thesis on money laundering

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Thesis on money laundering cover letter chemist examples

Thesis on money laundering

Guidelines on anti-money laundering became globally known after September 11, Now financial institutions have to request as much information as possible from their clients, but in different countries these process vary. There is also anti-money laundering software developed and implemented in different institutions, which filters information received from clients and classifies it according to suspicion levels.

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Subject of the call Please choose the reason of your request Order placement Payment and authorization Quality of my order General question. Customers are ready to provide the proof of identity and address but are reluctant in case of disclosing information such as their annual income, value of assets, details of accounts in other banks, source of funds, etc.

There is also reluctance in customers towards KYC updation practices and transaction reporting requirements of the banks. It is quite natural for the bank employees to exhibit a higher level of awareness because of their access to training, circulars etc. From this difference in perception it is inferred that the banks are either under estimating the willingness of the customers with regard to information disclosure, or bank customers are over stating their support for information disclosure norms of KYC.

Also, majority of the bank employees perceive that the reporting requirements followed by banks do not result in loss of customers for the banks; whereas, a good number of customers expresses their preference to remove the accounts from the bank that has reported their transactions. Therefore, there is a considerable significant difference in the perception of bank employee and bank customer with regard to the issue of closure of account because of reporting requirements.

The researcher believes that the adoption of the suggestions proposed in this thesis based on the research findings will positively contribute towards the development of a more effective AML system in Indian banking sector. Background of the Study 1.

Money Laundering: Overview……………………………………….. Concept of Terrorism Financing…………………………………… Effect of Globalization……………………………………………….. Problem Definition 1. Vulnerability of Banks to Money Laundering……………………….. Literature Review 1. AML regulation: Theoretical Context 1.

Research Gap and Objectives of Research………………………………… Hypotheses of the Study…………………………………………………… Scope of the Study…………………………………………………………… …54 1. Significance of the Study…………………………………………………….. Structure of the Thesis……………………………………………………….. Nature of the Study………………………………………………………… Locale of the Study………………………………………………………… Source of Data………………………………………………………..

Sampling Plan……………………………………………………… Data Collection Tool…………………………………………………. Pilot Test…………………………………………………………… Data Analysis Methods………………………………………………………. Demographic Profile of the Sample…………………………………………. Preliminary Assessment of the Instrument 3. Factor Structure of the Questionnaire……………………………… Validation of the Constructs………………………………………….

Need for Money Laundering Regulation…………………………….. AML Impact on Banks………………………………………………. AML Practices in Banks…………………………………………………… AML Policy………………………………………………………….. Customer Identification Procedures…………………………………..

Transaction Monitoring……………………………………………… …86 3. Transaction Reporting……………………………………………… Record Maintenance…………………………………………………. Issues in AML Implementation……………………………………………… …87 3. Staff Training………………………………………………………………… …90 3. Hypothesis Testing………………………………………………………… Summary of Findings………………………………………………………. Preliminary Assessment of the Instrument 4.

Difference in Employee and Customer Awareness Level…………… … 5. Implications of the Study…………………………………………………….. Study Limitations…………………………………………………………….. Scope for Future Research…………………………………………………… … 6. Conclusion…………………………………………………………………… … References Annexures Annexure I…. Background of the Study The countries world-wide faces the greatest challenge of protecting their economy from the menace of money laundering as it seriously affects the economic growth and has the potential to upset the programmes of the economic planners.

Apart from economic damage black money is used for illegal activities by anti-social and anti- national elements. The following sections describe the concepts of money laundering, terrorism financing, and the importance of counter measures. The laundering process makes this possible by routing the illicit money through a chain of several transactions, which disguises its origin and gives the impression to have come from a legitimate source. That is, in simple terms, the process aids in disguising the true origin of the money.

The process of money laundering comprises three phases namely, Placement, Layering and Integration. In placement stage, the illicit funds are infused into the financial system, or the retail economy. Structuring, which is an act of depositing the bulk money into the bank after breaking it into numerous small amounts to avoid cash reporting requirements; 2.

Smurfing — the illicit money is injected into the banks with the help of third party personnel, called as smurf, who make multiple deposits into multiple accounts at any number of banks; 3. Money mule transactions — the illicit money is injected into the banks with the help of third party personnel, called as money mule, who often for a receipt of certain commission payment, receives deposits through cheques or wire transfers, and then transfers these deposits into the accounts of other individuals held on behalf of the launderer; 4.

Alternative remittance systems such as Hawala; 5. Buying items of high value like diamonds, gold, vehicles, and real estate using the illegal money, often in the name of family members and close associates; 6. Repayment of bank loans using the illegal money; 7. Smuggling of cash, etc. During the layering phase, the funds are distanced from its entry or placement point through a chain of complex financial transactions. It involves transfer of money among different accounts, in different names, and in different financial institutions, often in different countries by citing various financial transactions among the parties.

The purpose of layering phase is to conceal the nature of funds, and the placement of funds by obscuring or breaking the money trail by creating a complex web of transactions layering one upon the other. Breaking the money trail is of utmost importance to the money launderer as it makes very difficult for the investigating authorities to establish where the illicit funds have actually ended up Indian Institute of Banking and Finance, Electronic fund transfers, offshore banks1, correspondent banking services2, shell corporations3, trusts, repeat invoicing, resale of assets, etc.

It provides an apparently legitimate explanation for the illicit proceeds Indian Institute of Banking and Finance, The criminals are inventing new methods of laundering from time to time such as the usage of prepaid value cards, electronic payment systems and internet banking so that tracking the actual source of funds becomes very difficult. A precise estimation of money being laundered globally every year is practically not possible as the nature of activities are illegal FATF, and are performed outside of the purview of legal aspect.

However, certain rough estimates had been put forth by peer institutions and studies to understand the magnitude of the money laundering problem. Since last three decades4 progress is being made in controlling money laundering because money laundering has been realized as a great threat to the national economy, and the security of the nations. Some of the important effects of money laundering are listed below: 4 Measures against transfer and safe keeping of illicit money in banks was first recommended in by the committee of ministers of the council of Europe.

It has a detrimental impact on government revenues by decreasing government income from tax. Thus money is diverged from good investments to risky and low quality investments. So on one side, money laundering facilitates the growth of anti — social and anti — national activities, and on the other hand creates a great loss to the Government exchequer. The nature of funds provided to support terrorism may be either of illicit origin, such as the proceeds from drug trade, smuggling, extortion, etc.

The detection and tracking of funds associated with terrorism financing is more difficult than in the case of money laundering as the financial transactions involved in terrorism financing are often structured in small amounts.

The detection becomes much more difficult when the funds are raised from legitimate sources. A variety of methods are used to move money to the destined place such as physical movement of cash, gold and other valuables using couriers and smuggling routes, formal banking system, and Hawala.

The funds are transferred out of the home country mostly to the countries with major financial hubs to conceal the final destination, using the banking system as a channel FINTRAC, Global Initiatives to Counter Money Laundering and Terrorism Financing The measures for combating money laundering had its roots in when a Committee of Ministers of the Council of Europe recommended the governments of its member states to adopt the measures against the transfer and the safe keeping of funds of criminal origin by its banks5.

In , money laundering was first recognized as a criminal offence6 by the United Nations UN through its Vienna Convention. R 80 10 of the committee of ministers to member states on measures against the transfer and the safe keeping of funds of criminal origin — adopted by the committee of ministers on 27 June The U. Therefore, to prevent the use of legitimate channels in terrorism financing, FATF came out with eight recommendations in October , and ninth recommendation in , specially to deal with countering of terrorist financing.

However, in , these guidelines were revisited by the FATF, wherein it integrated most of the measures focusing on the terrorist financing across its forty recommendations, thereby obviating the need for these separate nine recommendations. The concept of FIU has been evolved in response to the need of the financial system to make financial disclosures in the effort of combating money laundering. Often, financial institutions face a risk that the transactions or activities which they determine as suspicious for money laundering or terrorism financing may turn out to be false accusations and they may finally end up in disclosing the particulars of innocent customers.

Therefore, to reduce the risk of financial institutions, there is a need for substantiating the suspicious transactions with an evidence before disclosing them to the law enforcement and investigative authorities. The FIU fulfils this need by substantiating the financial information received with an evidence or justifiable interpretation of the facts that the transaction involves criminal activity.

In the early s, the first few FIUs were formed in response to the need for exchange of financial disclosures in combating money laundering. Effect of Globalization The globalization of national economies widened the scope for money laundering and terrorism financing. The removal of financial barriers to international capital flows and globalization of financial services has facilitated free flow of funds from one country to another country Popa, The reverse can also happen where money deposited in a bank branch of a less regulated jurisdiction is easily transferred internally within the bank to a branch in a more regulated jurisdiction Morris-Cotterill, The act was brought into force from July 1, The act imposed various obligations such as reporting of large value and suspicious transactions, maintenance of customer identification records and transaction history, etc.

The act was subsequently amended in the years , and to meet the international recommendations on AML. Figure 1. These guidelines increased the responsibility of Indian banks further with regard to the opening and maintenance of customer accounts.

Thus, the usage of banks by unscrupulous elements has been made more difficult by the adoption of AML measures in several countries, including India. Bank officials therefore are expected to exercise constant vigilance in opening and maintenance of accounts, and in identifying and duly reporting the suspicious and large value transactions.

It is a challenging task to understand the extent of compliance and ensure their effectiveness. Framework of AML Implementation in Banks The AML obligations for banks constitutes identification of customer, monitoring and reporting of customer activity, risk management function, maintenance and preservation of records, and guidelines on freezing and closure of bank accounts.

The customer identification process includes capturing the information of the prospective customers through application forms and interviews; Assessing the risk whether low, medium or high risk of the prospective customer based on parameters such as nature of business activity, location of customer, mode of payments, volume of turnover, and social and financial status; Collection and verification of relevant documents establishing customer identity, address and other particulars based on the risk of the prospective customer.

After the KYC process, once the person is accepted and account is opened, the account should be monitored for identification of any unusual and suspicious activity. The fundamental step in transaction monitoring is identifying the deviations from the normal or expected activity of the customer.

