Module-I (30%)

1. The first estimate of money laundering made by John Walker (University of Wollongong) in
1995 was of USD 2.8 trillion
2. United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
(1988) (Vienna Convention)
3. Bank of Credit and Commerce International (BCCI): Est. 1970s . 1991- Fraud.
4. The European Union Bank (EUB) initially registered as an offshore bank in Antigua in June 1994.
Collapsed in 1997
5. Riggs Bank: HQ: Washington DC. 2004 Fraud
6. UN‘s International Convention for the Suppression of the Financing of Terrorism (1999)
7. TBML: TRADE BASED MONEY LAUNDERING
8. STEPS IN MONEY LAUNDERING: PLACEMENT, LAYERING, INTEGRATION.
9. In India Rs. 10 lakhs is the reporting requirement
10. Slush funds maintained by big corporations, e.g., bribery, payment to political parties,
politicians, etc.
11. A shell company is just that - a shell where no real business is conducted. They appear on paper,
but may not physically exist.
12. Bureaux De Change (or equivalent) services - such as telegraphic transfer facilities, and
exchange services - which can be used to buy or sell foreign currencies, to consolidate small
denomination bank notes into larger ones, or to exchange financial instruments such as
travelers’ cheques, Euro cheques, money orders, and personal cheques are attractive to money
launderers. The degree of regulation over these businesses is often less stringent than that of
traditional financial institutions.
13. Hawala System: It is an alternative remittance system that operates outside the control of the
government allowing for undocumented deposits, withdrawals, and transfers. These are trust
based systems that leave no paper trail. Money is transferred via a network of hawala brokers. A
customer approaches a hawala broker in one city, and gives a sum of money to be transferred to
a recipient in another, usually a foreign city. The hawala broker calls another hawala broker in
the recipient‘s city, gives disposition instructions of the funds. This is prevalent in certain
countries of South Asia. This channel provides total anonymity, and hence is useful for funding
of terrorist activity through illegal funds across borders.
14. Cryptocurrency: $14 billion in 2021.
15. Smurfing: is a money laundering technique where individuals break down large sums of money
into smaller transactions to avoid detection by regulatory authorities.
16. Multiple Tier of Accounts In this technique: the funds are passed through multiple accounts by
splitting them into two or more portions at each stage.
17. Funnel Accounts: In this variant, a bank account is opened for the purpose of deposits of dirty
money to be made by several persons usually below the reporting threshold, say Rs.10 lakh.
18. Contra Transactions: Sometimes to show heavy turnover in accounts, some amount is
transferred from one account to another account, followed by an equal amount transferred
 from the recipient account to the originating account. Such transactions may be repeated
several times during a day, over several days or even few months.
19. Crypto coins other than the Bitcoins are called Altcoins.
20. BCBS: Basel Committee on Banking Supervision
21. Earliest such initiatives was undertaken by the Committee of Ministers of the Council of Europe
in June 1980
22. The mandate to UNDC was strengthened in 1998 by the Political Declaration at 20th session.
23. In 2000, at Palermo, the UN adopted the International Convention Against Transnational
Organised Crime.
24. IMF in 2000.
25. The BCBS is the primary global standard-setter for the prudential regulation of banks and
provides a forum for cooperation on banking supervisory matters.
26. BCBS, in pursuance of the call of Lyon G-7 Summit in June 1996 for action for strengthening
financial systems in various countries in the world, came out with a document on the Core
Principles for Effective Banking Supervision in September 1997. 25 core principles. Later in 2012:
29 revised principle. Principle 29 – Abuse of financial services.
27. FATF Standards, BCBS published a paper on ‘Sound Management of Risks Related to Money
Laundering and Financing of Terrorism’ in January 2014
28. The Asia/Pacific Group on Money Laundering (APG) is an autonomous and collaborative inter-
governmental organisation founded in February 1997 in Bangkok
29. The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the
Financing of Terrorism (MONEYVAL) is a monitoring body of the Council of Europe
30. The Wolfsberg Group (2000) is an association of 13 global banks formed with the objective to
develop frameworks and guidance for the management of financial crime risks, particularly with
respect to KYC/AML/CFT policies.
