AML & KYC Overview

You hate it when the bank asks for your Aadhaar and Pan Card again. But they are doing it to stop terrorists and criminals.

What is Money Laundering?

Money Laundering is the process of making "Dirty Money" (from crime, drugs, corruption) look like "Clean Money" (legal income).

The 3 Stages:

1. Placement: Putting dirty cash into the financial system (e.g., depositing ₹50,000 cash in 10 different bank accounts).
2. Layering: Moving money around to hide its source (e.g., transferring to offshore accounts, buying shell companies).
3. Integration: Money re-enters the economy as "legal" wealth (e.g., buying a luxury hotel).

What is AML (Anti-Money Laundering)?

Laws and regulations to prevent money laundering.

• PMLA (Prevention of Money Laundering Act, 2002): The main law in India.
• FIU-IND (Financial Intelligence Unit): The agency that tracks suspicious transactions.

What is KYC (Know Your Customer)?

KYC is the first step of AML. Banks MUST know who they are dealing with.

Mandatory Documents:

1. Proof of Identity: PAN, Aadhaar, Passport.
2. Proof of Address: Utility Bill, Aadhaar, Driving License.
3. Photograph.

Why is it annoying but necessary?

• If banks don't do KYC, terrorists could open accounts to fund attacks.
• Tax evaders could hide black money.

Suspicious Transaction Report (STR)

If you deposit ₹10 Lakhs cash in your account suddenly, the bank software triggers an alert. The bank manager may file an STR to the government. You won't even know.

7-Day Action Plan

Day 1: Check if your KYC is updated in your Bank and Mutual Funds. (CKYC status).
Day 2: Understand why "Cash" is the enemy of AML. (Digital trails are easy to track).
Day 3: Read about "Shell Companies" - fake companies used for laundering.
Day 4: Never lend your bank account to a friend to "receive money." You could be charged as a "Money Mule."
Day 5: Watch the series "Ozark" or "Breaking Bad" (entertaining examples of laundering).
Day 6: Check your CIBIL report. Ensure no unknown accounts are opened in your name (Identity Theft).
Day 7: Ensure your PAN is linked to Aadhaar. It is mandatory for KYC.

Quiz

💡 Final Wisdom: "Dirty money always leaves a trail." Compliance might be boring, but it keeps you out of jail.