Develop a compliance culture to implement anti-money laundering guidelines

Prevention and ethical value system are the only solution. A good internal control system with strong and robust ethical culture will keep any damage down to a minimum, where there are cases of money laundering

Anti-money laundering (AML) guidelines must be implemented and followed religiously. A touch of religiosity (religious rituals are done with devotion and with discipline) in implementation may perhaps inspire commitment and then hopefully it will be laced with ethics. This is how it should be—but does that happen?

The failures of several recent cases demonstrate that it does not happen. Inadequate internal controls coupled with lack of commitment and disrespect to ethical values from senior management has led to significant losses for banks.

Prevention and ethical value system are the only solution. Prevention means blocking an event that may pervert the established internal controls. Clearly, if the cancerous growth of money laundering is to be arrested/ checked, strong doses of chemo-radiation in the form of stringent internal checks and controls and high ethical business standards with all the unflinching commitment of the top management will need to be administered.

Know your customer (KYC), an essential prescribed precaution, must be coupled with know your employees (KYE). There are a host of instances that highlight the involvement of employees in fraudulent transactions and in most cases in league with customers as the Cobrapost sting operation indicated. The sting operation captured employees advising the customers how they could convert their black money by opening multiple accounts, engaging mules, and many other such methods. Though there was no evidence to show that they did it for any financial gains, yet it did prove that for attracting customer and mobilizing business to meet their targets they won’t hesitate to resort to any tactics. It seems the pressure to achieve the target was the motive behind their action. It couldn’t be established though whether they had the blessings of the senior management. However, the banks named in the sting operation are headed by eminent bankers who will certainly not approve of such dubious actions from their employees. This therefore brings in sharp focus the need for a thorough check on employee’s credentials and proper screening of candidates to prevent the hiring of undesirable characters. Criminals can deploy only one of two ways to launder money, they can either fool the bank employees into participating or they can get them to be complicit.  When banks take money laundering regulations seriously and follow them religiously the job gets a whole lot harder for the people involved in criminal activities.

Cobrapost’s sting operations brought to light officials of a few banks, who lacked integrity, had no discipline and transparency, and did no due diligence This should ring a warning bell and send a strong and clear message to all, to ensure that adequate systems are put in place so as to reduce the possibility of circumventing the policy guidelines and prescribed procedures. These imply that the controls should be such as to facilitate efficient conduct of business on ethical lines and at the same time obviate any chance of fraud. The need therefore is to revaluate AML compliance controls and systems.

Internal check forms a valuable part of the Internal AML Control System. Violations take place primarily because of target achievement pressure and veiled motivation from top management who to a group of officials said, compliance people tell how not to do the business; you have to take your own call on your business growth.It is so ironic that the person who made this statement spoke after a session on Business Ethics.

It has been observed that an organization implementing and maintaining a robust internal control system backed by a moral and ethical culture would, in most cases, prevent any perversion of rules and regulations. If banking organizations/financial institutions do not go down that road, it is inevitable that they will be more prone to violations and resultant reputational risk. A good internal control system with strong and robust ethical culture will keep any damage down to a minimum. However, despite the soundest internal checks and control system being in place subversion will take place because of staff collusion, abuse by person who has authority and overriding the control management.    

Each bank/financial institution must establish the appropriate internal systems necessary for the sound application of the anti-money laundering regulations and must  review such systems periodically to find out any weaknesses therein or in the extent to which such systems are applied and must  take the appropriate measures to correct such situations supported by the firm commitment from senior management.

Lack of spirituality and materialism seem to be the root cause for all these problems. Greed has taken over contentment and replaced ethical values. Everyone wants to get rich. It is the get-rich-quick syndrome that is driving people and organizations to indulge in activities inconsistent with organizational value systems. Organizations should try to develop a culture that has ethical and spiritual tone that echoes constantly and the more it is developed, less will be the incidence of fraud and violations.

(Saiyid (SSA) Zaidi is a training and development consultant as well as external subject matter expert at the Educom Group Banker's Academy in New York.)

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    nagesh kini

    7 years ago

    Bank branches are required to submit reports to various authorities - how many of these are really scrutinized and acted upon is a moot point - MOF/RBI need to clarify what is actually done after receiving the report particularly when something amiss is reported and/or noticed.



    In Reply to nagesh kini 7 years ago

    My article focuses on that-, Implementation of AML guidelines is lax and sloppy. If it has to be robust and implemented religiously
    a very strong ethically laced compliance culture has to be created backed by unflinching commitment of senior management


    In Reply to nagesh kini 7 years ago

    My article focuses on that-, Implementation of AML guidelines is lax and sloppy. If it has to be robust and implemented religiously
    a very strong ethically laced compliance culture has to be created backed by unflinching commitment of senior management

    Moneylife Impact: Now pay online for your passport; challan option also available

    The Moneylife campaign to streamline and speed up issuance of passports has resulted in TCS launching an online payment system, which will reduce tout menace as well as absenteeism of applicants who take appointments but do not turn up

    In a major step that would reduce absenteeism of around 20% passport applicants per day, who take appointment but do not turn up and prevent alleged block booking of appointments by illegal agents, Tata Consultancy Services (TCS), the private operator in partnership with the Passport Division of ministry of external affairs (MEA), has launched the online payment system for passport applications.


