VERY IMPORTANT FOREIGN EXCHANGE MCQs

VERY IMPORTANT FOREIGN EXCHANGE MCQs



1.Our Branches report their foreign currency transactions to __________________

(a) International Banking Department, Mumbai

(b) Treasury, Mumbai

(c) International Banking Division, LHO

(d) RBI

Ans: b

2.The foreign currency account maintained by our Foreign Department with our foreign

ranches/correspondents in different countries is known as __________________

(a) Special account...

(b) Vostro account

(c) Nostro account

(d) FCNR account

Ans: c

3.Transactions having international financial implications are regulated in our country by

(a) External Affairs Ministry, New Delhi

(b) The Foreign Exchange Dept., RBI, Mumbai

(c) Institute of Foreign Trade, New Delhi

(d) International Division, SBI, Bombay

Ans: b

4.All the forex transactions are reported to Treasury through

(a) Special account

(b) Branch Clearing General Account Schedules 3 and 7

(c) Foreign Currency General Account

(d) FCNR account

Ans: c



5.The account maintained by an our Foreign Branches / Correspondents with our domestic branch (in

India) is known as _________________

(a) Loro a/c

(b) Vostro a/c

(c) Special a/c

(d) Nostro a/c

Ans: b

6.Rate applied for a foreign exchange transaction which involves immediate conversion of currency is

known as _________________

.(a) ready rate

(b) forward rate

(c) merchant rate

(d) long rate

Ans: a

7.A quotation in which the home currency unit is the standard unit and the rate is expressed in variable

units of foreign currency is called _________________

(a) direct rate

(b) spot rate

(c) indirect rate

(d) forward rate

Ans: c

8.When conversion/exchange of currencies takes place at some future date at a rate of exchange agreed

upon now, such a transaction is known as

(a) spot transaction

(b) cover transaction

(c) cash transaction

(d) forward transaction

Ans: d




9.The maxim applied in respect of Direct Quotation is

(a) buy low, sell low

(b) buy low, sell high

(c) buy high, sell low

(d) buy high, sell high

Ans: b

10.A rate of exchange established between any two currencies on the basis of the respective quotation of

each currency in terms of a third currency is known as

(a) cross rate

(b) merchant rate

(c) wash rate

(d) composite rate

Ans: a

11.When branches pass forex transactions at provisional rates, the entries are passed by debit to

(a) Forex Clearing gen. a/c

(b) Br. Cl. Gen. a/c 3 and 7

(c) IBIT

(d) None of the above

.Continue....

Financial Regulatory Bodies in India

Financial Regulatory Bodies in India


In India, the financial system is regulated with the help of independent regulators, associated with the field of insurance, banking, commodity market, and capital market and also the field of pension funds. On the other hand, the Indian Government is also known for playing a significant role in controlling the field of financial security and also influencing the roles of such mentioned regulators. You must be aware of the regulatory bodies and their functions, before a final say. The most prominent of all is RBI or Reserve Bank of India. Let us look in detail about various Financial Regulatory Bodies in India.
RBI – Reserve Banks of India :
Reserve Bank of India : Reserve Bank of India is the apex monetary Institution of India. It is also called as the central bank of the country.
 The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated. Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.
The Central Office is where the Governor sits and is where policies are formulated. Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.
SEBI – Securities and Exchange Board of India :

Glossary of Cybercrime Terms very important

Glossary of Cybercrime Terms

back door -- a vulnerability intentionally left in the security of a computer system or its software by its designers

biometrics -- the use of a computer user's unique physical characteristics -- such as fingerprints, voice, and retina -- to identify that user

black hat -- a term used to describe a hacker who has the intention of causing damage or stealing information

bypass -- a flaw in a security device

ciphertext -- data that has been encrypted

Computer Emergency Response Team (CERT) -- an organization that collects and distributes information about security breaches

