Prevention of Money Laundering

Presentation By

ABDULLAH AL MASUM

Manager, Monitoring & Quality Assurance

• Enabling you to increase your awareness of anti-money laundering.

• Explaining your responsibilities under Money Laundering Prevention Act-2008 and to meet the regulatory requirements.

• Consequences of non-compliance.• Answering your queries which you may have in

implementing the AML/ KYC procedures of the Bank.

OBJECTIVES

Penalties/Do U Agree?

Imprisonment (Land you in jail)

Can get you fired

Fines (Individual & Org)

Revocation of license

Public Censure

Threaten your life and career, as you know it.

Overview• 1970 - US enacted ‘the Bank Secrecy Act’ - required reporting of large currency

transactions that were previously impossible to track.

• 1986 - In 1986, the U.S. became the first country in the world to criminalize the “laundering”

of the proceeds of criminal activity with the enactment of the Money Laundering Control Act

of 1986. Since enacting the law, the U.S. Congress has increased its coverage, reach and

scope, making it the broadest, strongest and most far-reaching money laundering law in the

world.

• 1988 - 140 countries signed the Vienna Convention, which called for fighting M/L and

enacting laws to combat it. In December 1988, the G-10's Basle Committee on Banking

Supervision issued a "statement of principles" with which the international banks of member

states are expected to comply. These principles cover identifying customers, avoiding

suspicious transactions, and cooperating with law enforcement agencies. In issuing these

principles, the committee noted the risk to public confidence in banks, and thus to their

stability, that can arise if they inadvertently become associated with money laundering.

• 1989 - Financial Action Task Force (FATF) was formed with members of G-7,

EC and eight other countries. It’s an inter-govt. body whose purpose is the

development and promotion of policies to combat M/L. Currently, consists of

29 countries plus 2 int’l org. (EC. & GCC). FATF assembled 40

recommendations for AML efforts designed to be at universal applications.

• 2002 - Bangladesh along with 140 countries was a signatory to the 1988

Vienna Convention, which called for fighting M/L and enacting laws to

combat it. Govt. of Bangladesh recognized the necessity of enacting

legislation in line with International Standards -- Money laundering Protirodh

Ain – 2002

• AML Act-2008 replaced AML Act 2002

What is Money Laundering

• Please refer section 2 ta AML Act-2008

Money from Predicate Offence

Bribe/Corruption

Dowry

Illegal Arms Dealing

Child & Women Trafficking

Forgery (Deed/Currency)

Extortion/Graft Case

Robbery/Theft

Smuggling

Terrorism

Kidnap/Murder/Assault

Illicit traffic in Narcotic Drug

Business in theft Goods

Why Money Laundering is done?

Criminals engage in money laundering for three main reasons:1. First, money represents the lifeblood of the organization that engages in

criminal conduct for financial gain because it covers operating expenses, replenishes inventories, purchases the services of corrupt officials to escape

detection and further the interests of the illegal enterprise, and pays for an extravagant lifestyle. To spend money in these ways, criminals must make the money they derived illegally appear legitimate.

2. Second, a trail of money from an offense to criminals can become incriminating evidence. Criminals must obscure or hide the source of their wealth or alternatively disguise ownership or control to ensure that illicit proceeds are not used to prosecute them.

3. Third, the proceeds from crime often become the target of investigation and seizure. To shield ill-gotten gains from suspicion and protect them from seizure, criminals must conceal their existence or, alternatively, make them look legitimate.

Money Laundering Process :

Placement :Physical disposal of CASH

Layering :Attempts to disguise/hide origin of initial deposits

Integration :Layered funds are broughtback into legitimate use

Asset

Dirty Money

Asset Asset

Placement

• Financial institutions

• Securities brokers

• Purchase of assets

• Mixing funds with legitimate

earnings,

• Currency smuggling, etc.

Physical disposal of cash through:

BANKS

Layering

• Multiple transfers (by TT, by different a/cs),

• Foreign Currency exchange,

• Pay up loans, trade finance facilities, mortgage

• Pay up trade payments incurred from false trades,

• Purchase of Travelers cheques,

• Multiple purchase & sale of assets (property, shares, business, etc.

