Anti Money Laundering

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Anti Money Laundering


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Anti Money Laundering : 

Anti Money Laundering

Why AML guidelines? : 

Why AML guidelines? Terror attack of 9/11 high-lighted the need of AML and Anti Terrorist Financing policies in financial institutions. Post attack International Regulatory Agencies insisted on application of AML measures particularly by Insurance companies. Why Insurance companies in particular? Involves transfer of financial risks of a certain event Sales products through various distribution Channels Prevention of Money Laundering Act, 2002 came in force w.e.f. 1 July, 2005.

Consequences of non adherence of AML measures by company : 

Consequences of non adherence of AML measures by company Punishment Imprisonment between 3 to 10 years and fine up to 5 lakhs. Consequences for company Failure to furnish information: fine starting from Rs.10,000 to Rs.1,00,000. Cancellation of Insurance license (bill is yet to be approved) Exposure to risks Reputation Risk Compliance Risk Financial Risk Exemptions Group Products Term Products Stand alone medical/ health insurance products

What is Money Laundering? : 

What is Money Laundering? Moving illegally acquired cash through financial systems so that it appears to be legally acquired. Section 3 of the PMLA 2002 defines Money Laundering as follows: ‘Whosoever 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.’ Main two aspects Proceeds of crime Projecting it as untainted property

Stages in Money Laundering : 

Stages in Money Laundering Main three stages in Money Laundering. Placement: Physical disposal of cash proceeds derived from illegal activity. Layering: separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the source of money, subvert the audit trail and provide anonymity. Integration: Creating the impression of apparent legitimacy to criminally derived wealth.

Steps taken by our company : 

Steps taken by our company Appointment of PCO. Non – acceptable customers Cash acceptance limits : Rs. 50,000 per person per day Third Party Payment : proof of insurable interest NRI Customers : copy of passport or travel documents KYC : ascertaining relevant information about customer required to do financial business with them. Moral Hazard Report from sales person Photo ID proof Recent photograph Residence proof Income proof : for high risk customers only CIP : determining identity of prospect DD for sales person employees DD for business partners Customers Interview Risk Profiling High Risk Customers Low Risk Customers

Steps taken by our company : 

Steps taken by our company Reportable Transactions Cash Transactions : Rs. 10 lakhs and above pre customer in a month Suspicious Transactions Forged or counterfeit currency notes or bank notes Suspicious Transactions: Whether made in cash or not Give rise to reasonable ground of suspicion that it may involve proceeds of crime Made in circumstances of unusual complexity No economic rational or bonafied purpose

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