• Anti-money Laundering

    Money laundering indicates the criminal and illegal processes by which the black money or funds from illegal activities enter into the financial system. Banks play the most critical role in avoiding the money laundering as laundered money is integrated into the economy corrupting the existing financial institutions.

    Banks have been used as a means for laundering money since a long time as the customers often hide their source of income properly before investing the money in different banking products. Banks also fail to identify the money laundering cases. Banks can also prosecute their employees if they are involved in money laundering activities. Employees are also provided with adequate training in order to train them about different money laundering cases.

    In order to stop money laundering, Central banks from different countries have introduced norms for record keeping, reporting, account opening and transaction monitoring to check the incidence of money laundering.

    Anti Money Laundering (AML) is the range of regulations and procedures that have been designed to prevent money laundering. The key points are

    • Financial Action Task Force (FATF) was set up in 1989 which aims to ensure global action against money laundering
    • It monitors the money laundering policies of member states and evaluates their progress towards the implementation of measures to end money laundering.
    • It also publishes new guidelines to stop money laundering across different countries
    • It can pass laws to confiscate and forfeit proceeds of crime, and require financial institutions to report suspicious transactions, identify clients, and establish internal controls.
    • After September 11, 2001 terrorist attack in USA, the FATF had added eight new recommendations to fight against financial transactions involving terrorism.
    • With these new norms, the member countries can criminalize the financing of terrorism and associated money laundering, freeze and confiscate their accounts and report transactions suspected of being related to terrorism.

    All these steps are taken in order to reduce money laundering activities across the global in order to protect the financial system.

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