Anti Money Laundering and Combating
Terror st F nanc ng
HDFC SECURITIES LTD
Need for Money Laundering
¾ Every year, huge amounts of funds are generated from
illegal activities. These funds are mostly in the form of
¾ The criminals who generate these funds need to bring them
into the legitimate financial system.
Over 1. tr on o ega un s are aun ere eac year.
Consequences of Money Laundering
¾ Finances Terrorism:
Money laundering provides terrorists with funds to carry out their
¾ Undermines rule of law and governance:
Rule of Law is a precondition for economic development – Clear and
li bl f
cer a n ru es app ca e or a
¾ Affects macro economy:
Money launderers put money into unproductive assets to avoid detection.
¾ Affects the integrity of the financial system:
Financial system advancing criminal purposes undermines the function
and integrity of the financial system.
¾ Reduces Revenue and Control:
Money laundering diminishes government tax revenue and weakens
government control over the economy.
Steps in which money is laundered
Money laundering basically involves three independent steps
This refers to physical disposal of bulk cash proceeds derived from illegal
Refers to separation of illicit proceeds from their source by creating
complex layers of financial transactions. Layering conceals the audit trail
and provides anonymity.
Refers to the re-injection of the laundered proceeds back into the economy
in such a way that they re-enter the financial system as normal business
funds. Banks and financial intermediaries are vulnerable from the Money
Laundering point of view since criminal proceeds can enter banks in the
form of large cash deposits.
Global Framework - Financial Action Task
¾ Established by the G-7 Summit in Paris in 1989 in
response to mounting concern over money laundering.
¾ A policy making body, having s