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AML & Financial Crimes – Hurdles in Implementation – Potential Pitfalls and the Way Forward Judy Manners October 22nd, 2005 1 Agenda Introduction Pitfalls Hurdles The Way Forward 2 Introduction – The Money Launderer Whosoever directly or indirectly - Attempts to indulge / deliberately assists or knowingly becomes a party Actually involved even unknowingly in any process / activity connected with the proceeds of crime projecting the same as untainted property is guilty of the offence. 3 Introduction – Money Laundering & Financial Crime THE WHAT Terrorist Financing, Drug Trafficking, Trafficking in Human Cargo, Corruption HOW MUCH ?? Global /annual volumes range - US$ 800 million to 2 trillion Erosion of the Financial System 4 Hurdles in Implementation ……. Competitive Environment for Banks with Overseas Operations Comply with standards in the Home Country Follow regulations of the Host Country Legal Hurdles : Immunity, Extradition & Repatriation of Stolen Wealth 5 ……. Hurdles in Implementation KYC & Documentation Genuiness of Documents Absence of a single effective identification of individuals control mechanism for Skill Sets - Not readily available Level of Automation & CBS Manual Branches co-exist with fully / partially computerized branches Decentralised Customer Delivery & Centralised Processing Complex Relationships Customer Identification, Monitoring of Transactions Due Diligence, Acceptance & Need to set up Robust Information Frameworks followed by Continuous Analysis of Data 6 Pitfalls in Implementation The Market Capital Account convertibility Active Money & Capital markets Holding & Shell Companies The Government The Structure Huge Deficit financing Economically Weak Trade, Tax Policies Corruption Legislation Nefarious Groups Nexus / Net Working of Terrorist organizations Cornering of Resources 7 The Way Forward The Environment o Basel Committee Recommendations o US Legislation – Patriot Act o Prevention of Money Laundering Act 02 o Monitoring of FATF non-members o … Beyond Legislation … The Customer o Education The Banker o Technology o Process o People o K …. K …. KYC 8 AML…. Is it a Courtship Display??? 9