NEWS FROM WORLD: India

In yesterday's Times of India piece titled "Our freedom was born with hunger, we're still not free", one of India's Green Revolution leaders Monkombu Sambasivan Swaminathan says, "Our freedom was born with hunger. It was born in the backdrop of the Bengal famine. If you read the newspapers dated August 15, 1947, one part was about freedom, the other was food shortage".

As India celebrates its 63rd independence anniversary, it is very unfortunate that economically resurgent India still remains home to the world's largest population of poor, hungry and illiterate people. Tragically, hunger remains India's biggest problem, with an estimated 7000 Indians dying of hunger every single day. Over 200 million Indians will go to bed hungry tonight, as they do every night, according to Bhookh.com. Along with chronic hunger, deep poverty and high illiteracy also continue to blight the lives of hundreds of millions of Indians on a daily basis.

India ranks 66th on the 2008 Global Hunger Index of 88 countries while Pakistan is slightly better at 61 and Bangladesh slightly worse at 70. Though the problems of poverty and hunger in Pakistan are a bit less serious than in India, Pakistan also suffers from high illiteracy and low levels of human development that pose a serious threat to its future.

India has the dubious distinction of being among the top ten on two very different lists: It ranks at the top of the nations of the world with its 270 million illiterate adults, the largest in the world, as detailed by a just released UNESCO report on education; India also shows up at number four in military spending in terms of purchasing power parity, behind United States, China and Russia.

Not only is India the lowest among BRIC nations in terms of human development, India is also the only country among the top ten military spenders which, at 134 on a list of 182 nations, ranks near the bottom of the UNDP's human development rankings. Pakistan, at 141, ranks even lower than India.

India also fares badly on the 2009 World Hunger Index, ranking at 65 along with several sub-Saharan nations. Pakistan ranks at 58 on the same index.

A recent Oxford study on multi-dimensional poverty confirmed that Indians are far more deprived than Pakistanis and the poorest of the poor Africans. The study reveals that there are more "MPI poor" people in eight Indian states (421 million in Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh , Orissa, Rajasthan, Uttar Pradesh, and West Bengal) than in the 26 poorest African countries combined (410 million).

Developed at Oxford University, the Multidimensional Poverty Index (MPI) goes beyond income poverty based on $1.25 or $2 a day income levels. It measures a range of "deprivations" at household levels, such as schooling, nutrition, and access to health, clean water, electricity and sanitation. According to Oxford Poverty and Human Development Initiative (OPHI) country briefings 2010, 55% of Indians and 51% of Pakistanis are poor.

Access to healhcare in South Asia, particularly due to the wide gender gap, presents a huge challenge, and it requires greater focus to ensure improvement in human resources. Though the life expectancy has increased to 66.2 years in Pakistan and 63.4 years in India, it is still low relative to the rest of the world. The infant mortality rate remains stubbornly high, particular in Pakistan, though it has come down down from 76 per 1000 live births in 2003 to 65 in 2009. With 320 mothers dying per 100,000 live births in Pakistan and 450 in India, the maternal mortality rate in South Asia is very high, according to UNICEF.

The health problems in India are compounded by serious lack of sanitation. According to a joint study conducted by the World Health Organization and UNICEF, 665 million Indians, or nearly two-thirds of them defecate in the open. While a mere 14 percent of people in rural areas of the country - that account for 65 percent of its 1.1 billion population - had access to toilets in 1990, the number had gone up to 28 percent in 2006. In comparison, 33 percent rural Pakistanis had access to toilets in 1990 and it went up to an impressive 58 percent in 2006, according to UNICEF officials.

In its issue earlier this year, the harsh reality of hunger and malnutrition in India was described by the Economist magazine as follows:

"India-wide, more than 43% of Indian children under five are malnourished, a third of the world’s total. Over 35% of Indians are illiterate and over 20m children out of school. For all its successes, including six decades of elections and a constitution that introduced the notion of equal rights to an inequitable society, India’s abiding failure is its inability to provide aid and economic opportunity to millions of its impoverished citizens."