    The company has provided various options for online payment in a very inclusive way as those who are not Internet-savvy have been given the option of depositing money in any of the State Bank of India branches after issuance of the challan online. So, in this case, the appointment would be given upon confirmation of payment by the bank. Otherwise, you can use your credit/debit card for online payment or opt for Internet banking of State Bank of India. Thereafter, the applicant would be automatically given the earliest appointment available.


    Once the online payment is introduced in any city, it will be compulsory for the passport applicant to make the payment online. Under this facility, an applicant will be able to cancel/reschedule the appointment only twice within one year of the first appointment date. The system will not allow booking of online appointment for that ARN once two reschedule options are exercised or the first appointment was scheduled more than one year ago.


    The press release elaborates: “Under the new process, payments can be made while booking an appointment on the website——either by credit /debit card (both Master and Visa) or internet banking of State Bank of India. Applicants can also use the challan option provided on thewebsite and deposit the money in the State Bank of India (SBI) branch after generating the challan online. In such cases, upon the confirmation of payment receipt by SBI in the online system, applicants can take an appointment.” Further, instead of the applicant choosing the date and time slot of the appointment, the system will automatically give earliest available appointment.


    As per the press release, “with the launch of the online payment-based appointments, applicants will be required to make payment at the time of booking the appointment on the MEA website. With this, only genuine applicants will book the appointment and number of no-shows will reduce.”  Clearly, the role of illegal touts who indulge in block bookings, thus denying an appointment to the genuine applicant, would greatly diminish.


    The facility, launched in Dehradun in the first week of June, has now been extended to 15 more cities, two days back. These include the Passport Seva Kendras (PSKs) of Ahmedabad, Varsha, Rajkot, Vadodra, Surat, Jammu, Srinagar, Guwahati, Saligramam, Tambaram, Aminjikarai, Madurai, Thirunelveli City, Trichy, Thanjavur, Coimbatore, Amritsar, Jalandhar and Hoshiarpur. The Online Payment System is already applicable at Dehradun, Chandigarh, Ambala, Ludhiana and Vizag PSKs. Pune and Mumbai would soon be included in this scheme.


    According to TCS officials, an average of 20% absenteeism is observed on a daily basis—which means, those applicants who take appointments do not turn up. The press release issued by the MEA states, “Reviewing the operations over the last one year, it was observed that a large number of applicants were not turning up at the PSKs despite taking a valid appointment. This not only resulted in lesser utilization of processing capacity of the PSK, but also caused denial of appointments for other genuine applicants. To resolve the issue of non-availability of appointments and to reduce no-shows of applicants, the ministry has launched the online payment system for booking appointments.”


    The new system will be gradually rolled out to all PSKs across the country in coming weeks.


    Other improvements in the Passport Seva Project after a successful campaign carried out by Moneylife since March 2013 include:


    *Longer working hours to benefit the citizens


    * 24X7 Call Center Support in 17 languages

    • Granting decision taken in front of the applicant, therefore greater transparency Citizens leave the PSK with certainty on the status of their application
    • Transparency in the process and online real-time availability of data for ease of monitoring and decision making


    For further information, please refer to MEA website – or contact the corresponding Regional Passport Office. You may also call up National Passport Call Centre at 1800 258 1800.


    Steps for Online Registration & Appointment:

    Following steps may be followed to obtain and manage appointment:

    Step 1: Visit the website
    Step 2: Register user name and assign a 'password'
    Step 3: Log in using your user name and password

    Step 4: Fill the online application form as the case may be and submit online
    (alternatively, download e-form, fill up and upload the same on the portal).
    Uploading of documents is optional

    Step 5: Now take an appointment to visit the nearest Passport Seva Kendra (appointments are released region wise). It is advised that the citizen should be ready with step '1' to '4' above before the "appointment release time". As soon as appointments are released (please see region wise timings), they should click on
    "Schedule Appointment" link to book the appointment. Appointment will be automatically booked and allocated to you if available.

    For more details, log in to:


    (Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)

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    Vikram R Parkar

    7 years ago


    shailesh gandhi

    7 years ago

    Congratulations to Vinita Deshmukh, Vijay Kumbhar and Moneylife. Persistent commitment has paid off.


    7 years ago

    Excellent stuff. Keep up the good work. They should also streamline the process of issuing passports. Some get in one weeks time and for others it takes over two months.

    R Balakrishnan

    7 years ago

    This is great. Kudos to Vinita Deshmukh and Moneylife. Getting the draft etc was a painful thing. Confusion about amounts etc. Online is great.

    Real Estate Bill: Centre and states may collude on parallel laws, cost

    There are some differences between the Central Bill and laws proposed or already present in various states with regard to housing. Maharashtra uses built up area in its Ready Reckoner, while the central Bill uses carpet area. In addition, states will have to foot the bill for setting up and running the regulatory authority and appellate tribunal under the proposed Act

    The Real Estate (Regulation and Development) Bill (Realty Bill) recently passed by the Union cabinet fails to provide clarity on several issues that the state governments are expected to implement. The conflict is not limited to Central and state laws, but also reaches to the basic definition of area under sale.