These deviations constitute the unusual behaviour of the customer account. The unusual behaviour is identified by comparing the account activity to its past behaviour, or when it exceeds the set threshold levels, or on analysing the account activity in comparison to its client peer groups.

The extent of monitoring depends on the risk category of the account. The monitoring function is mostly automated in banks since manually monitoring the activity of its large customer base is labour intensive and costly. The automation settings in the software should generate alerts on identification of any unusual activity in the account.

The indicators for unusual activity should be appropriately fed to the system to effectively combat money laundering. The principle officer senior management level of the bank shall be responsible for monitoring and reporting of all transactions. Table 1. All cash transactions of the value of more than rupees ten lakhs or its equivalent in foreign currency. Non-profit iii. All transactions involving receipts by non- To be furnished by organization profit organizations of value more than rupees the 15th day of Transaction ten lakh, or its equivalent in foreign currency.

Counterfeit iv. All cash transactions where, forged or Currency Report counterfeit currency notes or bank notes have CCR By 15th day of next been used as genuine or where any forgery of a month. Suspicious v. All suspicious transactions whether or not To be reported not Transaction made in cash. Cross border vi.

Besides, the risk of the customer should be reviewed periodically at an interval of not less than once in six months. During the course of such partial freezing, the account holders can revive their accounts by submitting the KYC documents.

Further, it would always be open to the bank to close the account of such customers after issuing due notice to the customer explaining the reasons for taking such a decision. Such decisions, however, need to be taken at a reasonably senior level. Maintenance of records enables banks to retrieve the data quickly and easily whenever required by the competent authorities.

Banks should maintain proper record of the transactions reported under PMLA for at least five years from the date of transaction between the bank and the customer. Also, the information pertaining to the identity of the customer should be preserved for at least five years after the business relationship is ended with the customer.

The proceeds from these crimes in turn increases the economic crimes such as money laundering, terrorism financing, identity theft, and fraud. The total amount of black money deposited in foreign banks by Indians is unknown. Neate, India has set up a special task force to find illicit money, the cash that has not been declared or taxed and is mostly deposited in foreign banks.

The RBI also announced the withdrawal of all currency notes printed prior to from 31 March in a bid to curb the circulation of black money. The economic times dated 16thMarch reported a case of money laundering in where about Rs. Many scams involving alleged money laundering are under trail in various courts in India involving corporate, political, bureaucratic and criminal nexus.

This includes 2G Spectrum scam involving alleged kickbacks of about Rs. The investigative authorities claimed that the kickbacks are laundered by using the bank accounts of family members residing at Mauritius and Seychelles. Correspondent, ; The Hindu, A strong likelihood is expressed by the ministry of finance that a larger part of the black money moved out of India, is being re-integrated into the Indian economy in the form of Foreign Direct Investment FDI , Participatory Notes, and foreign donations to the charitable organizations, non-government organizations, and other associations in India Ministry of Finance, Bureau of International Narcotics and Law Enforcement Affairs also cited India as one of the major money laundering countries for the year These indicators clearly shows that India at present is very vulnerable to money laundering activities.

The money laundering methods prevailing in India for laundering the proceeds of these crimes are diverse. Vulnerability of Banks to Money Laundering Banks in the process of financial intermediation are challenged with various kinds of financial and non —financial risks. These risks are highly interdependent and can have impact on the financial sector. One such risk is the Money Laundering, which exposes banks to reputational, legal, operational and integrity risks.

Banks are the preferred channel for criminals to launder their money because of the following reasons Sarigul, : a. Banks provide a variety of services and instruments such as bank drafts, fund transfers domestic and international , foreign correspondent accounts, etc. The spread of banks worldwide and the convergence of technology with banks has provided safer, faster and easier way to transfer money across the globe, thereby making the origins of money difficult to be traced back.

The banks offer their services relatively at a lesser cost. The principle of bank secrecy now compromised because of AML regulations helps criminals to avoid detection by law enforcement agencies. The AML guidelines issued by it in have been refined continuously to meet the international standards on combating money laundering and terrorism financing.

Despite various efforts by the RBI and FIU-India, RBI observed that there are laxities12 in the effective implementation of AML guidelines by the banks relating to compilation and periodic updation of customer profiles, risk categorization of customers, monitoring of accounts, and closure of alerts in accounts; thus leaving the banks vulnerable to operational risk. In recent years, the penalties imposed on various banks see figure 1.

It is observed that there is a sudden rise in the number of banks penalized in the year This may be due to the impact of sting operations of Cobrapost an Indian news website and television production house, known for its investigative journalism exposing several banks in India alleging their involvement in the money laundering activities; and as a result the banks attracted penal action by RBI.

The following is the list of AML violations registered during a. Non-adherence to KYC norms, including in the case of walk-in customers and sale of third party products b. Failure to monitor cash and suspicious transactions c. Non-compliance with guidelines on risk categorization and periodic review of risk profiling of the account holders d. Non-verification of source of funds credited to Non-resident ordinary NRO accounts f. Non-verification of the end use of funds in respect of loans g.

Omissions in filing of transaction reports h. Failure to provide certain documents or information when called for because of non-maintenance of records i. Non-adherence to instructions on issue of demand drafts against cash of above Rs.

Failure of internal controls required to ensure AML compliance Figure 1. The non-compliance with AML measures can be attributed to, a. Oversight while implementing the measures c. The negative perception prevailing in the employees towards AML measures; ii. The business interests are dominating compliance i. Given the vulnerability of the financial institutions, more importantly the banks, it is therefore required to assess the present status of AML compliance in banks and understand the constraints of AML implementation.

Hence, the present research work attempts to address the following research problems: 1. Whether the bank employees are aware of the problem of money laundering and terrorism financing, and AML and CFT regulation? What is the perception of bank employees towards AML regulation?

What is the perceived level of AML compliance in banks? What are the constraints faced by banks in AML implementation? Customer Support to AML Measures The efforts of the banks in the fight against money laundering and financing of terrorism cannot succeed without the support of their customers.

For the customers to lend their support, it is necessary that they should be aware of the threat of money laundering and the benefits of implementing the anti-money laundering measures by banks. The law-abiding citizens as consumers of banking services, can help their banks to weed out the prospective clients who pose a serious threat to the banks with their unaccounted money.

This act of customers also helps oneself from not becoming the victim of identity fraud and any resulting financial loss Financial Services Authority, Banks can also seek additional information apart from the identification documents, under KYC, based upon the conduct of the account, to rule out the suspicion of money laundering. Though many customers consider KYC rules as intrusive to the privacy of their data, they should be educated that these issues have to be balanced against the benefits of detecting and preventing the crime and terrorism Financial Services Authority, When the customers understand the reasons for complying with the AML requirements, KYC is no more a hindrance for the banker-customer relationship.

The awareness and confidence on AML measures among the bank customers can help the banks in controlling customer alienation and thereby preventing loss of business. Thus, the prospective account holders and customers, void of illegal notions, can play a constructive role in the implementation of AML policy and in keeping their banks clean of money laundering ML and terrorism financing TF. Awareness about the importance of AML controls, and acceptance to the AML measures among bank customers, can act as a facilitator for the effective implementation of AML guidelines by the banks.

The financial particulars of the customers is no more a confidential information as banks are mandated to report huge value transactions, and suspicious transactions to the FIU-India which in turn disseminates this financial information of the customers to the enforcement agencies such as income tax authorities, investigation bureaus, etc.

Bank employees stated that lack of support from the customers is a major hindrance factor in AML implementation and customers are often reluctant to provide information as required under KYC. Literature Survey The literature review presented in this section consists of reviews of reports of FATF, Basel Committee and RBI, and review of publications made by independent researchers in the field of AML regulation and practices in financial institutions.

AML Regulations: Theoretical Context The objective of AML regulations is to protect the financial sector integrity and the global economy from the threats of money laundering, financing of terrorism and proliferation, and contribute to the security of the nation FATF, In case the financial institutions depend on the third party personnel for conducting the CDD, the financial institutions should determine that the third parties are complying with the CDD and record keeping measures.

They should be provided with guidance and feedback by the competent authorities on implementation of these measures. The non-profit organizations should be prevented from the misuse of terrorism financing activities considering their vulnerability.

There should be rigorous sanctions against the persons making false declarations or disclosures. Further, the financial institutions secrecy laws should not hinder the mutual legal assistance between the countries. In the case of bank branches and subsidiaries in the foreign jurisdiction, Basel suggested to adopt the KYC standards that are more stringent out of the home country regulation and foreign jurisdiction standards.

The KYC framework as prescribed by the Basel comprises of four elements as follows: a. Customer acceptance policy b. Customer identification c. On-going monitoring of high risk accounts d. The policy should clearly prescribe the activities such as risk assessment of the prospective customer, account opening requirements based on the perceived risk, and measures of extensive diligence in the case of high risk customers.

The decision of accepting the high risk prospective customers, such as politically exposed persons, should be taken at the senior management level. Customer Identification Procedure: Basel mandates banks not to open accounts with fictitious names or anonymous accounts.

Banks should obtain the documents that establishes the identity of the prospective customer. The best documents recommended to be taken for customer identification are those which are most difficult to be obtained illicitly and to counterfeit. The extent and nature of information sought depends on the type of customer e.

For e. The documents or information provided by the person should be verified for its genuineness. The customer identification procedure is an ongoing process and should be repeated at regular intervals to ensure that customer identification information is up-to-date. In case of banks asking for introducers, banks should determine whether introducer identity was established and is up-to-date. Basel has set out special identification requirements apart from the normal due diligence in case of customers such as Trust, nominee, corporate companies, businesses referred by other banks, politically exposed persons, client accounts opened by professional intermediaries, non-face-to-face customers e.

The fundamental step in transaction monitoring is identifying the deviations from the normal or expected activity. These deviations constitute the unusual behaviour of the client account. The unusual behaviour is identified by comparing the account activity to its past behaviour, or when it exceeds the set threshold levels, or analysing the account activity in comparison to its client peer groups Young, The unusual transactions are further analyzed to identify any suspicious nature.

