Money laundering is the process whereby the
proceeds of crime are transformed into ostensibly legitimate money or other
assets. However in a number of legal and regulatory system the term money
laundering has become conflated with other forms of
financial crime, and sometimes used more generally to include misuse of the
financial system, including terrorism financing, tax evasion and evading of international sanctions.
Anti-money
laundering (AML) is a term popularly used in the global financial and legal
industries to describe the legal controls that require financial institutions and other regulated entities
to prevent, detect, and report money laundering activities. Anti-money
laundering guidelines came into prominence globally as a result of the
formation of the Financial Action Task Force (FATF) and the promulgation
of an international framework of anti-money laundering standards.
Even though India is a signatory to
various United Nations Conventions on anti money laundering and procures its
own central legislation, that is, the Prevention
of Money Laundering Act, 2002, it is so far successful neither in
implementing the law nor in preventing money laundering.
Now
it is high time for our country to bring about a drastic change in the existing
system and to introduce the concept of
‘corresponding law’ to link the provisions of Indian law with the laws of
foreign countries in such a way that it adds the concept of ‘reporting entity’
which would require
financial institutions and other intermediaries like, Chartered Accountants,
Lawyers etc. to identify their clients, establish risk-based controls, keep
records, and report suspicious activities to the Financial Intelligence Unit.
Banks and other
financial institutions can play a very crucial role in reporting money
laundering whereby they must verify a customer's identity and, if necessary,
monitor transactions for suspicious activity. This is often termed as "know your customer". This means
knowing the identity of the customer and understanding the kinds of
transactions in which the customer is likely to engage. Such anomalies include
any sudden and substantial increase in funds, a large withdrawal, or moving
money to a bank secrecy jurisdiction. By knowing one's customers, financial
institutions can often identify unusual or suspicious behavior, termed
anomalies, which may be an indication of money laundering.
As a part of reporting, bank employees,
must be trained in anti-money laundering and instructed to report activities that
they deem suspicious. Additionally, anti-money
laundering software can be adopted to filter customer data, classify it
according to level of suspicion, and inspect it for anomalies. The software can
be explored to flag names on government "blacklists" and transactions
that involve countries hostile to the host nation. Once the software has mined
data and flagged suspect transactions, it alerts bank management, who must then
determine whether to file a report with the government.
OUR IDEAS TO REFORM
Today, chartered accountants, auditors,
tax practitioners, company secretaries and lawyers being the professionals
whose service is inevitable in financial sector and comes in direct contact
with monetary transactions of clients, there should be clear cut guidance for
these professionals to identify and report transactions of a suspicious nature
to the Financial Intelligence Unit.
Like
in foreign countries, Client Due Diligence or CDD should be the key operational
responsibility of practicing accountants under the Indian law as well. The
overriding purpose of these requirements is to ensure that accountants are able
to comply with the dictum ‘Know your Client’. They should not only know who
their clients are but should also understand the motives of the client and the
nature his business. Only if the accountant understands what is normal and
usual in client’s business, will he be in a position, later on, to recognize
things which are abnormal or unusual and hence potentially suspicious.
Accordingly this CDD are essentially intended to ensure that accountants are
able to remain in control of the engagement and that their offices are not used
for criminal purposes. An indirect aim of the rules on client due diligence
should be to make those who may be trying to launder money aware that, should
they approach an accountant for help, the accountant will be obliged by law to
take steps which may lead to the detection of their criminal activities.
Once
any such suspicion is traced, the accountant being a public friend, should be
made duty bound to report to and disclose the same to the Financial
Intelligence Unit with immediate effect, without leaving any loop hole of doubt
for the client and in this way not just financial aid to terrorism is
demotivated and national security is added; but also a large quantity of black
money is turned into white and confiscated to the public exchequer through
deterring tax evasion and thereby ultimately adding to the national wealth. The
same way the government should undertake the responsibility of ensuring and
extending protection to the so called public friends, in return for serving the
country by risking their profession.
Suit 6-Westward House
Glebeland Road Camberley
Surrey, GU15 3DB
Tel: 02079935929
E
:info@globalcompanyformation.co.uk
W :www.globalcompanyformation.co.uk
Welcome
to Global Company Formation UK
We offer formation advice to start up business
globally. We advise you of the mode of start up like limited company,
partnership, sole trader, trust and which is more suitable to your business.
Our professional team consists of Lawyers, Chartered Accountants & Business
Consultants in all major jurisdictions across the globe. We guide you to the
country of formation on the basis of your domicile status, double taxation
agreement, international plan and repatriation rule of each country. Now you
can form your business anywhere in the world with us and we care your business.
Mathew Stephen FCA, AAIA, CeFA
Mathew Stephen is the founder Director of Global
Accountancy Services. He isa qualified accountant from the Association of
International Accountants in the UK and the Institute of Chartered Accountants
of India. He is also one of the partners of international Chartered Accountants
firm P. Parikh & Associates. He has 20 years’ experience in accounts,
business consultancy, taxation & statutory audit. He is also a UK
Independent Financial Advisor (IFA) and CeFA qualified at the IFS School of
Finance.
He has won the Online Technology Award in two
consecutive years, 2011 and 2012, from the Tenet Network. He specialises in
Global Company Formation, International Taxation and also as Corporate
Protection Advisor to the directors of Limited Companies.
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