The reality of grinding poverty in resurgent India was recently summed up well by a BBC commentator Soutik Biswas as follows:

A sobering thought to keep in mind though. Impressive growth figures are unlikely to stun the poor into mindless optimism about their future. India has long been used to illustrate how extensive poverty coexists with growth. It has a shabby record in pulling people out of poverty - in the last two decades the number of absolutely poor in India has declined by 17 percentage points compared to China, which brought down its absolutely poor by some 45 percentage points. The number of Indian billionaires rose from nine in 2004 to 40 in 2007, says Forbes magazine. That's higher than Japan which had 24, while France and Italy had 14 billionaires each. When one of the world's highest number of billionaires coexist with what one economist calls the world's "largest number of homeless, ill-fed illiterates", something is gravely wrong. This is what rankles many in this happy season of positive thinking.

As India and Pakistan celebrate their 63rd independence day, it is time for both major South Asian nations to reflect and act on the urgent need for careful balancing of their genuine defense requirements against the need to spend more to solve the very serious problems of food, education, health care and human resource development for securing a better future of their peoples.

Monday, August 9, 2010

Money Laundering 101, a primer and perspective on AML

Post under Anti Money Laundering Training, Hawala, India, Launderingmoney.com, Malaysia, Michael Hearns, Money Laundering, UNITED KINGDOM, United States

Money laundering, in a layman’s term means to clean dirty money. Literally it means concealing or disguising illicit income in order to make it appear legitimate. According to Black’s Lexicon, the term Laundering is referred to describe investment or other transfer of money flowing from racketeering, drug transactions and other illegal sources into legitimate channels so that its original source cannot be traced. Section 3 of the Prevention of Money Laundering Act 2002, defines it as “Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering. ”

The term money laundering is said to originate from the Mafia ownerships of Laundromats in the United States. Gangsters there were earning huge sums of money from prostitution, extortion, gambling and bootlegging. They needed to show a legitimate source of these monies. The original sighting was in newspapers reporting the Watergate scandal in United States in 1973. The expression first appeared in a judicial or legal context in 1982 in America in the case US vs. $4,255,625. 39(1982) 551 F Supp. 314. More recently, “Operation Green Ice (1992)” showed the essentially transnational nature of modern money laundering.

Money Laundering deprives Governments of tax revenues thereby raising the relative burden of honest citizens. Because of rapid movements of large amounts of money there occurs destabilization of financial institutions which in turn jeopardizes funds of innocent citizens. The estimated magnitude of the Money Laundering menace totals more than an astounding $500 billion to $1. 5 trillion billion a year of which the Asia Pacific alone accounts for around 30 percent.

The core of money laundering in India is certainly a parallel with the hawala transfer system that operates independently of the traditional banking or financial services channels. Now, its tentacles have spread all over the world. The popularity of hawala can be attributed to its cost, efficiency and reliability. Some additional reasons for the reduction in bureaucracy, lack of paper trail and tax evasion . In addition, motivated by the low use of negotiable instruments as a way to suspend hawaladars decreased significantly. Hawala is recognizable in other systems due to extensive use of the family and the region. Another unique aspect of hawala is the importance of trust between the parties. It is worth noting that one of the meanings of the word hawala is trust! Although hawala is illegal from a regulatory standpoint, a lot hawaladars ethnic newspapers and advertising their services on the Internet. The term “white hawala” refers to the legitimate transactions, while “black hawala” connotes illegal transactions. Black hawala transactions are always certain serious crimes such as drug trafficking, fraud and related illegal in most countries. Another transfer system, “Hack”, “chit” or “flying money” indigenous to China, and is used throughout the world.

Time and technology, money laundering has become more complex and advanced forms, such as

Smurfit-placement is another name used for money laundering. . Such as money laundering in the United States troops were sent to the banks of the country to earn cash checks, bills and similar instruments where the amount is less than $ 10,000. Even in India, Smurfit is quite common. Since most bank branches are the financial checks, bills, etc. the money Rs 10000-15000 Rs money launderers use different names and different transactions, the value of banknotes in bank branches, the first R 8 crores from the confirmation of Enforcement Directorate for Money Laundering Group of Delhi in the 1997th

Bank Complicity, Money Services and Currency Exchanges, Asset Purchases with bulk cash, Electronic Funds Transfer, Postal Money Orders, Credit Cards, Casinos, Legitimate business/ Co-mingling of funds, Value tampering.

The most perilous repercussion of money laundering has been Terrorist Financing, the reverse procedure of Money Laundering. In Terrorist Financing white money is converted into dirty money. Here the money earned through legitimate sources is used for illegitimate activities.