All unusual transactions may not be suspicious transactions, however vice versa holds true FSA, Basel suggested that the extent of monitoring depends on the risk sensitivity of the account. In case of high risk accounts, banks should conduct intensified monitoring of accounts.

Basel suggested to incorporate an indicative list of activities for e. Risk management: Risk management activities include management oversight, systems and controls, segregation of duties, training, internal audit, and other related internal controls. The hierarchy of reporting suspicious transactions should be clearly communicated to all the employees of the bank. Banks should conduct an independent audit evaluation of their own policies and procedures.

The audit function should also evaluate employee performance through sample testing for compliance functions. There should be an ongoing employee training in AML functions. The training should address with different requirements for different employees such as new staff, front- line staff, compliance staff, etc. Supervisors should ensure that the banks maintain good KYC standards in the interest of the integrity of the national banking system.

In case of any non-compliance with the KYC standards, appropriate action should be taken against such banks. A brief overview of such studies, research papers and reports of peer institutions, between and , are presented below. Graham highlighted the dual benefits of complying with KYC measures.

First, a strict compliance with KYC and customer due diligence measures facilitates understanding the risk posed by the customer, and thereafter in effectively monitoring their accounts for identification of reportable transactions. Secondly, the KYC information leads to the identification of business opportunities for serving the customer base in the financial sector. Thus, author explained that compliance with KYC is good for protecting the financial firms against the abuse of money laundering, terrorism financing, and other frauds, and also for serving the clients better.

The survey was conducted with the help of a questionnaire among money laundering reporting officers of financial companies in UK. In addition, interviews were also conducted with key personnel involved in AML to provide a detailed assessment. Except in the case of banks, where the level of regulation was proportionate to the risks, KYC requirements were considered burdensome by the other financial firms, as the implementation costs outweigh the risks. Majority respondents stated that KYC could alienate the prospective clients and the longer-standing clients.

KYC requirements were found ineffectual in identifying the beneficial owner. Further, the method of customer identification relied on the information produced by the client and the financial institution was not in a position to verify the information provided by the client as there was no independent official reference source available.

Thus, the study concluded that KYC requirements in UK were more likely effective for combating amateurish attempts of laundering money rather than the sophisticated offender. Harvey explored the costs and benefits of anti-money laundering compliance and shed light on the concern expressed by the financial institutions over the increasing costs of anti-money laundering compliance. The research was conducted using questionnaire and interviews with compliance staff from a range of financial institutions in UK and their regulatory body.

The respondents had positively accepted that AML compliance was essential for their business as reputation was the key benefit resulting out of it. However there was a mixed perception with regard to costs.

Few respondents saw little benefit in reporting as there was no feedback on the usefulness of the activities reported and there were no greater number of money laundering prosecutions. Another perception that prevailed was that the AML compliance was not considered as a hindrance to the customer relationship because the customers are aware of the reasons for AML compliance.

Author also noted that few respondents felt that compliance activity was driven out of fear of criminal sanctions rather than by benefits to the firm. It discussed the laws for financing of terrorism, customer identification and retention of records, foreign exchange and foreign trade, and efforts of the Japan financial intelligence unit office JAFIO.

Japan is a founding member of the FATF. This law also enables for punishing the acts of terrorism financing committed outside Japanese jurisdiction by its nationals. Japan also has stringent laws on customer identification norms. The law on Customer identification and Retention of Records on Transactions with Customers by Financial institutions, which was brought into effect in , imposes adequate due diligence measures, and maintenance of records on customer identification, and on domestic and international transactions.

Further this law imposes sanctions for non-compliance with these measures by the financial institutions. In addition, this law also prohibits customers from providing false names and other particulars to financial institutions and imposes a penalty on the customer who violates this prohibition.

Kumar outlined the prevention of money laundering function in India. It quoted that India was one of the first countries to introduce AML legislations, as a wartime measure in , later foreign exchange control laws up to ; more recent laws included the Foreign Exchange Management Act and the Prevention of Money Laundering Act The work summarized the provisions of these two laws.

It described the PMLA with regard to the offence of money laundering and its punishment; composition and powers of the adjudicating authorities; attachment, adjudication and confiscation; obligations of financial institutions and intermediaries; and mutual assistance on information exchange, confiscation of illegally acquired property, investigation, etc. Ruiz discussed about the antagonistic concepts — i. It reported that the activities of lawyers, public accountants, financial and tax advisors were regulated by law, as they were based on a special relationship of trust with their clients.

The lawyer though aware that funds belong to an illegitimate source, he would not be bound to notify that to the authorities, since it violates the client privilege. Hence, it was necessary to determine whether the lawyer who received a proposal to commit a money laundering act should notify the authorities.

Another issue highlighted was the behaviour of counsel who defended a money launderer in court. Webb surveyed the management aspects in implementation of AML system. The study conducted personal interviews with the money laundering reporting officers MLRO of thirty London banks that included small, medium and large sized banks, during Some of the major findings reported were: 1.

Forty percent of the respondents exhibited neutral attitude towards money laundering regulation by citing that these regulations were both a benefit and a burden to the bank; 7. Site visits were held with certain LEAs which were selected based on their size and location.

Ping traced the history of the obligation of suspicious transaction reporting system of the financial systems and other entities. The author highlighted the Statement of Principle of the Basel Committee on Banking Regulations and Supervisory Practices, citing that the statement did not impose any obligation on banks to report suspicious transactions.

The statement mandated the banks only to refrain from offering any service in transactions suspected for money laundering activities. This was due to the compliance with bank secrecy policies which was of high regard during those periods. Later, in , the FATF recommended recommendation 16, 18, and 19 that the financial institutions should be permitted to report promptly their suspicions to the competent authorities.

This permissive reporting system can be either of the form of a voluntary or mandatory requirement on the financial firms. In the absence of mandatory reporting system, FATF mandated the financial institutions to refrain from providing any services to the customer, and can even close their accounts. Thus the author provided an insight on the evolution of reporting requirement i. The study further cited the widening of the scope of institutions i.

The sample comprised of reporting entities, non-reporting entities and members of general public. A total sample of respondents were targeted using random probability selection and the responses were collected through self-administered questionnaire and face to face interviews.

The questionnaire to non-reporting institutions comprised of questions regarding usage of cash and to capture more or less same information as in reporting institution questionnaire. Kini reviewed high profile AML enforcement actions and drawn compliance lessons to be learned from those cases. The sample included the cross section of firms in terms of size, client base, products and services, corporate structure and risk profile.

The study found that the firms were undertaking extensive due diligence as set out in their guidance notes based on the risks inherent in private banking. The private banks identified the beneficial owners and conducted due diligence, however there was no uniformity in the threshold levels that were fixed to identify the beneficial owner.

It observes approval of the relationship manager, senior manager from the front office and money laundering reporting officer MLRO was required to open a new account. It states that the relationship managers were also responsible for screening new clients against third party data sources such as worldcheck, Factiva and Lexis Nexis. They conducted a survey with the help of interviews on the compliance officers and other participants from Banking commission, Tracfin France-FIU , etc.

The study reported that bankers were committed to fulfil their new obligations and to handle risks competently. It observes that large sum of investments were made in recruiting and training staff, to acquire expensive computer equipment and effective software solutions and in placing internal procedures.

Wit presented the importance of the risk-based approach in implementation of anti-money laundering AML system. To implement hundred percent CDD measures for all the customers is a highly strenuous task, especially in small institutions.

Thus, risk based approach comes in handy when implementation of CDD measures is to be considered. Author opined that at least 80 percent of all the customers of a financial institution can be categorized as low risk, and therefore a standard CDD would be sufficient to deploy. This means that the identity and transactions of high risk customers are thoroughly analyzed whereas a minimal attentions is paid towards low risk customers.

The author however expressed that there is a risk of a non-monitored low-risk customer turning out to be a money launderer or that a non-monitored transaction turning out to be suspicious. PricewaterhouseCoopers explored the benefits and obstacles of adopting the risk based approach RBA , and the present and future challenges of AML implementation in UK.

The study surveyed money laundering reporting officers MLROs and other compliance professionals from the financial services sector. The survey was based on the interview. The survey comprised of participants of which respondents were MLROs. The study reported that the financial firms were adopting risk based approach to AML requirements. The issues expressed in implementation of RBA were time constraints, lack of resources, lack of guidance, etc.

Further, more than half of the respondents stated that training of staff, and technology implementation as the biggest challenges before the firms. Vaithilingam and Nair analyzed the impact of efficiency of the legal framework, quality of human capital, ethical behavior of firms corporate governance , technology information and communication technology infrastructure and innovation capacity on the prevalence of money laundering in developed and developing countries using the empirical method.

The sample comprised of eighty eight nations from developing and developed economies and period for this study was The impact of the above-mentioned factors was examined using the ordinary least square method. The analysis showed that the efficient legal framework with good corporate governance lowered the spread of money laundering activities. The capacity for innovation contributed negatively i.

The impact of technology and quality of human capital over pervasiveness of money laundering is insignificant. Thus out of these five factors, the study indicated that effective legal framework and ethical behaviour of the firms were most important factors in reducing the extent of money laundering globally. Further, the study also revealed that the impact of these five factors on spread of money laundering in developing countries was significantly lower than that in developed countries.

Choo highlighted the risks constituted by politically exposed persons PEPs and presented the ways to reduce the risk of money laundering by PEPs for regulated entities. The recommendations made by the author include extending PEP monitoring onto - the individuals entrusted with a role of public importance in their own jurisdictions, and also to the individuals having political exposure and exercising functions which are not normally considered prominent; to the individuals holding prominent positions in private sectors such as CEOs of listed companies, because these persons are also susceptible to crime such as corruption.

Further, regulators and regulated entities should adopt a strategy e. Findings put forth were that the respondents were well aware of the AML legislation and believed that AML legislation was necessary to prevent money laundering in Indonesia.