Information Technology (Amendment) Act, 2008 full details

Information Technology (Amendment) Act, 2008
BRIEF HISTORY
The Indian Information Technology Act 2000 (“Act”) was a based on the Model Law on Electronic Commerce adopted by the United Nations Commission on International Trade Law[1]; the suggestion was that all States intending to enact a law for the impugned purpose, give favourable consideration to the said Model Law when they enact or revise their laws, in view of the need for uniformity of the law applicable to alternatives to paper-based methods of communication and storage of information. Thus the Act was enacted to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication, commonly referred to as "electronic commerce", which involved the use of alternatives to traditional or paper-based methods of communication and storage of information, to facilitate electronic filing of documents with the Government agencies. Also it was considered necessary to give effect to the said resolution and to promote efficient delivery of Government services by means of reliable electronic records. The Act received the assent of the President on the 9th of June, 2000.

CYBER CRIME TERMINOLOGY

CYBER CRIME  TERMINOLOGY

 Adware – Adware is software designed to force pre-chosen ads to display on your system. Some adware is designed to be malicious and will pop up ads with such speed and frequency that they seem to be taking over everything, slowing down your system and tying up all of your system resources. When adware is coupled with spyware, it can be a frustrating ride, to say the least.

Back Door – A back door is a point of entry that circumvents normal security and can be used by a cracker to access a network or computer system. Usually back doors are created by system developers as shortcuts to speed access through security during the development stage and then are overlooked and never properly removed during final implementation. Sometimes crackers will create their own back door to a system by using a virus or a Trojan to set it up, thereby allowing them future access at their leisure.

Black Hat – Just like in the old westerns, these are the bad guys. A black hat is a cracker. To add insult to injury, black hats may also share information about the “break in” with other black hat crackers so they can exploit the same vulnerabilities before the victim becomes aware and takes appropriate measures.

Bot – A bot is a software “robot” that performs an extensive set of automated tasks on its own. Search engines like Google use bots, also known as spiders, to crawl through websites in order to scan through all of your pages. In these cases bots are not meant to interfere with a user, but are employed in an effort to index sites for the purpose of ranking them accordingly for appropriate returns on search queries. But when black hats use a bot, they can perform an extensive set of destructive tasks, as well as introduce many forms of malware to your system or network. They can also be used by black hats to coordinate attacks by controlling botnets.

CERT-In (the Indian Computer Emergency Response Team)

CERT-In (the Indian Computer Emergency Response Team)

CERT-In (the Indian Computer Emergency Response Team) is a government-mandated information technology (IT) security organization. The purpose of CERT-In is to respond to computer security incidents, report on vulnerabilities and promote effective IT security practices throughout the country.
CERT-In was created by the Indian Department of Information Technology in 2004 and operates under the auspices of that department. According to the provisions of the Information Technology Amendment Act 2008, CERT-In is responsible for overseeing administration of the Act.
CERT organizations throughout the world are independent entities, although there may be coordinated activites among groups. The first CERT group was formed in the United States at Carnegie Mellon University.
CERT-In is operational since January 2004. The constituency of CERT-In is the Indian Cyber Community. CERTIn
is the national nodal agency for responding to computer security incidents as and when they occur.
In the recent Information Technology Amendment Act 2008,CERT-In has been designated to serve as the national
agency to perform the following functions in the area of cyber security:
Collection,analysis and dissemination of information on cyber incidents.
Forecast and alerts of cyber security incidents
Emergency measures for handling cyber security incidents
Coordination of cyber incident response activities.
Issue guidelines,advisories,vulnerability notes and whitepapers relating to information security
practices,procedures, prevention,response and reporting of cyber incidents.
Such other functions relating to cyber security as may be prescribed

Very important Cyber fraud and management exam

Short notes ( Important Points for Prevention of cyber fraud & crime exam point of view)



l  3 aspects of crime fraud triangle are 1.Need 2. Opportunity 3. Rationalization( Criminal commits the crime himself)

l  cyber-crime is not defined in IT act 2000 and amendment 2008 also

l  Crimes comes under Indian penal code 1860

l  Script kiddies means hacker who is having lacks of any serious technical expertise like child –like manner

l  Spammers ..spam like keep sending advertisement and discount offer  mails

l  Vulnerabilities are the opportunities provided by system itself

l  Threat vector to understand the modes of operandi

l   In case of copy right  infringement  to the actual offender  Vitim can apply for John doe order

Kyc aml cuckoo surfing

cuckoo smurfing.::

In 2005, FATF added a new term to the vast money laundering
lexicon – “cuckoo smurfing.

