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Banking Exam Question - What are the NRB Directives for KYC, Anti-Money Laundering & Terrorist Activities Reduction in Banking? Explain




Introduction - KYC & Anti-Money Laundering in Banking
Know your customer (KYC) is the process of a business identifying and verifying the identity of its clients. The term is also used to refer to the bank and anti-money laundering regulations which governs these activities.

Anti money laundering (AML) refers to a set of procedures, laws and regulations designed to stop the practice of generating income through illegal actions. Though anti-money-laundering laws cover a relatively limited number of transactions and criminal behaviors, their implications are far-reaching.

Against illegal tax avoidance (AML) is a term principally utilized as a part of the budgetary and legitimate enterprises to depict the lawful controls that require monetary foundations and other directed elements to forestall, recognize, and report tax evasion exercises. Tax evasion is the nonexclusive term used to depict the procedure by which lawbreakers camouflage the first possession and control of the returns of criminal lead by making such continues seem to have gotten from a true blue source. 

There are three phases associated with tax evasion; arrangement, layering and reconciliation. Arrangement – This is the development of money from its source. Every so often the source can be effectively masked or distorted. Hostile to tax evasion (AML) alludes to an arrangement of systems, laws and controls intended to stop the act of producing pay through unlawful activities.

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