Except the lawyer respondent, all other stakeholders agreed to the requirement of reporting large value transactions. Legal respondent expressed that costs of reporting outweighed its benefit. Respondents from insurance firms stated that the disclosure of customer identities to the authorities resulted in loss of clients.

Except the accounting stakeholders, all others reported that reporting system resulted in too many bad quality STRs, as firms focus more on the number of reports submitted rather than the qualitative attributes of the STR. It concludes that except the accounting and money changer respondents, all others felt feedback on the STRs submitted was essential. Chaikin assessed the effectiveness of STR regime of Switzerland.

The suspected tax evasion cases were not reported because tax evasion was not a crime in Switzerland. However the study inferred that the quality of reports filed in Switzerland was good because a high percentage of STRs were forwarded to the prosecuting authorities for further investigation. The STR system resulted in generating a significant amount of frozen funds because of the statutory requirement to automatically block funds once an STR is filed.

The content of the annual reports was subjected to qualitative analysis via the application of content analysis under the themes anti-money laundering, account related activity, training, identification of reputation, compliance or regulatory activity, and financial crime. It also examined the driving factors for reporting of suspicious or unusual activity i.

Hence the study reported that there was no evidence from their reports that AML legislation was driven by the necessity to protect the reputation of financial sector. Indeed, it observed that compliance was undertaken in order to avoid the impact of a fine for non-compliance with AML measures. Further, most of the financial institutions had difficulties in fully complying with CDD regulations in short time because of the recentness of the customer identification measures.

The study addressed various loopholes and problems in the implementation of AML laws. The study found that the banks failed to comply with the AML regulation. The reasons attributed for the failure were: AML laws were too flexible which can be interpreted in different ways; lack of understanding of the international AML norms and standards by the participants; lack of feedback on the effectiveness of the measures taken by the banks; AML compliance activities were driven by fear rather than a desire to contribute to the fight against money laundering.

In view of these findings, the study recommended that the state must provide better understanding and clarity in the implementation of its rules. Verhage studied the practices and challenges of compliance officers in Belgium. It also assessed the effectiveness of AML regulation. A survey was conducted on Belgian compliance officers, asking about their practices. The study was also based on 13 years statistics on AML implementation in Belgium.

The survey examined general characteristics of compliance officers, the need for information exchange between public and private actors, and bottlenecks in AML compliance. It found that the reporting system had only limited impact on money laundering repression.

Survey was conducted with the help of web based questionnaire and the computer assisted interview method. The sample comprised of employees from all levels of management majority being the middle management group working across different departments in public sector banks, private sector banks, and foreign banks in India.

Shahrivar assessed the developed economies U. The assessment was based on both primary and secondary resources. The author also examined the views of respondents from developed economies and developing economies towards AML laws, institutional measures on AML, AML awareness, technology, and legal punishment. The sample for the study comprised of banks. The study found that the compliance with AML laws was relatively lower in developing economies.

Iran recorded low compliance of all the four nations under this study. The study observed that the intensity of legal punishment was more in developing economies contrary to the developed economies. The compliance with international co-operation framework was reportedly in developing economies. No much variation was found in the perception of respondents from public and private sector towards AML regulation.

The survey comprised of respondents. It reported huge increase in the work load because of increased focus on AML regulations, understaffing, and lack of sufficiently trained staff. Kutubi studied current initiatives and challenges in the financial sector of Bangladesh to combat money laundering. Survey was conducted using questionnaire on 21 financial institutions comprising private commercial banks, foreign banks and non-bank financial institutions. The respondents were senior level professionals having more than ten years of working experience in the financial sector.

The focus of survey was detection of money laundering transactions, reporting of transactions, cost of implementing AML, institutional framework and governance. The study reported that banks have taken good initiatives on the prevention of money laundering based on the guidance notes issued by the Central Bank of Bangladesh. The monitoring mechanism was operating quite well with a huge detection of risky transactions. However, the reporting function was not up to the desired level because only a small percentage of the suspicious transactions that were detected was reported to the Central bank.

Simonova examined the problems associated with the risk-based approach to AML, and presented methods to improve the risk-based approach by comparing the Danish and British AML regimes. It observed that development of risk- based AML systems was based on financial institutions discretion that could overthrow the objective of AML law.

The other common issue observed across financial institutions was lack of public registries that recorded beneficial owners of all legal persons and thus was a hindrance to the identification and verification of beneficial owners.

Financial institutions were left to rely on the truthfulness of statements provided by legal persons and their private registries; the same problem existed with regard to identification and verification of politically exposed persons and their family members and associates.

Also, with regard to trusts, there was no central register of all trusts in the UK. Another concern highlighted was risk assessment should not be one- dimensional i. Author expressed that if product requested by a foreign PEP is deemed to be low risk, it is justified to apply simplified diligence on such customers, instead of adopting enhanced due diligence just for the reason that PEPs are classified under high risk category by the international standards. The risk of money laundering is not reliant upon one specific risk factor as predetermined by international standards or national legislation but depends on many factors.

The author recommended that AML considerations have to be included in corporate social responsibility CSR policies and in codes of business conduct and ethics, for making the AML regulatory framework effective. Simser explored the countering of financing of terrorism. Al-Qaeda received funds from Saudi Arabia and other countries through charities and directly solicited donations. The study also analyzed the impact of international and Canadian regulation of countering the financing of terrorism on financial institutions.

The study highlighted the importance of knowledge sharing and intelligence opportunity to counter financing of terrorism. If policy makers wanted intelligence to control terrorism, the CFT system had a number of limitations. As per regulation, financial institutions were compelled to close down the account on the knowing its link with terrorist activities. In that case, the intelligence opportunity was lost.

Hence the author stressed on the point that a balance should be sought between the objective, actionable intelligence and the mechanism used to advance that objective. The survey was conducted on ten commercial banks in Xichang City. A questionnaire and guided oral interviews were employed to collect data from the bank employees entrusted with AML activities.

The period of the study was between 1stJuly and 20th August The study found that all the banks between and were never been assessed by the PBOC for compliance with AML regulations and policies despite being independently audited by external auditors.

All banks had AML policies and procedures in place, had designated a compliance officer for AML activities and trained their employees. The study further highlighted the difference between attitudes of senior management and junior staff.

The study also addressed the difficulties faced by the compliance officers which ranged from customer identification to identifying and reporting suspicious transactions. With regard to the customer identification, verifying the authenticity of the identity documents was a serious challenge because of the ease with which they can be forged.

Also, the realization of an exact suspicious transaction and a timely report of it was a difficult task. The study applied a scale under which a score of 49 represents full compliance. Though some low-income countries were at low risk for ML, this was not always the case. A census of three banks located in Nigeria was taken and bank staff was surveyed using a structured questionnaire.

The study adopted a simple random sampling technique to recruit employees with an average of 67 employees from each bank. The questionnaire collected level of awareness of the respondents and extent of success of AML policy. The author cited that there are number of developing economies in Asia characterized by political instability, economic instability, high level of corruption and low institutional capacity.

These factors generate both opportunity and demand for money laundering. Further, prevalence of cash transactions, alternative remittance systems, and high end criminal activity facilitates money laundering in Asia. It also stats that stringent privacy laws in several jurisdictions prevents reporting of suspicious transactions to regulators, and other authorities. The study further cited the significant problems in AML implementation as lack of enforcement, capacity constraints such as lack of skills, training, and resources , and the need for co-ordination across jurisdictions.

In spite of stringent laws criminalizing money laundering and terrorism financing activities, lack of enforcement resulted in low rate of prosecutions and confiscations. India reported six prosecutions and zero convictions towards money laundering and financial crimes during It surveyed the financial services sector covering public sector banks, private sector banks, foreign banks, general and life insurance companies, mutual funds, non-banking financial companies and other institutions covered under PMLA.

The respondents of the survey included senior and middle management members from Compliance, Audit, Risk Management and AML departments, and senior management members from the business and operation functions. Banks of different sizes were covered in the sample. Staff awareness and training, 2. Internal audit, 3. Unambiguous regulation, 4.

Compliance culture, 5. Robust systems and processes, 6. Cost of non-compliance, 7. Government and third party support, 8. Strict enforcement or penalties, 9. Effective communication, Regulation is compliable, Internal control measures, System support to throw up alerts.

The major effects of non-compliance recorded were presented in the order of their ranking scored : 1. Caught up in audit findings, 2. Regulatory action, 3. Fraud, 4. Business disruption, 7. Affects staff accountability, and 8. NPA quality. Rusmin and Brown conducted a qualitative study to report the progress of KYC implementation in Indonesia and crackdown of foreign bribery.

The interviews with respondents from Indonesian police force revealed that many institutions in Indonesia were not executing their KYC protocols. Though the police personnel were ready to conduct certain training sessions, in order to achieve KYC compliance, the request for training was never put forth by the institutions which do not had sufficient resources to achieve KYC compliance. Huang, Amirruddin, Noruddin and Othama assessed the perceived effectiveness of AML requirements to control money laundering and terrorism financing in Malaysia, from the perspective of enforcement agencies, with the help of questionnaire.

However, the study reported a low response from these organizations, and hence the sample size was extended to include participants from the reporting institutions. The study found that majority Sarigul explained the abuse of the financial system, especially the banks, for money laundering. Though use of banks for money laundering has been made difficult in these recent years by the implementation of AML measures, still the banks remain as an important vehicle for launderers.

It states that various instruments and services such as bank drafts, electronic money transfers, branch less banking e. The study found that the Lebanese banking system was in line with the USA patriot act; Lebanon had been always a major compliant with international rules especially since with the creation of FATF. The Lebanese banking sector was abiding by international sanctions taken to deter any infiltration; and Lebanese banks, whether in Lebanon or abroad, were maintaining good and clear relations with correspondent banks.

Brooks explored the present strategies adopted to counter money laundering in Dubai. The study reported that all the respondents were well aware that these strategies were required to prevent money laundering in Dubai. Gallant analysed the impact of four decades of money laundering regulation in Canada. Kemal explored the effectiveness of AML regulations, in specific, customer record keeping, employee training, and suspicious transaction reporting on money laundering in Pakistan. A sample of hundred responses has been collected from the employees of public sector and private sector banks located in Rawalpindi, and Lahore, with the help of a questionnaire.