The term, mentioned in the organization’s 2005 Typologies Report,
refers to a form of money laundering linked to alternative
remittance systems, in which criminal funds are transferred through
the accounts of unwitting persons who are expecting genuine
funds or payments from overseas. The term cuckoo smurfing first

Kyc aml FATF recommendations

THE FATF RECOMMENDATIONS:: Total 40

A – AML/CFT POLICIES AND COORDINATION

1 - Assessing risks & applying a risk-based approach *
2 - National cooperation and coordination

B – MONEY LAUNDERING AND CONFISCATION

3 Money laundering offence *
4 Confiscation and provisional measures *

C – TERRORIST FINANCING AND FINANCING OF PROLIFERATION

NEW updated IIBF Prevention of cyber crime & fraud management PDF as on 04.07.2018

NEW updated IIBF  Prevention of cyber crime & fraud management PDF


 All the best

Download link here::
https://drive.google.com/file/d/1JQJ7un3l8dvwvjUSBdG-4RA6WlPV_C36/view?usp=sharing

Current Affairs on July 3rd 2018

Today's Headlines from www:

*Economic Times*

📝 Govt rules out bad bank, unveils five-point plan to clean NPA mess

📝 India's May core industries output slows to 3.6%

📝 Flipkart deal in line with government's FDI policy: Walmart

📝 ITC to add 2500 rooms in 5 yrs, mulls foray to healthcare space

📝 NTPC power generation up 7.45pc in April-June at 69.2 BU

KYC AML VERY IMPORTANT

1.1.      Know Your Customer (KYC) Norms/Anti-Money Laundering (AML) Measures/Combating of Financing of Terrorism (CFT)/Obligations of banks under PMLA, 2002

The objective of KYC/AML/CFT guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. KYC procedures also enable banks to know/understand their customers and their financial dealings better which in turn help them manage their risks prudently.

1.2.      Definition of Customer

For the purpose of KYC policy, a ‘Customer’ is defined as:

a        a person or entity that maintains an account and/or has a business relationship with the bank;

b      one on whose behalf the account is maintained (i.e. the beneficial owner). [Ref: Government of India Notification dated February 12, 2010 - Rule 9, sub-rule (1A) of PMLA Rules - 'Beneficial Owner' means the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercise ultimate effective control over a juridical person]

c        beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and

d       any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction.

2            Guidelines

1  1.General

(c)   Banks  should  keep  in  mind  that  the  information  collected  from  the customer for the purpose of opening of account is to be treated as confidential and details thereof are not to be divulged for cross selling or any other like purposes. Banks should, therefore, ensure that information

sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard. Any other information from the customer should be sought separately with his/her consent and after opening the account

26.  Banks should ensure that any remittance of funds by way of demand draft, mail/telegraphic transfer or any other mode and issue of travellers’ cheques for value of Rupees fifty thousand and above is effected by debit to the customer’s account or against cheques and not against cash payment

27.  With effect from April 1, 2012, banks should not make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or any subsequent date, if they are presented beyond the period of three months from the date of such instrument.

28.  Banks should ensure that the provisions of Foreign Contribution (Regulation) Act, 2010, wherever applicable, are strictly adhered to.

2.2.            KYC Policy

Banks should frame their KYC policies incorporating the following four key elements:

1    Customer Acceptance Policy;

2    Customer Identification Procedures;

3    Monitoring of Transactions; and

iv)Risk Management.

KYC AML SHORT NOTES 4

KYC AML SHORT NOTES 4

49.  Banks/FIs should ensure that records pertaining to the identification of the customers and their address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills, etc.) obtained while opening the account and during the course of business relationship, are properly preserved for at least five years after the business relationship is ended as required under Rule 10 of the Rules ibid. The identification of records and transaction data should be made available to the competent authorities upon request.

