Financial Times

HSBC urges need for awareness about money laundering
Banks have to be more conscious in getting to know customers and be alert to identify early signs of money laundering in order to prevent potential damage to its reputation, severe penalties by law, and eventual loss of its charter, according to Hersel Mehani, Senior Vice President, HSBC Bank USA.

In a presentation on "Know Your Customer and Anti Money Laundering," which was the theme of the Payments and Cash Management Conference organized by HSBC in Colombo last week, he provided an overview of the impact on local financial institutions through money laundering and hence the need for institutions to 'know its customers'.

He added that the issue was relevant to Sri Lanka with the increase in international trade and as such it faces the challenge of adhering to international standards in Anti Money Laundering. Further, the overseas experience helps the country to enact its own Anti Money Laundering legislation in the near future.

Globally, money laundering collectively identifies a variety of methods by which the proceeds of a crime are converted to hide their illegitimate source. It involves three stages. Illegal funds are physically disposed through strategic placements in financial institutions and layered through complex transactions to dislodge them from its illegal source before integrating it back into the economy, he said.

Mehani said instances of money laundering could be tackled through proper deterrence procedures when opening accounts and maintaining proper documentation for a bank to know its customers. The presentation included an overview of the US anti money laundering legislation and international efforts being taken to combat money laundering based on the Basle Principles.

The Basle Principles of 1988 is a statement of principles on how the international banking community will cooperate to combat money laundering comprising of specified customer identification steps, emphasis on legal and ethical compliance, greater cooperation with legal authorities and commitment to its principles.

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