Equal number of responses was collected from both the cities to make the analysis more reasonable. Snowball sampling was adopted in selecting the sample. The study found that there is a moderate impact of employee training on money laundering in banks.

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AML Regulations: Theoretical Context The objective of AML regulations is to protect the financial sector integrity and the global economy from the threats of money laundering, financing of terrorism and proliferation, and contribute to the security of the nation FATF, In case the financial institutions depend on the third party personnel for conducting the CDD, the financial institutions should determine that the third parties are complying with the CDD and record keeping measures.

They should be provided with guidance and feedback by the competent authorities on implementation of these measures. The non-profit organizations should be prevented from the misuse of terrorism financing activities considering their vulnerability. There should be rigorous sanctions against the persons making false declarations or disclosures. Further, the financial institutions secrecy laws should not hinder the mutual legal assistance between the countries. In the case of bank branches and subsidiaries in the foreign jurisdiction, Basel suggested to adopt the KYC standards that are more stringent out of the home country regulation and foreign jurisdiction standards.

The KYC framework as prescribed by the Basel comprises of four elements as follows: a. Customer acceptance policy b. Customer identification c. On-going monitoring of high risk accounts d. The policy should clearly prescribe the activities such as risk assessment of the prospective customer, account opening requirements based on the perceived risk, and measures of extensive diligence in the case of high risk customers. The decision of accepting the high risk prospective customers, such as politically exposed persons, should be taken at the senior management level.

Customer Identification Procedure: Basel mandates banks not to open accounts with fictitious names or anonymous accounts. Banks should obtain the documents that establishes the identity of the prospective customer. The best documents recommended to be taken for customer identification are those which are most difficult to be obtained illicitly and to counterfeit. The extent and nature of information sought depends on the type of customer e.

For e. The documents or information provided by the person should be verified for its genuineness. The customer identification procedure is an ongoing process and should be repeated at regular intervals to ensure that customer identification information is up-to-date. In case of banks asking for introducers, banks should determine whether introducer identity was established and is up-to-date.

Basel has set out special identification requirements apart from the normal due diligence in case of customers such as Trust, nominee, corporate companies, businesses referred by other banks, politically exposed persons, client accounts opened by professional intermediaries, non-face-to-face customers e.

The fundamental step in transaction monitoring is identifying the deviations from the normal or expected activity. These deviations constitute the unusual behaviour of the client account. The unusual behaviour is identified by comparing the account activity to its past behaviour, or when it exceeds the set threshold levels, or analysing the account activity in comparison to its client peer groups Young, The unusual transactions are further analyzed to identify any suspicious nature.

All unusual transactions may not be suspicious transactions, however vice versa holds true FSA, Basel suggested that the extent of monitoring depends on the risk sensitivity of the account. In case of high risk accounts, banks should conduct intensified monitoring of accounts. Basel suggested to incorporate an indicative list of activities for e.

Risk management: Risk management activities include management oversight, systems and controls, segregation of duties, training, internal audit, and other related internal controls. The hierarchy of reporting suspicious transactions should be clearly communicated to all the employees of the bank. Banks should conduct an independent audit evaluation of their own policies and procedures.

The audit function should also evaluate employee performance through sample testing for compliance functions. There should be an ongoing employee training in AML functions. The training should address with different requirements for different employees such as new staff, front- line staff, compliance staff, etc.

Supervisors should ensure that the banks maintain good KYC standards in the interest of the integrity of the national banking system. In case of any non-compliance with the KYC standards, appropriate action should be taken against such banks. A brief overview of such studies, research papers and reports of peer institutions, between and , are presented below.

Graham highlighted the dual benefits of complying with KYC measures. First, a strict compliance with KYC and customer due diligence measures facilitates understanding the risk posed by the customer, and thereafter in effectively monitoring their accounts for identification of reportable transactions.

Secondly, the KYC information leads to the identification of business opportunities for serving the customer base in the financial sector. Thus, author explained that compliance with KYC is good for protecting the financial firms against the abuse of money laundering, terrorism financing, and other frauds, and also for serving the clients better.

The survey was conducted with the help of a questionnaire among money laundering reporting officers of financial companies in UK. In addition, interviews were also conducted with key personnel involved in AML to provide a detailed assessment. Except in the case of banks, where the level of regulation was proportionate to the risks, KYC requirements were considered burdensome by the other financial firms, as the implementation costs outweigh the risks.

Majority respondents stated that KYC could alienate the prospective clients and the longer-standing clients. KYC requirements were found ineffectual in identifying the beneficial owner. Further, the method of customer identification relied on the information produced by the client and the financial institution was not in a position to verify the information provided by the client as there was no independent official reference source available.

Thus, the study concluded that KYC requirements in UK were more likely effective for combating amateurish attempts of laundering money rather than the sophisticated offender. Harvey explored the costs and benefits of anti-money laundering compliance and shed light on the concern expressed by the financial institutions over the increasing costs of anti-money laundering compliance.

The research was conducted using questionnaire and interviews with compliance staff from a range of financial institutions in UK and their regulatory body. The respondents had positively accepted that AML compliance was essential for their business as reputation was the key benefit resulting out of it. However there was a mixed perception with regard to costs. Few respondents saw little benefit in reporting as there was no feedback on the usefulness of the activities reported and there were no greater number of money laundering prosecutions.

Another perception that prevailed was that the AML compliance was not considered as a hindrance to the customer relationship because the customers are aware of the reasons for AML compliance. Author also noted that few respondents felt that compliance activity was driven out of fear of criminal sanctions rather than by benefits to the firm.

It discussed the laws for financing of terrorism, customer identification and retention of records, foreign exchange and foreign trade, and efforts of the Japan financial intelligence unit office JAFIO. Japan is a founding member of the FATF. This law also enables for punishing the acts of terrorism financing committed outside Japanese jurisdiction by its nationals. Japan also has stringent laws on customer identification norms. The law on Customer identification and Retention of Records on Transactions with Customers by Financial institutions, which was brought into effect in , imposes adequate due diligence measures, and maintenance of records on customer identification, and on domestic and international transactions.

Further this law imposes sanctions for non-compliance with these measures by the financial institutions. In addition, this law also prohibits customers from providing false names and other particulars to financial institutions and imposes a penalty on the customer who violates this prohibition. Kumar outlined the prevention of money laundering function in India. It quoted that India was one of the first countries to introduce AML legislations, as a wartime measure in , later foreign exchange control laws up to ; more recent laws included the Foreign Exchange Management Act and the Prevention of Money Laundering Act The work summarized the provisions of these two laws.

It described the PMLA with regard to the offence of money laundering and its punishment; composition and powers of the adjudicating authorities; attachment, adjudication and confiscation; obligations of financial institutions and intermediaries; and mutual assistance on information exchange, confiscation of illegally acquired property, investigation, etc.

Ruiz discussed about the antagonistic concepts — i. It reported that the activities of lawyers, public accountants, financial and tax advisors were regulated by law, as they were based on a special relationship of trust with their clients. The lawyer though aware that funds belong to an illegitimate source, he would not be bound to notify that to the authorities, since it violates the client privilege.

Hence, it was necessary to determine whether the lawyer who received a proposal to commit a money laundering act should notify the authorities. Another issue highlighted was the behaviour of counsel who defended a money launderer in court. Webb surveyed the management aspects in implementation of AML system.

The study conducted personal interviews with the money laundering reporting officers MLRO of thirty London banks that included small, medium and large sized banks, during Some of the major findings reported were: 1. Forty percent of the respondents exhibited neutral attitude towards money laundering regulation by citing that these regulations were both a benefit and a burden to the bank; 7. Site visits were held with certain LEAs which were selected based on their size and location.

Ping traced the history of the obligation of suspicious transaction reporting system of the financial systems and other entities. The author highlighted the Statement of Principle of the Basel Committee on Banking Regulations and Supervisory Practices, citing that the statement did not impose any obligation on banks to report suspicious transactions. The statement mandated the banks only to refrain from offering any service in transactions suspected for money laundering activities.

This was due to the compliance with bank secrecy policies which was of high regard during those periods. Later, in , the FATF recommended recommendation 16, 18, and 19 that the financial institutions should be permitted to report promptly their suspicions to the competent authorities.

This permissive reporting system can be either of the form of a voluntary or mandatory requirement on the financial firms. In the absence of mandatory reporting system, FATF mandated the financial institutions to refrain from providing any services to the customer, and can even close their accounts.

Thus the author provided an insight on the evolution of reporting requirement i. The study further cited the widening of the scope of institutions i. The sample comprised of reporting entities, non-reporting entities and members of general public. A total sample of respondents were targeted using random probability selection and the responses were collected through self-administered questionnaire and face to face interviews. The questionnaire to non-reporting institutions comprised of questions regarding usage of cash and to capture more or less same information as in reporting institution questionnaire.

Kini reviewed high profile AML enforcement actions and drawn compliance lessons to be learned from those cases. The sample included the cross section of firms in terms of size, client base, products and services, corporate structure and risk profile. The study found that the firms were undertaking extensive due diligence as set out in their guidance notes based on the risks inherent in private banking.

The private banks identified the beneficial owners and conducted due diligence, however there was no uniformity in the threshold levels that were fixed to identify the beneficial owner. It observes approval of the relationship manager, senior manager from the front office and money laundering reporting officer MLRO was required to open a new account.

It states that the relationship managers were also responsible for screening new clients against third party data sources such as worldcheck, Factiva and Lexis Nexis. They conducted a survey with the help of interviews on the compliance officers and other participants from Banking commission, Tracfin France-FIU , etc. The study reported that bankers were committed to fulfil their new obligations and to handle risks competently. It observes that large sum of investments were made in recruiting and training staff, to acquire expensive computer equipment and effective software solutions and in placing internal procedures.