50.  Banks/FIs may maintain records of the identity of their clients, and records in respect of transactions referred to in Rule 3 in hard or soft format.

51.  Combating Financing of Terrorism : The United Nations periodically circulates the following two lists of individuals and entities, suspected of having terrorist links, and as approved by its Security Council (UNSC).

(a)  The “Al-Qaida Sanctions List”, includes names of individuals and entities associated with the Al-Qaida.

(b)  The “1988 Sanctions List”, consisting of individuals (Section A of the consolidated list) and entities.

52.  The United Nations Security Council Resolutions (UNSCRs), received from Government of India, are circulated by the Reserve Bank to all banks and FIs. Banks/FIs are required to update the lists and take them into account for implementation of Section 51A of the Unlawful Activities (Prevention) (UAPA) Act, 1967, discussed below. Banks/FIs should ensure that they do not have any account in the name of individuals/entities appearing in the above lists. Details of accounts resembling any of the individuals/entities in the list should be reported to FIUIND.

53.  Freezing of Assets under Section 51A of Unlawful Activities (Prevention) Act, 1967 :

(a)  The Unlawful Activities (Prevention) Act, 1967 (UAPA) has been amended by the Unlawful Activities (Prevention) Amendment Act, 2008. Government has issued an Order dated August 27, 2009 (Annex II of this circular) detailing the procedure for implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967 for prevention of, and for coping with terrorist activities.

In terms of Section 51A, the Central Government is empowered to freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of the individuals or entities listed in the Schedule to the Order, or any other person engaged in or suspected to be engaged in terrorism and prohibit any individual or entity from making any funds, financial assets or economic resources or related servicesavailable for the benefit of the individuals or entities listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism.

57.  Jurisdictions that do not or insufficiently apply the FATF Recommendations:

(a)  Banks/FIs are required to take into account risks arising from the deficiencies in AML/CFT regime of the jurisdictions included in the FATF Statement. In addition to FATF Statements circulated by Reserve Bank of India from time to time, banks/FIs should also consider publicly available information for identifying countries, which do not or insufficiently apply the FATF Recommendations. It is clarified that banks/FIs should also give special attention to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries that do not or insufficiently apply the FATF Recommendations and jurisdictions included in FATF Statements. (b) Banks/FIs should examine the background and purpose of transactions with persons (including legal persons and other financial institutions) from jurisdictions included in FATF Statements and countries that do not or insufficiently apply the FATF Recommendations. Further, if the transactions have no apparent economic or visible lawful purpose, the background and purpose of such transactions should, as far as possible be examined, and written findings together with all documents should be retained and made available to Reserve Bank/other relevant authorities, on request.

58.  In terms of the Rule 3 of the PML (Maintenance of Records) Rules, 2005, banks/FIs are required to furnish information relating to cash transactions, cash transactions integrally connected to each other, and all transactions involving receipts by non-profit organisations (NPO means any entity or organisation that is registered as a trust or a society under the Societies Registration Act, 1860 or any similar State legislation or a company registered (erstwhile Section 25 of Companies Act, 1956 ) under Section 8 of the Companies Act, 2013), cash transactions ;where forged or counterfeit currency notes or bank notes have been used as genuine, cross border wire transfer, etc. to the Director, Financial Intelligence Unit-India (FIU-IND).

59.  FIU-IND has released a comprehensive reporting format guide to describe the specifications of prescribed reports to FIU-IND. FIU-IND has also developed a Report Generation Utility and Report Validation Utility to assist reporting entities in the preparation of prescribed reports. The Office Memorandum issued on Reporting Formats under Project FINnet dated 31st

March, 2011 by FIU containing all relevant details are available on FIU’s website. Banks/FIs should carefully go through all the reporting formats prescribed by FIU-IND.

60.  FIU-IND have placed on their website editable electronic utilities to file electronic Cash Transactions Report (CTR)/ Suspicious Transactions Report (STR) to enable banks/FIs which are yet to install/adopt suitable technological tools for extracting CTR/STR from their live transaction data base. It is, therefore, advised that in cases of those banks/FIs, where all the branches are not fully computerized, the Principal Officer of the bank/FI should cull out the transaction details from branches which are not yet computerized and suitably arrange to feed the data into an electronic file with the help of the editable electronic utilities of CTR/STR as have been made available by FIU-IND on their website http://fiuindia.gov.in.