31. FATF: sets the global standards for managing ML/TF/FC risks
32. FATF include 40 recommendation.
33. FATF black list: Iran, N.Korea, Myanmmar.
34. Anti Money Laundering directives are of EU
35. USA Patriot act : Voluntary sharing os info among financial institutions. Most acts belong to US.
36. Council of Europe set up in 1949.
37. The central functions related to co-ordination with these bodies fall under the Ministry of
Finance.
38. Terrorism related measures, these are connected with internal security, fall in the purview of
Ministry of Home Affairs.
39. FATF Cell is functioning under the Department of Economic Affairs in the Ministry of Finance
40. (FIU-IND) is the central national agency responsible for receiving, processing, analyzing and
disseminating information relating to suspect financial transactions to enforcement agencies
and foreign FIUs. Implementation of FATF recommendations.
41. (FIU-IND) was set up by GOI vide O.M. dated 18th November 2004 under the Department of
Revenue in the Ministry of Finance. FIU-IND is, however, an independent body reporting to the
 Economic Intelligence Council (EIC) headed by the Finance Minister. FIU-IND is the fulcrum of all
AML related activities in the country.
42. ED-1956: FEMA 1999, FERA 1973, COFEPOSA, PMLA 2002
43. NIA 2008: Central Counter Terrorism Law Enforcement Agency in India. NIA is required to
investigate and prosecute offences affecting the sovereignty, security and integrity of India.
44. AML Steering Committee (AML-SC) was constituted in the Department of Revenue, Ministry of
Finance in February, 2012; Following directives of FATF 2012.
45. In August 2015, the government decided to set up a Working Group (WG) of leading agencies
for a ‘National Risk Assessment’ of various sectors, based on a methodology formed by the
World Bank. Assisted by 8 teams.
46. PMLA amendment 2023: No monetary ceiling/Threshold for investigating officer.
47. The Director, FIU may take punitive/ corrective actions against the bank, the designated
director, and any employee of the bank minimum Rs.10000, and maximum Rs.100000 for each
failure.
48. India has achieved an outstanding outcome in the Mutual Evaluation conducted during 2023-24 by
Financial Action Task Force (FATF). The Mutual Evaluation Report of India, which was adopted in the FATF
plenary held in Singapore between June 26th and June 28th, 2024, places India in the ‘regular follow-up’
category, a distinction shared by only four other G20 countries. This marks a significant milestone in the
nation’s efforts to combat money laundering (ML) and terrorist financing (TF).
49. UNLAWFUL ACTIVITIES (PREVENTION) ACT, 1967
50. Section 51A of UAPA, the Central Government is empowered to freeze, seize or attach funds of
and/or prevent entry into or transit through India, any individual or entities that are suspected
to be engaged in terrorism.
51. Correspondent banking is the provision of banking services by one bank (the ‘correspondent
bank’) to another bank (the ‘respondent bank’).
52. FATF List: 1. Black List (Call for action): S.Korea, Iran, Myanmar. Grey List aka Monitored
Jurisdiction.
53. OFAC: Office of Foreign Assets and Control, USA.
54. T.Raja Kumar: Previous head of FATF from Singapore. Elisa de Anda Madrazo of Mexico is the
new FATF President
55. CTR: Cash Transaction Report- For more than >10 Lakh
STR: Suspicious Transaction Report, No fix amt
CCR: Counterfeit Currency Report, No fix amt
NTR: Non-Profit Organisation Transaction Report- >10 Lakh
CBTR: Cross Border Wire Transfer Report- >5 Lakh
All above report to be sent monthly by 15th of next month except STR. STR should be sent as
and when reported.
56. Non-submission or delayed submission or incomplete reports may result in the various penal
actions by the Director, FIU-IND, including levy of monetary penalty.
Module-II & III (50%)

1. In 1990, among the 40 recommendations of FATF, customer due diligence was one of the most
important recommendation. In 2001, BCBS published detailed guidance for banks on customer
due diligence.
2. RBI has advised that following four key elements must be included in the KYC Policy of the
banks:
A. Customer Acceptance Policy
B. Risk Management
C. Customer Identification Procedures
D. Monitoring Of Transactions
3. Risk Rating Model/System
A. Size of Customer Base
B. Range of Customer Type
C. Range Of Customer Business
D. Geographical Spread
E. Any Cross border activities
4. Low Risk Customers: Low income persone like cobbler, salaried person (not in senior
management) etc.