Disguise/hide origin of initial deposit through :

Integration

Layered funds are brought back into legitimate use:

Layered FundsFixed AssetsBusiness AssetsMoney Assets

Crimes

How does M/L affect business ?

• Makes crime a profitable business.

• Damages market integrity.

• Deters foreign investment

• Diminish Govt. Tax revenue.

• Corruption undermines good governance

• Contaminates the industry

• Risks for financial institutions

• Distorts assets & commodity prices and leads to

misallocation of resources.

• Uneven playing field for honest businesses

Benefits –Prevention of ML

• Crime is perpetrated to Make Money• Criminals succeed only if they can convert “Dirty”

Money into respectable funds, to spend legitimately

• If criminals can not do this, then they have difficulty storing and spending their ill-gotten gains

• If this situation can prevail , then such crimes may eventually become less worthwhile for the criminals

Offences & Punishment

Sec.4. for involvement by any means with M/L 6 mon. to 7 yrs imprisonment with fine of max. The amount of the money involved with the crime will be confiscated.

Sec.5 for violating attachment order or Freezing order’- – either min.1yr. imprisonment or fine min.Tk.5K or both

Sec.6 for divulging info. for impeding the investigation either min.2yr. imprisonment or fine of min. Tk 10K or both

Offences & Punishment

Sec.7 for refusing to assist or co-operate with authorized investigating officer, without any reasonable ground : either min. 1yr imprisonment or a fine of min. Tk5K or both.

Sec.8. for providing false information on source & identity of the client or nominee knowingly: either min. 1yr imprisonment or a fine of min. Tk50K or both.

Sec.25 failure by Banks/ Fin. institutions to preserve and supply the required data information – max.Tk 5 lac fine with a min. of Tk.10K. Even cancellation of license

Effective Tools For Prevention of MLKYC

 OBJECTIVE Customer identification evidence:Reason for the relationshipDetermine the source of wealth /funds are derived from legitimate sources: (anticipated volume& type of activity, source of funds,underlying source of wealth)

Document relevant information about the customer:Have all necessary information to deliver excellent service, satisfy regulatory and best practice requirements. 

Purpose

• To deter and detect attempts to use our institution, to Place, Layer or Integrate proceeds of criminal activity thru any of its products or services.

• Confirm identity of and obtain sufficient information about customers to satisfy yourself that they are involved in legitimate business activities.

• Determine that income & source of wealth are derived from legitimate sources.

• Document information about the customer.• Develop a profile of anticipated transactions to determine cust.

financial service requirements, suitability/ risk tolerance and anticipated bakg. activity & product needs.

• Monitor trns. to ensure they are consistent with profiles.

Through KYC, Bank expects to:

• Be compliant with all applicable statutes and

regulations

• Adhere to sound banking practices.

• Decrease likelihood that the bank will become

associated with or a victim of illegal activities of its

customers.

• Protect and enhance the good name and reputation of

the Bank.

KYC-ChecklistBasic information requirements

• Mandatory checks for all parties to the a/c.• Status verification

• Name ,DOB & Nationality

• Address, Purpose of account,

• Source of funds,

• Anticipated volume & type of activity

• Relationship between parties/ signatories to the a/c.

• Special Customers – check• Source of wealth.

Verification (identity) process of Customers/ beneficial owners/Agents.

Exact type of evidence used to verify identity Evidence of identity and address. Depending on the risk associated with an a/c, more

detailed due diligence about the customer & their business.

KYC is an ongoing process, does not end when a/c is completed.

IDENTITY Info.As a min. the following info. must be obtained and i & ii

verified reliable evidence. For Personal accounts

• Name, date of birth & nationality• Residential address, (PO Box not reliable)• Occupation/ name of business• Purpose of account

For Non-Personal Accounts• Full legal name- if applicable regtrn. No.• Regd. & operating addresses• Nature of business • Purpose of account• Info. of individuals controlling the account or acting on

behalf of another.

Suspicious Activity/Transaction Reporting

(SAR/STR)

• What is it?