In terms of Rule 8, while furnishing information to the Director, FIU-IND, delay of each day in not reporting a transaction or delay of each day in rectifying a misrepresented transaction beyond the time limit as specified in the Rule shall constitute a separate violation. Banks/FIs are advised to take note of the timeliness of the reporting requirements.

62.  Reports to be furnished to FIU-IND :

1)  Cash Transaction Report (CTR)

2)  Suspicious Transaction Reports (STR)

3)  Non-Profit Organisation

4)  Cross-border Wire Transfer

63.  The CTR for each month should be submitted to FIU-IND by 15th of the succeeding month. Cash transaction reporting by branches to their controlling offices should, therefore, invariably be submitted on monthly basis and banks/FIs should ensure to submit CTR for every month to FIU-IND within the prescribed time schedule.

64.  All cash transactions, where forged or counterfeit Indian currency notes have been used as genuine should be reported by the Principal Officer of the bank to FIU-IND in the specified format(Counterfeit Currency Report – CCR), by 15thday of the next month. These cash transactions should also include transactions where forgery of valuable security or documents has taken place and may be reported to FIU-IND in plain text form.

65.  While filing CTR, details of individual transactions below Rupees Fifty thousand need not be furnished. CTR should contain only the transactions carried out by the bank on behalf of their clients/customers excluding transactions between the internal accounts of the bank.

66.  A summary of cash transaction reports for the bank as a whole should be compiled by the Principal Officer of the bank every month in physical form as per the format specified. The summary should be signed by the Principal Officer and submitted to FIU-IND. In case of CTRs compiled centrally by banks for the branches having Core Banking Solution (CBS) at their central data centre, banks may generate centralised CTRs in respect of the branches under core banking solution at one point for onward transmission to FIU-IND, provided the CTR is to be generated in the format prescribed by FIU-IND.

KYC AML SHORT NOTES 3

KYC short Notes:

1.     The objective of KYC/AML/CFT guidelines is to prevent banks/FIs from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities.

2.     The PMLA came into effect from 1st July 2005. Necessary Notifications / Rules under the said Act were published in the Gazette of India on 1st July, 2005 by the Department of Revenue, Ministry of Finance, Government of India. The PMLA has been further amended vide notification dated March 6, 2009 and inter alia provides that violating the prohibitions on manipulative and deceptive devices, insider trading and substantial acquisition of securities or control as prescribed in Section 12 A read with Section 24 of the Securities and Exchange Board of India Act, 1992 (SEBI Act) will now be treated as a scheduled offence under schedule B of the PMLA.

3.     KYC procedures also enable banks/FIs to know/understand their customers and their financial dealings better and manage their risks prudently.

4.     For the purpose of KYC Norms, a ‘Customer’ is defined as a person who is engaged in a financial transaction or activity with a reporting entity and includes a person on whose behalf the person who is engaged in the transaction or activity, is acting.

5.     “Designated Director" means a person designated by the reporting entity (bank, financial institution, etc.) to ensure overall compliance with the obligations imposed under chapter IV of the PML Act.

SHORT NOTES 2 KYC AML

 SHORT NOTES  2 KYC AML

5. Terrorism Financing are 3 types



A.    State financing: Separate entities are created with organizational and financial support of the state

B.    Legimate modes : Donations by business,individuals and charity funds

C.    Private funding:by criminal activities by bank robberies, drug trafficking, kidnaps,exortion..



6. Money laundering can take several forms, although most methods can be categorized into one of a few types. These include "bank methods, smurfing [also known as structuring], currency exchanges, and double-invoicing".

 Structuring: Often known as smurfing, this is a method of placement whereby cash is broken into smaller deposits of money, used to defeat suspicion of money laundering and to avoid anti-money laundering reporting requirements. A sub-component of this is to use smaller amounts of cash to purchase bearer instruments, such as money orders, and then ultimately deposit those, again in small amounts.