Wit presented the importance of the risk-based approach in implementation of anti-money laundering AML system. To implement hundred percent CDD measures for all the customers is a highly strenuous task, especially in small institutions. Thus, risk based approach comes in handy when implementation of CDD measures is to be considered.

Author opined that at least 80 percent of all the customers of a financial institution can be categorized as low risk, and therefore a standard CDD would be sufficient to deploy. This means that the identity and transactions of high risk customers are thoroughly analyzed whereas a minimal attentions is paid towards low risk customers. The author however expressed that there is a risk of a non-monitored low-risk customer turning out to be a money launderer or that a non-monitored transaction turning out to be suspicious.

PricewaterhouseCoopers explored the benefits and obstacles of adopting the risk based approach RBA , and the present and future challenges of AML implementation in UK. The study surveyed money laundering reporting officers MLROs and other compliance professionals from the financial services sector. The survey was based on the interview.

The survey comprised of participants of which respondents were MLROs. The study reported that the financial firms were adopting risk based approach to AML requirements. The issues expressed in implementation of RBA were time constraints, lack of resources, lack of guidance, etc. Further, more than half of the respondents stated that training of staff, and technology implementation as the biggest challenges before the firms.

Vaithilingam and Nair analyzed the impact of efficiency of the legal framework, quality of human capital, ethical behavior of firms corporate governance , technology information and communication technology infrastructure and innovation capacity on the prevalence of money laundering in developed and developing countries using the empirical method.

The sample comprised of eighty eight nations from developing and developed economies and period for this study was The impact of the above-mentioned factors was examined using the ordinary least square method. The analysis showed that the efficient legal framework with good corporate governance lowered the spread of money laundering activities.

The capacity for innovation contributed negatively i. The impact of technology and quality of human capital over pervasiveness of money laundering is insignificant. Thus out of these five factors, the study indicated that effective legal framework and ethical behaviour of the firms were most important factors in reducing the extent of money laundering globally.

Further, the study also revealed that the impact of these five factors on spread of money laundering in developing countries was significantly lower than that in developed countries. Choo highlighted the risks constituted by politically exposed persons PEPs and presented the ways to reduce the risk of money laundering by PEPs for regulated entities.

The recommendations made by the author include extending PEP monitoring onto - the individuals entrusted with a role of public importance in their own jurisdictions, and also to the individuals having political exposure and exercising functions which are not normally considered prominent; to the individuals holding prominent positions in private sectors such as CEOs of listed companies, because these persons are also susceptible to crime such as corruption.

Further, regulators and regulated entities should adopt a strategy e. Findings put forth were that the respondents were well aware of the AML legislation and believed that AML legislation was necessary to prevent money laundering in Indonesia. Except the lawyer respondent, all other stakeholders agreed to the requirement of reporting large value transactions.

Legal respondent expressed that costs of reporting outweighed its benefit. Respondents from insurance firms stated that the disclosure of customer identities to the authorities resulted in loss of clients. Except the accounting stakeholders, all others reported that reporting system resulted in too many bad quality STRs, as firms focus more on the number of reports submitted rather than the qualitative attributes of the STR.

It concludes that except the accounting and money changer respondents, all others felt feedback on the STRs submitted was essential. Chaikin assessed the effectiveness of STR regime of Switzerland. The suspected tax evasion cases were not reported because tax evasion was not a crime in Switzerland. However the study inferred that the quality of reports filed in Switzerland was good because a high percentage of STRs were forwarded to the prosecuting authorities for further investigation.

The STR system resulted in generating a significant amount of frozen funds because of the statutory requirement to automatically block funds once an STR is filed. The content of the annual reports was subjected to qualitative analysis via the application of content analysis under the themes anti-money laundering, account related activity, training, identification of reputation, compliance or regulatory activity, and financial crime.

It also examined the driving factors for reporting of suspicious or unusual activity i. Hence the study reported that there was no evidence from their reports that AML legislation was driven by the necessity to protect the reputation of financial sector.

Indeed, it observed that compliance was undertaken in order to avoid the impact of a fine for non-compliance with AML measures. Further, most of the financial institutions had difficulties in fully complying with CDD regulations in short time because of the recentness of the customer identification measures. The study addressed various loopholes and problems in the implementation of AML laws.

The study found that the banks failed to comply with the AML regulation. The reasons attributed for the failure were: AML laws were too flexible which can be interpreted in different ways; lack of understanding of the international AML norms and standards by the participants; lack of feedback on the effectiveness of the measures taken by the banks; AML compliance activities were driven by fear rather than a desire to contribute to the fight against money laundering.

In view of these findings, the study recommended that the state must provide better understanding and clarity in the implementation of its rules. Verhage studied the practices and challenges of compliance officers in Belgium. It also assessed the effectiveness of AML regulation.

A survey was conducted on Belgian compliance officers, asking about their practices. The study was also based on 13 years statistics on AML implementation in Belgium. The survey examined general characteristics of compliance officers, the need for information exchange between public and private actors, and bottlenecks in AML compliance. It found that the reporting system had only limited impact on money laundering repression.

Survey was conducted with the help of web based questionnaire and the computer assisted interview method. The sample comprised of employees from all levels of management majority being the middle management group working across different departments in public sector banks, private sector banks, and foreign banks in India.

Shahrivar assessed the developed economies U. The assessment was based on both primary and secondary resources. The author also examined the views of respondents from developed economies and developing economies towards AML laws, institutional measures on AML, AML awareness, technology, and legal punishment.

The sample for the study comprised of banks. The study found that the compliance with AML laws was relatively lower in developing economies. Iran recorded low compliance of all the four nations under this study. The study observed that the intensity of legal punishment was more in developing economies contrary to the developed economies.

The compliance with international co-operation framework was reportedly in developing economies. No much variation was found in the perception of respondents from public and private sector towards AML regulation. The survey comprised of respondents. It reported huge increase in the work load because of increased focus on AML regulations, understaffing, and lack of sufficiently trained staff. Kutubi studied current initiatives and challenges in the financial sector of Bangladesh to combat money laundering.

Survey was conducted using questionnaire on 21 financial institutions comprising private commercial banks, foreign banks and non-bank financial institutions. The respondents were senior level professionals having more than ten years of working experience in the financial sector. The focus of survey was detection of money laundering transactions, reporting of transactions, cost of implementing AML, institutional framework and governance. The study reported that banks have taken good initiatives on the prevention of money laundering based on the guidance notes issued by the Central Bank of Bangladesh.

The monitoring mechanism was operating quite well with a huge detection of risky transactions. However, the reporting function was not up to the desired level because only a small percentage of the suspicious transactions that were detected was reported to the Central bank. Simonova examined the problems associated with the risk-based approach to AML, and presented methods to improve the risk-based approach by comparing the Danish and British AML regimes.

It observed that development of risk- based AML systems was based on financial institutions discretion that could overthrow the objective of AML law. The other common issue observed across financial institutions was lack of public registries that recorded beneficial owners of all legal persons and thus was a hindrance to the identification and verification of beneficial owners.

Financial institutions were left to rely on the truthfulness of statements provided by legal persons and their private registries; the same problem existed with regard to identification and verification of politically exposed persons and their family members and associates. Also, with regard to trusts, there was no central register of all trusts in the UK. Another concern highlighted was risk assessment should not be one- dimensional i.

Author expressed that if product requested by a foreign PEP is deemed to be low risk, it is justified to apply simplified diligence on such customers, instead of adopting enhanced due diligence just for the reason that PEPs are classified under high risk category by the international standards. The risk of money laundering is not reliant upon one specific risk factor as predetermined by international standards or national legislation but depends on many factors. The author recommended that AML considerations have to be included in corporate social responsibility CSR policies and in codes of business conduct and ethics, for making the AML regulatory framework effective.

Simser explored the countering of financing of terrorism. Al-Qaeda received funds from Saudi Arabia and other countries through charities and directly solicited donations. The study also analyzed the impact of international and Canadian regulation of countering the financing of terrorism on financial institutions. The study highlighted the importance of knowledge sharing and intelligence opportunity to counter financing of terrorism.

If policy makers wanted intelligence to control terrorism, the CFT system had a number of limitations. As per regulation, financial institutions were compelled to close down the account on the knowing its link with terrorist activities. In that case, the intelligence opportunity was lost. Hence the author stressed on the point that a balance should be sought between the objective, actionable intelligence and the mechanism used to advance that objective.

The survey was conducted on ten commercial banks in Xichang City. A questionnaire and guided oral interviews were employed to collect data from the bank employees entrusted with AML activities. The period of the study was between 1stJuly and 20th August The study found that all the banks between and were never been assessed by the PBOC for compliance with AML regulations and policies despite being independently audited by external auditors. All banks had AML policies and procedures in place, had designated a compliance officer for AML activities and trained their employees.

The study further highlighted the difference between attitudes of senior management and junior staff. The study also addressed the difficulties faced by the compliance officers which ranged from customer identification to identifying and reporting suspicious transactions.

With regard to the customer identification, verifying the authenticity of the identity documents was a serious challenge because of the ease with which they can be forged. Also, the realization of an exact suspicious transaction and a timely report of it was a difficult task. The study applied a scale under which a score of 49 represents full compliance. Though some low-income countries were at low risk for ML, this was not always the case.

A census of three banks located in Nigeria was taken and bank staff was surveyed using a structured questionnaire. The study adopted a simple random sampling technique to recruit employees with an average of 67 employees from each bank. The questionnaire collected level of awareness of the respondents and extent of success of AML policy.

The author cited that there are number of developing economies in Asia characterized by political instability, economic instability, high level of corruption and low institutional capacity. These factors generate both opportunity and demand for money laundering. Further, prevalence of cash transactions, alternative remittance systems, and high end criminal activity facilitates money laundering in Asia.

It also stats that stringent privacy laws in several jurisdictions prevents reporting of suspicious transactions to regulators, and other authorities. The study further cited the significant problems in AML implementation as lack of enforcement, capacity constraints such as lack of skills, training, and resources , and the need for co-ordination across jurisdictions.

