What is money laundering? What are the macro-economic consequences of money laundering? Discuss Anti-Money Laundering guidelines.

Money laundering is the mechanism of introducing illegal or dirty money in the system and is put through a cycle of transactions so that it comes out washed at the other end and is called legal or clean money. The macro economic consequences of money laundering are: It can pose risks to the soundness of financial institutions and financial system It contaminates legal financial transaction It can increase the volatility of internal capital flows and exchange rates due to huge unanticipated cross border transfers. The Anti-Money Laundering guidelines are: Know your customer at the inception and at regular intervals Risk Profiling of the customer Imparting training to staff Account monitoring and reporting of transactions Effective system controls including internal audit. Reporting of transactions to finance intelligence unit.