·         Bulk cash smuggling: This involves physically smuggling cash to another jurisdiction and depositing it in a financial institution, such as an offshore bank, with greater bank secrecy or less rigorous money laundering enforcement

·         Cash-intensive businesses: In this method, a business typically expected to receive a large proportion of its revenue as cash uses its accounts to deposit criminally derived cash. Such enterprises often operate openly and in doing so generate cash revenue from incidental legitimate business in addition to the illicit cash – in such cases the business will usually claim all cash received as legitimate earnings. Service businesses are best suited to this method, as such enterprises have little or no variable costs and/or a large ratio between revenue and variable costs, which makes it difficult to detect discrepancies between revenues and costs. Examples are parking structures, strip clubs, tanning salons, car washes, arcades, bars, restaurants, and casinos.

·         Trade-based laundering: This involves under- or over-valuing invoices to disguise the movement of money. For example, the art market has been accused of being an ideal vehicle for money laundering due to several unique aspects of art such as the subjective value of artworks as well as the secrecy of auction houses about the identity of the buyer and seller.

·         Shell companies and trusts: Trusts and shell companies disguise the true owners of money. Trusts and corporate vehicles, depending on the jurisdiction, need not disclose their true owner. Sometimes referred to by the slang term rathole, though that term usually refers to a person acting as the fictitious owner rather than the business entity.

·         Round-tripping: Here, money is deposited in a controlled foreign corporation offshore, preferably in a tax haven where minimal records are kept, and then shipped back as a foreign direct investment, exempt from taxation. A variant on this is to transfer money to a law firm or similar organization as funds on account of fees, then to cancel the retainer and, when the money is remitted, represent the sums received from the lawyers as a legacy under a will or proceeds of litigation.

·         Bank capture: In this case, money launderers or criminals buy a controlling interest in a bank, preferably in a jurisdiction with weak money laundering controls, and then move money through the bank without scrutiny.

·         Casinos: In this method, an individual walks into a casino and buys chips with illicit cash. The individual will then play for a relatively short time. When the person cashes in the chips, they will expect to take payment in a check, or at least get a receipt so they can claim the proceeds as gambling winnings.

·         Other gambling: Money is spent on gambling, preferably on high odds games. One way to minimize risk with this method is to bet on every possible outcome of some event that has many possible outcomes, so no outcome(s) have short odds, and the bettor will lose only the vigorish and will have one or more winning bets that can be shown as the source of money. The losing bets will remain hidden.

·         Real estate: Someone purchases real estate with illegal proceeds and then sells the property. To outsiders, the proceeds from the sale look like legitimate income. Alternatively, the price of the property is manipulated: the seller agrees to a contract that underrepresents the value of the property, and receives criminal proceeds to make up the difference.

·         Black salaries: A company may have unregistered employees without written contracts and pay them cash salaries. Dirty money might be used to pay them.

·         Tax amnesties: For example, those that legalize unreported assets and cash in tax havens.

·         Life insurance business: Assignment of policies to unidentified third parties and for which no plausible reasons can be ascertained.

·         By using national banking services smurfing, Muiltiple tier of accounts,funnel accounts,Contra transactions,DD,cash depost and transfer fund connected accounts, front companies, legimate accounts, dormant accounts(Mostly used by terrorists) and wire transfer

·         Using remittance ,prepaid cards, money changers,credit and debit cards

By using The credit card industry includes: case study


 Credit card associations, such as American Express,MasterCard and Visa, which license member banks toissue bankcards, authorize merchants to accept thosecards, or bothIssuing banks, which solicit potential customers and issue the credit cards.Acquiring banks, which process transactions for merchants who accept credit cards.
 Third-party processors, which contract with issuing or acquiring banks to provide transaction processing andother credit card–related services for the banks.Credit card accounts are not likely to be used in the initialplacement stage of money laundering because the industrygenerally restricts cash payments. They are more likely to be usedin the layering or integration stages.
Example
Money launderer Josh prepays his credit card using illicit funds that he has already introduced into thebanking system, creating a credit balance on his account. Josh then requests a credit refund, whichenables him to further obscure the origin of the funds, which constitutes layering. Josh then uses the illicitmoney he placed in his bank account and the creditcard refund to pay for a new kitchen that he bought.Through these steps he has integrated his illicit fundsinto the financial system.

