Page 237 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes Therefore, there is a:
1. Need for proper risk management policy
2. Need to manage risk to protect NIM Liquidity planning, interest rate risk management.
ALM guidelines have been issued for banks in Feb 1999 and for FIs in Dec. 1999.

Self Assessment

Fill in the blanks:

10. ALM is the process involving decision making about the .....................................
11. For banks, ALM was issued in ........................................

14.6 Anti-money Laundering (AML)

Anti-money Laundering is the term used by banks and other financial institutions to describe
the diverse measures to combat this illegal activity and to forbid criminals from using individual
banks and the financial system in general as the channel for their proceeds of crime.

Money laundering is traditionally done in three stages, called Placement, Layering and
Integration.
1. Placement is the physical depositing of the cash.

2. Layering describes the process of transactions, some very simple, some more complicated
and often involving transactions within and between banks and across borders, which
seek to confuse the trail back to the original cash.
3. Integration is the process by which the money is brought back into use by the criminal in
the normal economy, often by the purchase of assets (houses, cars, works of art) but which
make it appear legitimate.
Anti Money Laundering processes and controls helps banks and financial institutions protect
themselves and their reputation from the criminals. Vital elements of a sound Anti Money
Laundering program, many of them required by law, include:
Minimum standards and policies, approved by senior management, which clearly sets out
philosophy on crime prevention and business requirements.
Robust training program for all staff.
Strong KYC checks at customer take-on to identify and exclude known criminals but also
to be sure you know the real identity of the customers you encounter.
Automated processes to monitor the activities on customer accounts to identify shady
activity and to check incoming and outgoing payments for unauthorized transactions and
to enable reports to be made to relevant authorities.

Self Assessment

Fill in the blanks:

12. The three stages of money laundering are ........................., ......................... & ..........................
13. The process by which the money is brought back into use by the criminal in the normal
economy is known as ..........................

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