money laundering(3) final
TRANSCRIPT
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Paul Lower and Henry Hardoon 2010
FRAUD DETECTION & CONTROL
MONEY LAUNDERING
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Money Laundering
Henry Hardoon ACA, FCCA, FAIA, CMC, APM, MIIT
Chartered Accountant & Chartered Management Consultant
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MONEY LAUNDERING
By
Henry Hardoon
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Every year, huge amounts of funds are generated fromillegal activities. These funds are mostly in the form ofcash.
The criminals who generate these funds need to bring theminto the legitimate financial system.
Money Laundering - Intro
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Money Laundering Modus Operandi
It is a process of making dirty money clean.
Money is moved around the financial system again andagain in such manner that its origin gets hidden.
Money generated from illegitimate source is converted intothat derived from legitimate source
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Hide Wealth
Avoid
Prosecution
Evade Taxes
Increase
ProfitsBecome
Legitimate
Over $1.5 trillion of illegal funds are laundered each year
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Consequences of Money Laundering
Finances Terrorism: Money laundering provides terrorists withfunds to carry out their activities.
Undermines rule of law and governance: Rule of Law is aprecondition for economic development - Clear and certainrules applicable for all
Affects macro economy :Money launderers put money intounproductive assets to avoid detection
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Consequences of Money Laundering
Cont
Affects the integrity of the financial system : Financialsystem advancing criminal purposes undermines the function
and integrity of the financial system.
Reduces Revenue and Control : Money launderingdiminishes government tax revenue and weakens governmentcontrol over the economy.
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Money Laundering - The Legal
FrameworkWhosoever directly or indirectly attempts to indulge or
knowingly assists or knowingly is a party or is actually
involved in any process or activity connected with the
proceeds of crime and projecting it as untainted property
shall be guilty of offence of money-laundering - Sec 3
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Laws Indian Context
Prevention of Money Laundering Act (PMLA)
incorporated on 1st July 2005
Offence of money laundering (section 3 of PMLA)
Proceeds of crime (section 2(1)(u) of PMLA)
Scheduled offences
Financial Intelligence Unit India (FIU-IND)establishedin Nov 2004.
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Money Laundering Process PLACEMENT: Entry of funds in banking system. For e.g.
Deposits, Money transfers, bank cheques or money orders,foreign currency conversions etc.
LAYERING: Distancing of funds from point of entry. Manytransactions and conversions take place to blur the trail back tothe original crime.
For e.g. investments, using several smaller cheques topurchase a bank wire etc.
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Money Laundering Process Cont INTEGRATION: Usage of funds. The criminal re-introduces
the funds into the legitimate economy with an apparentlylegitimate origin. For e.g. investing in a company, purchasingreal estate, luxury goods, etc.
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General Steps in any money
laundering process
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Suspicious Transactions
Number of cash deposits into same account
Substantial increase in turnover in a dormant A/c
Receipt or payment of large cash sums with no obviouspurpose or relationship to Account holder / his business
Reluctance to provide normal information when opening anAccount or providing minimal or fictitious information
Deposit of third party cheques
Sudden increase in cash deposit in a/c from abroad
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Why is it a Problem for Countries?
Money laundering may look like a polite form of white collar
crime, but it is the companion of brutality, deceit and
corruption.
Money laundering deprives governments of some tax
revenues, thereby raising the relative burden of honest
citizens.
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Why is it a Problem for Countries?
cont
Because of rapid movements of large amounts of money,
normally stable financial institutions become destabilized,
threatening savings accounts and retirement funds of innocent
citizens.
Estimates of the size of the money laundering problem totals
more than $500 billion annually world - wide
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Summary: Prevention of Money
Laundering
Money
Laundering
Prevention
Observing Rules forBankers
Compliance withLaws
IdentifyingIrregular / Suspicious
Transactions
Customerdue Diligence
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Thank you !Thank you !