The endemic of money laundering is similar to that of terrorism. As no country is immune from the malady of terrorism, likewise no nation is impervious to the vicious threat of money laundering. This is corroborated by the various legislations enacted by different countries to tackle it. Strategies used by these countries include effective legal framework and tax systems, sound financial institutions, efficient tracking and monitoring systems to identify irregular financial transactions. A few of the key laws relating to money laundering in some major countries are enumerated below:-

USA

Patriot Act 2001; Money Laundering and Financial Crimes Strategy Act 1998; Annunzio-Wylie Anti-Money Laundering Act, 1992; Money Laundering Control Act, 1986; Bank Secrecy Act, 1970. The Acts establish requirements for record keeping by individuals, banks and other financial institutions, establish money laundering as a federal crime; introduce civil and criminal forfeitures for the Bank Secrecy Act violations, criminalize the financing of terrorism, prohibit financial institutions from engaging in business with foreign shell banks, require financial institutions to have due diligence procedures, provide the Secretary of Treasury with the authority to impose “special measures” on jurisdictions or transactions that are of “primary money laundering concern”.

Money Laundering Regulations 2007; Proceeds of Crime Act 2002; and Terrorism Act of 2000. The Acts criminalize both actions relating to criminally acquired property and the failure to disclose suspicious transactions that may indicate money laundering. The Regulations create a regime of Due Diligence, record keeping and reporting that the institutions are required to comply with and also establish penalties ((both civil and criminal) for non-compliance.

Germany

Section 261 of the Criminal Code, 1998; Money Laundering Act of 25 October 1993. The Acts penalises any person who hides an object derived from a specified unlawful act, makes its obligatory for institutions or casino to report any financial transaction that serves the purpose of money laundering.

Australia

The Anti Money Laundering and Counter Terrorism Financing Act, 2006. The Act covers the financial sector, gambling sector and bullion dealing and any other professionals or business that provides particular ‘designated services’. The Act imposes a number of obligations on businesses when they provide these designated services such as customer Due Diligence, reporting and recordkeeping.

Malaysia

Anti Money Laundering Act 2001 The Act criminalises money laundering stating that any person who engages in a transaction that involves proceeds of any specified unlawful activity commits an offence. It also provides for an investigation, freezing, seizure and forfeiture of the proceeds of money laundering and terrorist financing offences, suspicious transactions reporting, record keeping and the establishment and functions of the Financial Intelligence Unit.

India

The Prevention of Money Laundering Act 2002:- Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees:
Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words “which may extend to seven years”, the words “which may extend to ten years” had been substituted. ” It also attracts offences under The Arms Act, 1959; The Wildlife (Protection) Act, 1972; The Immoral Traffic (Prevention) Act 1956; The Prevention of Corruption Act, 1988; Smugglers and Foreign Exchange and Prevention of Smuggling Activities Act 1974; The Benami Transactions (Prohibition) Act, 1988; The Prevention of Illicit Traffic in Narcotics Drugs and Psychotropic Substances Act 1988.

The Parliamentary Standing Committee on Finance examined the Prevention of money Laundering Bill 2008 and suggested recommendations of which a few are enlisted below:-

As a result, trends in money laundering, law enforcement agencies to update itself and it is not using the Advanced anti-money laundering (AML) software can be. A couple of AML software market available Mantas Complinet software companies Omni Infrasoftech, search space AML, AML2 from ECONWARE, and Bank Alert AMLOCK by 3i Infotech. All banks, asset management companies and securities agencies are the target markets. AML software market in India is linked to more than Rs. 200 crores. It is still early days. AML vendors also need to update the customer identification requirements. Some banks, the AML software Indusi, ING Vysya, Bank of Baroda, UTI, Karnataka Bank, etc. Some of the major companies involved in the production of AML software, TCS, InfoSys, 3i Infotech, Logica CMG, Wipro, Misys, SAS, and India.

The Reserve Bank of India introduced KYC i. e. , Know Your Customer norms on 16th August, 2002 owing to the recommendations made by the Financial Action Task Force (FATF) on AML standards. The standards provided by FATF have become mandatory for maintaining cordial international financial relationships. In addition to the FATF, a paper on customer due diligence presented by the Basel Committee on Banking Supervision has been cardinal to the formulation of the KYC and AML measures. The main purpose of the KYC was to restrict money laundering and terrorist financing.