In spite of stringent laws criminalizing money laundering and terrorism financing activities, lack of enforcement resulted in low rate of prosecutions and confiscations. India reported six prosecutions and zero convictions towards money laundering and financial crimes during It surveyed the financial services sector covering public sector banks, private sector banks, foreign banks, general and life insurance companies, mutual funds, non-banking financial companies and other institutions covered under PMLA.

The respondents of the survey included senior and middle management members from Compliance, Audit, Risk Management and AML departments, and senior management members from the business and operation functions. Banks of different sizes were covered in the sample. Staff awareness and training, 2. Internal audit, 3. Unambiguous regulation, 4. Compliance culture, 5. Robust systems and processes, 6. Cost of non-compliance, 7. Government and third party support, 8.

Strict enforcement or penalties, 9. Effective communication, Regulation is compliable, Internal control measures, System support to throw up alerts. The major effects of non-compliance recorded were presented in the order of their ranking scored : 1. Caught up in audit findings, 2. Regulatory action, 3. Fraud, 4. Business disruption, 7. Affects staff accountability, and 8.

NPA quality. Rusmin and Brown conducted a qualitative study to report the progress of KYC implementation in Indonesia and crackdown of foreign bribery. The interviews with respondents from Indonesian police force revealed that many institutions in Indonesia were not executing their KYC protocols. Though the police personnel were ready to conduct certain training sessions, in order to achieve KYC compliance, the request for training was never put forth by the institutions which do not had sufficient resources to achieve KYC compliance.

Huang, Amirruddin, Noruddin and Othama assessed the perceived effectiveness of AML requirements to control money laundering and terrorism financing in Malaysia, from the perspective of enforcement agencies, with the help of questionnaire. However, the study reported a low response from these organizations, and hence the sample size was extended to include participants from the reporting institutions. The study found that majority Sarigul explained the abuse of the financial system, especially the banks, for money laundering.

Though use of banks for money laundering has been made difficult in these recent years by the implementation of AML measures, still the banks remain as an important vehicle for launderers. It states that various instruments and services such as bank drafts, electronic money transfers, branch less banking e. The study found that the Lebanese banking system was in line with the USA patriot act; Lebanon had been always a major compliant with international rules especially since with the creation of FATF.

The Lebanese banking sector was abiding by international sanctions taken to deter any infiltration; and Lebanese banks, whether in Lebanon or abroad, were maintaining good and clear relations with correspondent banks. Brooks explored the present strategies adopted to counter money laundering in Dubai.

The study reported that all the respondents were well aware that these strategies were required to prevent money laundering in Dubai. Gallant analysed the impact of four decades of money laundering regulation in Canada. Kemal explored the effectiveness of AML regulations, in specific, customer record keeping, employee training, and suspicious transaction reporting on money laundering in Pakistan.

A sample of hundred responses has been collected from the employees of public sector and private sector banks located in Rawalpindi, and Lahore, with the help of a questionnaire. Equal number of responses was collected from both the cities to make the analysis more reasonable. Snowball sampling was adopted in selecting the sample. The study found that there is a moderate impact of employee training on money laundering in banks.

But, suspicious transaction reporting and customer record keeping regulations has exhibited a weak impact on money laundering. Koker investigated that whether the compliance with customer identification framework of FATF prevented anonymous usage of financial services. The sample size was The study found that respondents exhibited moderate to high level of awareness on AML requirements.

From the above studies, it is evident that implementation of AML guidelines is a dependent function of knowledge on AML standards and attitudes of the staff implementing the AML regulation. The other factors like lack of resources, lack of feedback, lack of customer support and legal constraints also affects the AML implementation. FIU — Republic of Mauritius stated that to seek the support of public, it is important to create awareness of the regulations and build confidence in them that those regulations will be used for its intended purpose only.

The FIU-Canada also expressed the same notion of the importance of public awareness of money laundering for realizing the benefits of its efforts. It reported that 90 percent of the Canadians had some understanding of money laundering and 79 percent believed that it has an impact on the financial institutions.

Accordingly, it recommended for developing a public awareness program to make them understand their role in combating money laundering and terrorist financing FINTRAC, , Gerstein, Unger and Rawlings reported that money laundering is still an underrated issue in the public sphere and demands more public debate and news telecasts to gain the attention of public. Singh cited that in India the lack of awareness about the problem of money laundering among the common people is an obstacle for having a proper AML regime.

Public should be educated on the negative consequences of money laundering, importance of AML measures and the operations of the Financial Intelligence Unit FIU to effectively combat money laundering Jun and Ai, ; Simwayi and Haseed, Simultaneously, it is also important to understand and ease out the issues confronting the bank customers in meeting the KYC requirements.

In India, people have difficulty in establishing proof of current address Ail, ; Revathy, , especially for those who are on continuous relocation to different places because of their employment. And in case, if the address proof submitted is not of the current address where the customer is actually residing, the bank may obtain a declaration of the current address on which all the correspondence can be made.

Also, India being a state of several languages, people are also finding difficulty in responding to the details asked in account opening application cum KYC form, by not finding the form in their local language Revathy, In regard to the process of updating the KYC documents of the existing account holders, certain banks have the practice of freezing the accounts of the account holders who have not submitted their KYC documents, instead of closing the accounts with due notice as per the RBI regulation.

This is because the banks have considered the freezing of the account is less harmful compared to the closure of the account. This has placed the customers in unfavourable situations. In the recent past, in a court case seeking bail for the purpose of submitting the KYC documents, the judiciary14 ordered that personal presence of the account holder is not a must and the documents can be submitted through an authorized representative of the account holder.

The court also held that if the KYC documents are not submitted, the bank would neither have the right to freeze the account, nor it could stop the cheque book or ATM facility. However, the bank reserves the right to close the account in the case of non-submission of documents under KYC after repeated requests and with prior intimation to the customer.

The court considered that freezing the account is not less prejudicial to the closure of account because in the case of freezing the account, the account holders are deprived of using their monetary property held in their bank accounts; whereas the bank is supposed to refund the money held in the account at the time of closure of the account.

Also the huge documentation imposed in the name of KYC has an adverse impact both on the banks and the customers as it chases the prospective customers away from using the banking system. Shreshtha reported that in Nepal, the number of new account openers decreased after the introduction of stringent KYC requirements in , because of the huge paperwork imposed by its central bank in the name of KYC while opening new accounts.

These studies have partially addressed the problem defined under this study by examining the level of awareness, and status of certain AML practices and its challenges during and There is a dearth of studies examining the acceptance level and attitudes prevailing in the bank staff in India towards AML measures. Further, the work on understanding customer perception towards AML regulation is very scanty.

Objectives: 1. To examine the level of knowledge on money laundering risk, and AML measures among bank employees and bank customers. To assess the attitude of bank employees and bank customers regarding AML measures implemented in Indian commercial banks. Hypotheses of the Study Based on the aforesaid objectives, the following research hypotheses are framed and tested: 1. H1: There will be a significant difference in the awareness, attitude, and compliance among the employees of various bank sectors.

H2: There will be a significant difference in the demographic wise distribution of the employees based on their awareness, attitude and practices on AML measures. H4: There will be a significant difference in the AML awareness, and acceptance among the customers of various bank sectors. H5: There will be a significant difference in the demographic wise distribution of the customers based on their awareness and acceptance on AML measures. Scope of the Study The scope of the present study has been restricted to the Pondicherry and Chennai regions.

The survey covers the employees working in the front office of the banks, and the bank customers. It also covers employees working in the risk management, audit, and credit departments of the zonal office of the banks. Further, no distinction is made between the AML and CFT measures in this survey, since most of the counter measures adopted for money laundering and terrorism financing are almost the same.

Significance of the Study This thesis provides a holistic approach to the work in AML by recording the perspectives of both the employee as well as the customer of the bank. The findings from this study provides important insights regarding the awareness, acceptance and constraints of employees and customers on AML regulation. Because of the scarcity of research works that contribute to the understanding of customer viewpoints on AML, this research work will enhance the literature in this area by providing comprehensive knowledge on customer perception in terms of their awareness, acceptance and constraints towards AML regulation in Indian commercial banks, based on the original data.

Structure of the Thesis The report of the thesis is organized in six chapters. After presenting a brief overview of the money laundering and terrorism financing activities, initiatives evolved to counter money laundering and terrorism financing, the statement of problem, review of related studies, objectives of the present study, and significance and scope of this research, in this Chapter 1, the description of subsequent chapters is as follows.

Chapter 2 discusses the research methods and procedures employed in the conduct of this research study. A detailed description of the different aspects of the research design is presented in the context of both the studies i. Chapter 3 presents the analysis, findings and discussion with regard to the employee perspective of AML implementation.

Results are discussed under five sub- heads, namely, awareness on concept of money laundering and the AML measures; attitude towards money laundering regulation; AML practices in banks; challenges in AML implementation; and staff training. Results are discussed under three sub- heads, namely, awareness on concept of money laundering and the AML measures; acceptance to AML measures; and issues in AML implementation. Chapter 6 presents the summary of findings and suggestions for strengthening of AML implementation in Indian commercial banks.

In addition, it discusses the limitations and the scope for future research in the study area. Introduction This chapter discusses the methodology adopted in conducting the present research. It deals with sampling method, instrument development, data collection and data analysis techniques. The present research aims at recording and analysing the status of AML implementation in banks from the perspective of bank employees and the bank customers.

The researcher developed two separate questionnaire for capturing the perception of bank employees and bank customers because the employees and the customers have got a different role to play in building a successful AML regime in banking sector. The employees are responsible for implementing the AML measures not only in letter but also in spirit, whereas the customers are expected to provide their support for the AML measures being practiced by the banks.

Therefore, a single instrument cannot capture the perception of both the employee and the customer and hence two separate questionnaires have been developed and used, which is customised to the role of the employee and the customer. This research was conducted to understand both sides perspective to achieve the objectives of this study. First part focuses on the study of employee perception and second part focuses on the study of customer perception. Nature of the Study The present study is of descriptive and causal in nature.