·         A money launderer could put ill-gotten funds in accounts at banksoffshore and then access these funds using credit and debitcards associated with the offshore account. Alternatively, he couldsmuggle the cash out of one country into an offshore jurisdictionwith lax regulatory oversight, place the cash in offshore banks and— again — access the illicit funds using credit or debit cards.In a 2002 Report called “Extent of Money Laundering throughCredit Cards Is Unknown,” the U.S. Government AccountabilityOffice, the Congressional watchdog of the United States, offered hypothetical money laundering scenarios using credit cards. One
example was: “[Money launderers establish a legitimate businessin the U.S. as a ‘front’ for their illicit activity. They establish a bank account with a U.S.-based bank and obtain credit cards and ATM cards under the name of the ‘front business.’ Funds from theirillicit activities are deposited into the bank account in the United States. While in another country, where their U.S.-based bank hasaffiliates, they make withdrawals from their U.S. bank account,
using credit cards and ATM cards. Money is deposited by one of their cohorts in the U.S. and is transferred to pay off the credit cardloan or even prepay the credit card. The bank’s online services make it possible to transfer funds between checking and creditcard accounts.”



6.ML Global measures can be achieved by



A.    Engagement of international organizations

B.    UNO initiatives like Vienna convention in 1988, Political declaration in 1998  , The Palermo convention in 2003

C.    International monetary fund

D.    Financial intelligence units (In india 15th nov 2004 , Director EIU economic intelligence council, Headed by finance Minister)

E.    Egmont group of FIUs..1995 (151  FIUs)

CASE STUDY KYC AML

Online or Internet Banking ( Special Case study how Money laundering 3 steps Happens):: Very important

Placement — Launderers want to get their proceeds into legitimate repositories such as banks, securities or real estate, with as little trace of the source and beneficial ownership as possible. Often, cyberspace banks do not accept conventional deposits. However,cyberbanks could be organized to take custodial-like forms — holding, reconciling and transferring rights to assets held in different forms around the world. Money launderers can create their own systems shadowing traditional commercial banks in order to acceptdeposits, perhaps as warehouses for cash or otherbulk commodities. Thus, cyberspace banks have thepotential to offer highly secure, uncommonly private“placement” vehicles for money launderersLayering — Electronic mail messages, aided by encryption and cyberspace banking transfers, enablelaunderers to transfer assets around the world manytimes a day.

 Integration — Once layered, cyberspace bankingtechnologies may facilitate integration in two ways.If cyberbanking permits person-to-person cash-like transfers, with no actual cash involvement, existing currency reporting regulations do not apply. Using“super smart-card” technologies, money can be movedaround the world through ATM transactions. These smart cards permit easy retrieval of the “account”balance by the use of an ATM card

Short Notes on Anti Money Laundering

Short Notes on Anti Money Laundering

1. The conversion or transfer of property, the concealment or disguising of the nature of the proceeds, the acquisition, possession or use of property, knowing that these are derived from criminal activity and participate or assist the movement of funds to make the proceeds appear legitimate is money laundering.

Money obtained from certain crimes, such as extortion, insider trading, drug trafficking, and illegal gambling is "dirty" and needs to be "cleaned" to appear to have been derived from legal activities, so that banks and other financial institutions will deal with it without suspicion. Money can be laundered by many methods which vary in complexity and sophistication.

Money laundering involves three steps: The first involves introducing cash into the financial system by some means ("placement"); the second involves carrying out complex financial transactions to camouflage the illegal source of the cash ("layering"); and finally, acquiring wealth generated from the transactions of the illicit funds ("integration"). Some of these steps may be omitted, depending upon the circumstances. For example, non-cash proceeds that are already in the financial system would not need to be placed.