    For instance, the Ready Reckoner of the Maharashtra government uses built-up area for referring area under sale, while the Realty Bill talks about carpet area. Carpet area is the area enclosed within the walls, while built up area covers carpet area plus walls and the balcony. (As per the Bill, ‘carpet area’ means the net usable floor area of an immovable property, excluding the area covered by the walls.)


    Pranay Vakil, founder chairman of Praron Consultancy and former chairman of Knight Frank India, while speaking at a Moneylife Foundation seminar said there would be some issues (for the Realty Bill) like jurisdiction, registration and control of developers with multi-state operations besides conflict between central and state laws. In his words, the Realty Bill, which is a huge step forward in terms of consumer protection, would need some ‘debugging’. 


    There are areas of conflict between the central and state laws that also need to be debugged. Last year, both houses of the state legislature passed the Maharashtra Housing (Regulation and Development) Bill (MHRDB), which at present is awaiting the presidential nod.


    According to media reports, Sachin Ahir, (minister of state for housing), Maharashtra, and few other states too have objected to the Realty Bill due to difference in conditions and development control regulations for different cities.


    “We do not know in what form the Realty Bill will be imposed on states, whether it will be a nodal law or a law that will supersede what the state government has proposed. We will decide what next once we get information from the Centre, once we get the minutes of the Cabinet meeting,” Ahir had said.


    While the MHRDB seeks to safeguard interests of home buyers and bring transparency in real estate deals by setting up a housing regulatory authority and a housing appellate tribunal, the central Bill also proposes the same.


    A press note issued by the Union government states that “Establishment of one or more ‘Real Estate Regulatory Authority’ (RERA) in each state/UT, or one authority for two or more states/ UT, by the appropriate government, with specified functions, powers, and responsibilities to exercise oversight of real estate transactions, to appoint adjudicating officers to settle disputes between parties, and to impose penalty and interest”.


    While speaking at the Moneylife Foundation seminar, Parimal Shroff, who has over 37 years’ experience in constitutional, corporate, civil and property law, pointed out that the Central Act is “too ambitious”. He said, the functions of RERA includes administrative, advisory, executive, judicial and regulatory and it needs to be rationalised as it can be overburden by solving smallest to largest issues across the country.


    In addition, the state governments are expected to establish Real Estate Appellate Tribunal (REAT) to hear appeals from the orders or decisions or directions of the authority and the adjudicating officer. The REAT should be headed by a sitting or retired Judge of the high court with one judicial and one administrative or technical member. This is also not practical, especially looking at the dearth of high court judges today.


    According to Ahir the central Realty Bill was largely based on the housing bill proposed by Maharashtra. He said, the only major difference was the MHRDB sought to equate the appellate tribunal with a civil court, while the central one did not. Instead, the Realty Bill provides same powers to RERA as vested in a civil court while trying a suit.


    One of the issues that could put brakes on setting up RERA and the REAT is the cost factor. As per the Bill, the state government should set up RERA and tribunals. However, the states would be too reluctant to bear the financial burden on setting up these authorities, unless the Centre provides sufficient funding. 


    The Realty Bill says, “The state government may, after due appropriation made by the state legislature by law in this behalf make to the authority, grants and loans of such sums of money as the state government may think fit for being utilized for the purposes of this Act.”


    In addition, the appropriate governments are expected to constitute “Real Estate Fund” and shall credit all government grants received by the authority, the fees received under this Act and the interest accrued on these amounts.


    Salaries and allowances payable to the chairperson, other members as well as officers and other employees of the RERA and REAT and administrative expenses would be paid from the Fund.


    While there is no mention on any budgetary support for establishing the RERAs and REATs, the question is will there be sufficient funds for all the expenses, like employee cost, infrastructure like computer systems, offices, transportation and communication. Especially, in states like Maharashtra setting up RERA and REAT with meagre funding would not only prove a hurdle, but also sabotage entire purpose of the Realty Bill.


    The Realty Bill demands greater disclosure from the developers and a higher level of project accountability to remove the information asymmetries from the property market. There is also mandatory registration of all real estate projects and real estate agents who intended to sell properties, with the RERA.


    For each project, the developer must disclose details of the promoters, project, layout plan, plan of development works, land status, carpet area and number of the apartments booked, status of the statutory approvals and disclosure of pro-forma agreements, names and addresses of the real estate agents, contractors, architect and structural engineer.


    This is another area that could pose challenges. Monitoring whether all the projects that fall under purview are actually submitting themselves for registration would be a huge task. Even creating and maintaining data would require trained employees. And this would not be possible without adequate funding.

    Read more about the Real Estate Regulation Bill:

    A bulk allottee or buyer will also be considered as a promoter causing confusion

    Will the regulation really exclude commercial property?

    The humungous job of monitoring 30,000 crore sq ft of construction planned

    Registration of brokers: Huge challenges ahead

    Moneylife Foundation event on decoding the realty regulator

    Here is the Real Estate Bill, kept hidden from public



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