Further, it is a quantitative study for the reason that the study gathered the data in a numerical form using close-ended questionnaires. The study is also cross-sectional in nature because the information gathered from employees and customers represents the status of AML with respect to the observed research variables at one specific point in time.

Locale of the Study The scope of the present study has been restricted to the Pondicherry and Chennai regions. Puducherry is the capital of the Union Territory of Puducherry. The Union Territory of Puducherry has achieved hundred percent15 financial inclusion in December , and relatively has a good literacy rate16 Chennai is the capital city of Tamilnadu state. It is the fourth most populous17 metropolitan area and fourth largest economy18 in India.

There are a large number of public sector banks, private banks, and foreign banks present in these regions that facilitated the conduct of this research. Source of Data This study has been organized based on the primary source of information gathered from the employees working in the Scheduled Commercial Banks of different sectors i. The target population comprises of the employees who are working in the front office of the banks, and are routinely involved in the duties of account opening, customer interaction and customer service.

Sampling Plan Due to the non-availability of employee count working in Pondicherry and Chennai regions, the study considered the population of employees for the states of Pondicherry and Tamilnadu to determine the sample size. The total population of the employees which includes officers and clerks, as reported by RBI, for the states of Pondicherry and Tamilnadu was , as on March Therefore, the present research fixed the sample size at minimum of employees for the population of employees located in Puducherry and Chennai regions.

The Sample is selected using the Snowball sampling method, which is a non- probability sampling technique. The final sample for the study comprised of employees of the banks from across all the three sectors. Data Collection Tool A structured questionnaire has been administered to collect the data. The questionnaire method is adopted considering the size of the sample as it facilitates the respondents to answer the questions or statements in their own convenient time.

The questionnaires are distributed in person, by post and in electronic format to the respondents of the study. The questionnaire comprised of closed-ended statements on a five point agreement scale Likert Scale. Brief profile of the respondents and the bank, such as employee designation, work experience, branch location and bank sector. The statements are based on the findings of earlier studies as discussed under the literature survey section of this thesis.

Training in AML — this section includes a total of two categorical questions on the AML training aspect for employees. The table 2. Table 2. The content validity of the questionnaire has been verified by the experts from both the academic and the banking industry.

Their feedback on whether the items in the instrument are relevant to the targeted objectives of the study, clarity of the questions and the length of the questionnaire was assessed. Based on the feedback, the items have been modified to strengthen the constructs in the questionnaire. This process ensured content validity of the instrument. Pilot Test The constructed questionnaire is pilot tested to assess the appropriateness of wording, clarity and reliability aspects of the questionnaire.

The questionnaire is administered to a total of thirty employees of the various bank branches located in Pondicherry and Chennai region. The researcher during the pilot testing adopted a simple random sampling method to select the bank branches present in the regions of Pondicherry and Chennai. The list of bank branches located in these regions was taken from the RBI website.

The bank branches are randomly selected using the lottery method. One branch each from Pondicherry and Chennai is selected under each sector. The questionnaires are then distributed to all the employees falling within the target group of this study of the selected branches. But considering the reluctance of employees to participate in the study and the huge return of unfilled questionnaires, the researcher shifted to snowball sampling method during the course of pilot study to receive the participation of employees by identifying the prospective respondent for the study through the existing respondent.

Thus, based on the personal observation and discussions with the respondents, certain changes are made to the method of sampling and the questionnaire, wherein the researcher shifted to snowball sampling method in selection of samples, and the construction of statements is made simpler and understandable to the respondents.

All these changes are again reviewed by the experts to reach the final form of the questionnaire for the conduct of main study. The data for the present study has been collected during June, to January, Source of Data This study is based on the primary data collected from the customers of the scheduled commercial banks of different sectors i.

The persons of the age 18 and above is chosen for the study considering that it is the age of majority23 in India. Sampling Plan As per Census report, the population of Pondicherry and Chennai is , and 8,, respectively. However, there is no exact data available on the total population of the persons holding bank accounts above the age of 18 years.

Therefore the minimum sample required for the study has been fixed as persons. Convenience sampling method has been adopted to select the sample from the regions of Puducherry and Chennai. The final sample for the study comprised of customers of the banks from across all the three sectors. Data Collection Tool The responses are collected through survey method by administering the structured questionnaire.

The questionnaires have been distributed in person and in electronic format to the respondents of the study. In case of the persons who felt convenient to respond to the questionnaire in their native language, interview schedule has been adopted to record the data. The questionnaire comprised of closed-ended statements on a five point Likert scale.

It is structured as follows: 1. Demographics, such as age, gender, location, educational level, occupation, and bank sector. The following table 2. It is pre-tested with two practitioners from academic industry and one from banking industry.

Pilot Test The constructed questionnaire is tested to assess the appropriateness of wording, clarity, reliability and validity aspects of the questionnaire. The questionnaire is administered to forty bank customers residing in Pondicherry and Chennai region. All the observations made during the pilot test were again reviewed by the experts to reach the final form of the questionnaire for the conduct of main study.

The data for the final study has been collected during June — December Sample size Sampling Snowball sampling method Convenience sampling method technique Data collection Survey method by administering the Survey method by administering tool structured questionnaire. Missing value analysis revealed that all the cases have complete data. The following methods are adopted to analyse the data. To determine the Factor structure of the Instrument In this research, confirmatory factor analysis CFA using Maximum Likelihood Estimation is conducted to investigate the fit of the factors sub-constructs structure under each study variable construct as constructed in the questionnaire.

To enable conducting CFA, exploratory factor analysis EFA using principal component analysis and varimax rotation method has been applied prior on each factor to identify the items with good factor loading 0. The items with a factor loading of less than 0. The factors retaining only those items with a factor loading of 0. RMSEA value also ranges between 0 and 1 with a value of less than 0. Assessment of Construct Validity and Reliability of the Instrument: Average Variance Extracted AVE 25 , composite reliability26 and squared inter construct correlation matrix are computed to determine the convergent and discriminant validity of the constructs.

A latent construct is deemed to have acceptable convergent validity if it has an AVE value greater than 0. The AVE computed for each construct is evaluated against its correlation with the other constructs. AVE represents the average squared loading i. When the squared inter construct correlation is lower than the AVE of the constructs latent variables , discriminant validity is established.

It indicates the correlation among the items in the questionnaire. The alpha value ranges between 0 and 1. A value of 0. A reliability coefficient value of 0. For Evaluating Research Variables: 1. Descriptive statistics - Mean and Frequency are used for describing the respondents profile and analyze the research objectives. Parametric tests - Independent samples t-test and Anova are used to find out any significant difference among the demographic wise distributions of the respondents with regard to the dependent variables under the study.

Post- hoc Scheffe test is used to identify the sub groups that showed statistically significant differences. Pearson correlation is used to find out any relationship among the dependent variables. The analyzed data has been presented in the tabular form, and the graphical representation is provided wherever required.

Introduction From the review of literature, it is evident that implementation of AML guidelines is a dependent function of knowledge on AML standards and attitudes of the bank staff implementing the AML regulation. Accordingly, this chapter describes the results of research carried out to achieve the objectives one to four as mentioned under chapter 1 of this thesis. Table 3. Public Private 42 Foreign 0 27 6. Clerks 87 Less than 12 months 32 8.

Greater than 60 48 More than half of the respondents By taking into account of work experience Figure 3. Preliminary Assessment of the Instrument The instrument has been assessed for determining its factor structure, convergent validity and discriminant validity of the constructs and reliability of the construct. Factor Structure of the instrument Table 3. Items Items Awareness of 0. The factors in the model include: Resource deficit, Lack of customer support, Lack of sufficient training, Lack of feedback and information exchange, and other implementation issues.

Validation of the Constructs The convergent and discriminant validity of the constructs are determined using average variance extracted AVE , composite reliability, and squared inter construct correlation matrix. The AVE value of above 0. Also, the Discriminant validity is established since the squared inter construct correlation is lower than the AVE in all the constructs.

Money laundering is an act of 1. Money laundering promotes bribery 0. Money laundering increases crime. Money laundering affects our 0 8. Money laundering increases terrorist 0 1. Terrorism Financing: 3. Cross border donations are the 1. Aware of Prevention of Money 1. PMLA is Not applicable to banking PMLA aims at protecting the nation 0 2. Aware of the Unlawful Activities 3. About FIU-India: 1. I am aware that Financial 0. AML Measures: 3. Customer Identification: 3. Bank can open the account though it The names and details of the 4.

Risk Management: 3. Customers should be assessed for 6. Risk of the customer should be 0. Information Updation: 4. KYC updation is not compulsory. Transaction Reporting: 2. There is no regulation to report the 26 The suspicious transactions should 0 0. Record Maintenance: 3. The details of reportable 2. After ending the relationship with Overall mean awareness score 3. While the contemporary phenomenon of AML has been reduced mostly into a set of technological consequences from profiling technologies technologies that attempt within financial institutions to model and simulate money-laundering behaviour for the generation of suspicious transactions , this dissertation takes a different approach.

Instead of focusing at profiling technologies that are believed to be the core technological artefacts that influence AML within financial institutions, this dissertation examines a variety of information systems and their interplay and describes through empirical findings the multitude of interactions that are technologically supported and that construct a much more complex picture of dealing with AML and thereby influencing how money-laundering is perceived.

The empirical findings supporting the theoretical treatise come from a longitudinal case study of a Greek financial institution where a systematic examination takes place regarding a variety of information systems that may affect AML within the bank. Beyond isolated interferences of information systems to AML, their interrelations are further examined in order to reflect on the emergent complexity that often distorts cause-and-effect AML manipulations.

A systems theoretical approach for anti-money laundering informed by a case study in a Greek financial institution: Self-reference, AML, its systematic constitution and technological consequences.

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This Thesis is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital. Prevalence of money laundering in Commercial Bank of Pakistan. Final Thesis for the Master's degree in Business Administration (Full-Time). Fall/Spring Economic crime harmfully affects financial markets, and as such, researchers have studied its various forms, causes, and consequences. This thesis focuses on.