laundering (AML) and know your customer (KYC) practices. It defines money laundering and describes the three stages involved: placement, layering, and integration. It then lists some common illegal sources of money. The presentation explains AML regulations and why they are important to prevent, detect, monitor, and prosecute money laundering. It also defines KYC and the process of identifying and verifying customer identities. Additionally, it covers customer due diligence, including risk ratings, verification procedures, and types of due diligence for different risk levels. Cash transaction reporting and important organizations like the Financial Action Task Force are also summarized.

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.