It is the prompt report of suspicious transactions, or proposed transactions, through the appropriate

internal channels and, where required or permitted by local legislation, to the relevant authorities

It is the prompt report of suspicious transactions, or proposed transactions, through the appropriate

internal channels and, where required or permitted by local legislation, to the relevant authorities

SAR/STR - Process

Mr. Rais Uddin Ahmad, CAMLCO: Country Anti Money Laundering Compliance Officer, BRAC Bank Ltd

Notices suspicious

transactions –reports

directly to the

BAMLCO/BM/LM

Line Manager conducts necessary

investigation or instruct

responsible person to do

the same

CAMLCO reports the

case to local authorities

Line Manager reports the

case to CAMLCO*

Reporting The suspicious Transaction will be reported immediately

Bangladesh Bank – AMLU(BB-Anti Money Laundering Unit)

CAMLCO(Chief Anti Money Laundering Compliance Officer)

BAMLCO(Branch Anti Money Laundering Compliance Officer)

Branch Officer/Staff

Suspicious Activity – What is It?

• Suspicious Activity will often be one which is inconsistent with the customer’s known, legitimate business or personal activities or with the normal business for that type of account

• The first key to recognition is knowing enough about the customer’s business to recognize that a transaction, or series of transactions, is unusual and large

– ‘Unusual and large’ – Transactions with context to the account, which have no apparent genuine economic or lawful purpose

GENERAL CAUSES FOR SUSPICIONS.

• Gaps in critical information• Inconsistencies in information/ explanations• Inability to explain• Attempt to conceal• Unnecessarily complex structures• Excessive request for secrecy• Unnecessary use of intermediaries

Monitoring Points

• Customers declared TP is consistent with his transaction.

• Customers Profession commensurate with his declared TP or transaction.

• Purpose of Account is understandable

• Funds coming into the account is from legitimate source

SAR – Important Points

NOTE

• Nobody can prevent you from filing a SAR

• You can consult your line manager but the decision to file a SAR should be yours, depending entirely on your suspicion

• Disciplinary action can be taken if an employee willfully fails to report a very obvious suspicious activity

• Disciplinary action will be taken against anybody including

supervisors if they dissuade or prevent an employee from filing a SAR

SAR/STR – Important Points NOTE

• No action will be taken against a person for filing a SAR even if it later turned out to be a genuine transaction if the person acted in good faith without any mala-fide intent

• Do not alert the customer about your suspicion or about filing of the SAR. (Putting hard holds on accounts can result in a tip-off)

• Once a SAR is filed, act as per the instructions of the CMLPO or the authorities, if external disclosure has been made

• CAMLCO is the only authority in the Bank who is empowered to take a decision on a SAR, including external disclosure

Warning !

• Overstate income/wealth• Mis-describe source of funds• Misstate purpose of loan• Exaggerate business connections/interest• Speculate about intents/objectives• Omit important details

• Forget to check references who know or recommend the

client

Do not :

Guiding Principles:Each one of us is personally responsible for :

• Understanding and maintaining high ethical standards, including the standards and policies of the bank we work for

• Understanding and complying with local laws, rules and regulations that apply to your jobs.

• Consulting with managers and compliance officers, when you have questions regarding compliance or compliance failures/ violations or situations where there may be confusion as to applicability of any regulations.

• Ignorance of applicable laws & regulations is not an excuse for failure to comply.

Address Verification1.     Address Visited: ………………………………………………..

2.     Date of Visit: ……………………………………………………

3.     Time of Visit: ……………………………………………………

4.     Person’s Visited: …………………………………………………

5.     Other Comments: …………………………………………………

 ………………………………. ……………………………….

Signature of DSE Signature of Sales Team Leader

Name: Name:

Date: Date:

Note: This template will be used only by DSEs in events they are not able

to obtain ‘Proof of Address’.

Customer’s Meeting/Interview

• A customer is interviewed by BM/CSM when he/she comes to open an account in the Branch

• When an account is opened through Sales Centre the customer is interviewed by the Sales Team Leader

Periodical Return

• Monthly: CTR & STR ( Cash Transaction Tk.7,00,000/ and above)

• Bi monthly: Deposit amount Tk. 1.00crore and above in NR Taka a/c – Statement-2

– Unusual Transaction –Statement-3

– Ref:BRPD(P)760/29/2002 dt 25.06.2002

– Quarterly:Unusual/Suspicious Transaction- Appendix Gha

– Ref: ML Circular # 2

What’s in your Mind ?