1 Judy Manners October 22 nd, 2005 AML & Financial Crimes – Hurdles in Implementation – Potential Pitfalls and the Way Forward

2  Introduction  Pitfalls  Hurdles  The Way Forward Agenda

3  Attempts to indulge / deliberately assists or knowingly becomes a party  Actually involved even unknowingly in any process / activity connected with the proceeds of crime  projecting the same as untainted property is guilty of the offence. Whosoever directly or indirectly - Introduction – The Money Launderer

4  THE WHAT Terrorist Financing, Drug Trafficking, Trafficking in Human Cargo, Corruption  HOW MUCH ?? Global /annual volumes range - US$ 800 million to 2 trillion  Erosion of the Financial System Introduction – Money Laundering & Financial Crime

5 Hurdles in Implementation …….  Competitive Environment for Banks with Overseas Operations  Comply with standards in the Home Country  Follow regulations of the Host Country  Legal Hurdles : Immunity, Extradition & Repatriation of Stolen Wealth

6 ……. Hurdles in Implementation  KYC & Documentation  Genuiness of Documents  Absence of a single effective control mechanism for identification of individuals  Skill Sets - Not readily available  Level of Automation & CBS  Manual Branches co-exist with fully / partially computerized branches  Decentralised Customer Delivery & Centralised Processing  Complex Relationships  Customer Identification, Due Diligence, Acceptance & Monitoring of Transactions  Need to set up Robust Information Frameworks followed by Continuous Analysis of Data

7  The Market  Capital Account convertibility  Active Money & Capital markets  Holding & Shell Companies  The Government  The Structure  Huge Deficit financing  Economically Weak  Trade, Tax Policies  Corruption  Legislation  Nefarious Groups  Nexus / Net Working of Terrorist organizations  Cornering of Resources Pitfalls in Implementation

8  The Environment oBasel Committee Recommendations oUS Legislation – Patriot Act oPrevention of Money Laundering Act 02 oMonitoring of FATF non-members o… Beyond Legislation …  The Customer oEducation  The Banker oTechnology oProcess oPeople oK …. K …. KYC The Way Forward

9 AML…. Is it a Courtship Display???