The KYC guidelines have been issued under section 35A of the Banking Regulation Act, 1949 and attract stringent penal measures for any contravention or non-compliance under the same act. The guidelines issued in 2002 were:
On May 17th 2004, US firm Goldman Sachs stock market saga played out bringing forth the lacuna in the KYC norms for foreign institutional investors (FIIs). Capital market watchdog SEBI had proceeded against Goldman Sachs, as it had found evidence that the US firm had conducted some trades which had resulted in the market crash that day. The regulator wanted to give detailed information about the clients, which the latter did not provide. The contention of the firm was that the interpretation of KYC which SEBI had sought to apply would result in FII being required to know to know ultimate client level information and details of reasons for client trades.

This interpretation of the barriers, Reserve Bank of India in 2004 was more specific guidelines on customer identification. They were divided into four sections: –

Customer Acceptance Policy

Customer Identification Procedures

Monitoring of Transactions

Risk Management

The RBI also directed all banks to make a policy for implementing ‘Know Your Customer’ and Anti-Money Laundering measures and remain fully compliant with given guidelines before December 31, 2005. But there have been instances of lapses in the implementation of these guidelines by several banks. The culmination of these failures and the mother of all scams was undoubtedly the IPO scam. Here, one Roopalben Panchal applied for shares in her own name, in a single application, but failed to get an allotment. Undeterred, she ensured herself 9. 47 lakh shares by applying through a staggering 6,315 demat accounts! Most of these accounts were with depository participant Karvy and had almost identical addresses. The Securities and Exchange Board of India unearthed this demat racket involving entities that opened these thousands of demat accounts to ensure higher allotments in the retail offering. The Board advised the two depositories in the country, NSDL and CDSL, to step up their surveillance systems and referred Bharat Overseas Bank and Vijaya Bank to the Reserve Bank of India to examine their roles in opening bank accounts of Benami entities and funding their initial public offer applications. Moreover, SEBI instructed NSDL to thoroughly inspect the systems and procedures put in place by the depository participant Karvy as regards “know your client” norms. Thirteen entities were barred from dealing in Yes Bank shares and in ensuing IPO’s.

Moreover, in the infamous Abdul Karim Telgi case, the machines used to print the fake stamps were acquired by way of money laundering by one Manoj Ramesh Sharma, Telgi’s accomplice.

PROBLEMS WITH KYC

SOME POSITIVES FOR A BETTER FUTURE

The Income Tax department is now working hand in hand with the banks and is sharing its database with them. This has enabled banks to authenticate the identification proof submitted by customers at the time of opening accounts. Moreover, every bank has been given a unique identification with which they can verify the PAN (Permanent Account Number) card details of a customer.

CONCLUSION

Although India has not seen any money laundering scams for funding of anti national activities after the introduction of KYC norms, it sure has failed to prevent innocent customers from being fraught unnecessarily. This is because it has failed to curb offences like fraud, cheating etc. involving money laundering. Another huge threat that India still faces is Narcotics. It is mostly owing to this business that money laundering is used. Hence India has a long way to go before it actually sees the success of KYC norms and is able to nip the menace of money laundering in its bud.

BIBLIOGRAPHY:-

1) Prevention of Money Laundering Act 2002.

2) Financial Intelligence Unit -India, Ministry of Finance.

3) Reserve Bank of India notifications from 16th August 2002- 18th February 2008.

4) Financial Express (June 4, 2009).

5) Indian Banks Association (Briefing on Compliance to ‘KYC Norms and AML Measures’ June 2

2006).

5) The Web page of the Financial Action Task Force.

6) The Web page of the BIS.

7) Money Laundering: A New International Law Enforcement Model book, by Stessens Guy.

Posted by Michael Hearns from www.launderingmoney.com and http://launderingmoney.blogspot.com

Source: http://launderingmoney.blogspot.com/2010/08/money-laundering-101-primer-and.html

»» read more

NEWS FROM WORLD

Wednesday, August 25, 2010

Qualification drives

Thursday, August 19, 2010

An indigenous hit!

Wednesday, August 18, 2010

Daily News August 18, 2010

Sunday, August 15, 2010

India is Home to World's Largest Population of Poor, Hungry and Illiterates

Monday, August 9, 2010

Money Laundering 101, a primer and perspective on AML

Blog Archive

Followers

Total Pageviews

Popular Posts

About This Site