Medium Risk: Real Estate Agents, Retaurants, Small companies etc
High Risk: Diamond Merchant, Arms dealer, Real estate Developers, Salaried at high position,
NPO.
5. Foreign Tax Compliance Act –USA
6. Periodicities for various risk categories:
High: 2 Years
Med: 8 Years
Low: 10 Years
7. UCIC: Unique Customer Identification Code
8. The responsibility for KYC ultimately rests with the concerned banks.
9. Any person who does not have / possess any of the OVDs as prescribed by RBI and has no other
bank account.
10. Following are the salient features of ‘Small Account’ (a) Type: Savings Account (b) Restrictions
on Credits: Not more than `.1 lakh in a year (c) Restrictions on Withdrawals: Not more than `
10,000/- in a month (including transfers) (d) Restrictions on balance: Not more than Rs.50,000/-
at any time. (e) Other Restrictions: No foreign inward remittance to be credited.
11. Limited Liability Partnership Act 2008.
12. Partnership Act 1932.
13. In case of companies (Companies Act 2013): Beneficial Owners: Beneficial owners need to be
determined and identified (individual(s) having/enjoying 10% or more stake/control/benefit).
This is not required to be done for listed companies or their subsidiaries.
14. In case of Associations/Body Of individuals: Beneficial Owner: At least 15%.
15. Trust: At least 10% for beneficial owner.
16. Juridical Person: 15%
17. In case of walk-in customers too KYC requirements apply where the amount involved is
Rs.50000/- or more.
18. Issue of demand drafts/banker‘s cheque or NEFT, etc. for Rs. 50,000/- and above should be only
by debit to the customer‘s account or against cheques. These should not be against cash
payment.
19. All domestic wire transfers (of Rs. 50000/- and above) must include accurate and meaningful
originator information – name, address, and account number. The originating bank will be
responsible for the KYC of the remitter. The receiving bank will be responsible for the KYC of the
beneficiary of the payment.
20. FATCA means Foreign Account Tax Compliance Act of the United States of America (USA) which,
inter alia, requires foreign financial institutions to report about financial accounts held by U.S.
taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest. IGA
means Inter Governmental Agreement between the Governments of India and the USA to
improve international tax compliance and to implement FATCA of the USA.
21. US Tax department came up with FATCA guidelines in 2010 to enforce tax compliance and avoid
tax evasion.
22. Indian Government signed the inter-governmental agreement (IGA) with US in year 2015 for its
implementation.
23. Common Reporting Standards (CRS) is an international version of FATCA. While FATCA is only for
US persons, CRS is applicable for citizens of every country.
24. OECD, Organisation for Economic Cooperation and Development developed the Common
Reporting Standard for Automatic Exchange of Information (AEOI). The CRS mandates financial
institutions across countries to provide respective tax authorities information about their
citizens and their wealth overseas
25. Both FATCA & CRS require cooperation from the tax authorities from all the G20 and OECD
countries
26. CENTRAL KYC REGISTRY (CKYCR): Its main functions are to receive, store, safeguard and retrieve
electronic copies of KYC records obtained by the reporting entities from their clients, in
accordance with PML Rules.
27. Three Lines Of Defence:
1st Line: Frontline Staff
2nd Line: Supervisory Staff
3rd Line: Internal and Concurrent Audit
28. Banks face a number of risks in conducting their business, for instance:
• Credit risk: risk of loss arising due to non-recovery of loans.
• Liquidity risk: risk that a given security or asset cannot be realised to meet the cash
requirement.
• Market risk: risk that the value of an asset portfolio will decrease due to fall in market prices. •
Operational risk: risk arising from business operations.
• Reputational risk: risk related to the trustworthiness of the organisation.
 • Macroeconomic risk: risks related to the economy the bank is operating in. The capital
requirement is a primary bank regulation prescription, to enable banks to withstand the risks
and sustain. The categorization of assets and capital is standardized with regulatory
prescriptions so that it can be adequately risk weighted.
29. The RBI performs Financial supervision under the guidance of the Board for Financial
Supervision (BFS), committee of the Central Board of Directors of the RBI.