According to the United States Treasury Department:

Money laundering is the process of making illegally-gained proceeds (i.e., "dirty money") appear legal (i.e., "clean"). Typically, it involves three steps: placement, layering, and integration. First, the illegitimate funds are furtively introduced into the legitimate financial system. Then, the money is moved around to create confusion, sometimes by wiring or transferring through numerous accounts. Finally, it is integrated into the financial system through additional transactions until the "dirty money" appears "clean".

2.Money laundering involves taking criminal proceeds and disguising their illegal source in anticipation of ultimately using the criminal proceeds to perform legal and illegal activities.

Simply put, money laundering is the process of making dirty money look clean.

3. Money laundering methods

Money laundering:

The money laundering cycle can be broken down into three distinct stages; however, it is important to remember that money laundering is a single process. The stages of money laundering include the:

Placement Stage

Layering Stage

Integration Stage

The Placement Stage
The placement stage represents the initial entry of the "dirty" cash or proceeds of crime into the financial system. Generally, this stage serves two purposes: (a) it relieves the criminal of holding and guarding large amounts of bulky of cash; and (b) it places the money into the legitimate financial system. It is during the placement stage that money launderers are the most vulnerable to being caught. This is due to the fact that placing large amounts of money (cash) into the legitimate financial system may raise suspicions of officials.

The placement of the proceeds of crime can be done in a number of ways. For example, cash could be packed into a suitcase and smuggled to a country, or the launderer could use smurfs to defeat reporting threshold laws and avoid suspicion. Some other common methods include:

Loan Repayment

Repayment of loans or credit cards with illegal proceeds Gambling

Purchase of gambling chips or placing bets on sporting events

Currency Smuggling

The physical movement of illegal currency or monetary instruments over the border

Currency Exchanges

Purchasing foreign money with illegal funds through foreign currency exchanges

Blending Funds

AML KYC PREFACE

AML KYC:

This policy and procedure document is a comprehensive source of reference for all the

concerned and relevant activities of the Bank towards Know Your Customer (KYC), Anti

Money Laundering (AML) and Combating the Financing of Terrorism (CFT) compliance. The

policies and procedures developed are designed to ensure that the Bank is committed to the

prevention of the use of its facilities for laundering the proceeds of crime and financing

terrorist activities. It consists of the following sections:

− Risk based acceptance model to facilitate the classification of current and

existing customers on the basis of money laundering and terrorist financing

risk;

− Account opening procedures including customer classification, verification of

customer information using documentary and non-documentary methods and

escalation processes;

− Policy for customer information updates based on the risk level of the

individual or entity;

− Internal controls to measure the risk levels of products, services and

customers accepted and to measure the effectiveness of current policies and

procedures;

− Policies and procedures for the monitoring and reporting of transactions;

− Policies and procedures for customer record maintenance, retention and their

sharing with government agencies; and

− Recommendation for a training programme for Bank officials geared towards

customer identification and acceptance, customer risk ranking and detection

of money laundering instances.

1.1 Statement of commitment

The goals and objectives of this KYC, AML & CFT programme are to (1) deter

individuals and entities from using the Bank to launder the proceeds of illegal activities;

(2) enable member branches of the Bank to comply with their obligations under the

Prevention of Money Laundering Act, Unlawful Activities Prevention Act (ULPA) and

regulations from Reserve Bank of India (RBI) and National Bank for Agriculture and

Rural Development (NABARD), regulatory bodies for the banks; (3) manage and

mitigate money laundering and terrorist financing related risks; (4) allow banks to cooperate

with regulatory bodies and government agencies in detecting and deterring

money laundering and terrorist financing; and (5) provide employees with guidance for

actions to be taken to comply with the Bank’s obligations under the law and the Bank’s

policies.

2 Definitions

2.1 Customer

RBI defines a customer1 as any one of the following:

− A person or entity that maintains an account and/or has a business

relationship with the Bank.

− One on whose behalf the account is maintained (i.e., the beneficial owner) or

beneficiary of transactions conducted by professional intermediaries, such as

stock brokers, chartered accountants, solicitors, etc. as permitted under the

law.

− Any person or entity connected with a financial transaction or any other

product offered by the Bank including walk-in customers.