30. Banks are required to submit data / information (data points) towards ISE (RBS) on quarterly /
annually vide Tranche submission:
Tranche-I : Quarterly
Tranche-II : Annually
Tranche-III : Annually
31. The SEBI was established on April 12, 1992
32. NABARD: 1982. It has been vested with the powers of inspection of the RRBs, the District
Central Cooperative Banks (Dt.CCB) and the State Co-operative Banks (St.CB) on behalf of the
RBI. It is an apex institution handling matters concerning policy, planning and operations in the
field of credit for agriculture and for other economic and developmental activities in rural areas.
It is a refinancing agency for financial institutions offering production credit and investment
credit for promoting agriculture and developmental activities in rural areas.
33. The PFRDA was established in 2014 for regulating National Pension Scheme (NPS) open to
employees of Govt. of India, State Governments, private institutions/organizations and
unorganized sectors.
34. FIMMDA: Fixed Income Money Market and Derivatives Association of India
35. FEDAI: Foreign Exchange Dealer’s Association of India.
36. The RBI Act, 1934
The Banking Regulation Act, 1949
The Negotiable Instruments Act, 1881
Foreign Exchange Management Act, 1999
Information Technology Act, 2000
The Income Tax Act, 1961
The Companies Act, 2013
The Indian Partnership Act, 1932
The Limited Liability Partnership Act, 2008
The Recovery of Debts and Bankruptcy Act, 1993
Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002
The Insolvency and Bankruptcy Code, 2016
The Transfer of Property Act, 1882
The Legal Services Authorities Act, 1987
The Limitation Act, 1963
The Consumer Protection Act 2019
Principle 1: The Bank‘s Board of Directors (BOD) are responsible for overseeing and
management of the bank‘s compliance risk. The Board should approve the bank‘s compliance
policy which must include a formal document establishing a permanent and effective
compliance function. At least once a year, Board or a committee of the Board should assess the
extent to which the banks are managing its compliance risk effectively. Principle 2: The bank‘s
senior management is responsible for effective management of the bank‘s compliance risk.
Principle 3: The bank‘s senior management is responsible for establishing and communicating a
compliance policy and for reporting to the BOD on the management of the bank‘s compliance
risk. Principle 4: The bank‘s senior management is responsible for establishing a permanent and
effective compliance function within the bank as part of the bank‘s compliance policy. Principle
5: The bank‘s compliance function should be independent. Principle 6: The bank‘s compliance
function should have the resources to carry out its responsibilities effectively. Principle 7: The
responsibilities of compliance function are carried out by staff in different departments, the
allocation of responsibilities to each department should be clear. Principle 8: The scope and
breadth of the activities of the compliance function should be subject to periodic review by the
internal audit function. Principle 9: Banks should comply with applicable laws and regulations in
all jurisdictions in which they conduct business. Principle 10: Specific tasks of the compliance
function may be outsourced, but those must be subject to appropriate oversight by the head of
compliance on continuous basis (periodic review).

The Compliance function should identify, document, assess the compliance risks associated with
banks’ business activities and products, including in all new products and processes. Appropriate
risk mitigants should be put in place before launching. All new products should be subjected to
intensive monitoring for the first six months for indicative compliance parameters.

ROLE AND RESPONSIBILITIES OF CHIEF COMPLIANCE OFFICER (CCO)

Tenor: Min 3 Years

Transfer: Only in exceptional case. Prior approval of board in necessary.
Rank - The CCO shall be a senior executive of the bank, preferably in the rank of a General
Manager or an equivalent position (not below two levels from the CEO). The CCO could also be
recruited from market;
Age: Not more than 55.
Experience - The CCO shall have an overall experience of at least 15 years in the banking or
financial services, out of which minimum 5 years shall be in the Audit / Finance / Compliance /
Legal / Risk Management functions
The CCO shall have direct reporting lines to the MD & CEO and/or Board/Board Committee
(ACB) of the bank.
The CCO and compliance function shall have the authority to communicate with any staff
member and have access to all records or files that are necessary to enable him/her to carry out
entrusted responsibilities in respect of compliance issues. This authority should flow from the
compliance policy of the bank;
The Chief Compliance Officer should be a member of the ‘new product’ committee/s to ensure
that the new products / processes have clearance from all perspectives including compliance. All
new products should be subjected to intensive monitoring for the first six months of
introduction to ensure that the indicative parameters of compliance risk are adequately
monitored.
Annihilation Risk: Closure of business