Money Laundering Literature Review

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3.1 INTRODUCTION Risk Management and Risk based Supervision in Banks has been the subject of study of many Agencies and Researchers and Academicians. There is a treasure of literature available on the subject. A careful selection of relevant material was a formidable task before the Researcher. Efforts have been made to scan the literature highly relevant to the Context. The main sources of literature have been the Website of the Reserve Bank of India, the website of the Basle Committee on Banking Supervision and the websites of several major Banks both in India and abroad. The publications of Academicians engaged in the Risk Management and Central Banking Supervision sphere also throws valuable insights in to the area. The occasional Research…show more content…
Its risk has wide ramifications. Money Laundering has lead to the fall of Banks like BCCI in the past. In this context the book on Anti-Money Laundering: International Practice and Policies by John Broome 51 Published by Sweet and Maxwell (August 2005) reviews the developments in the area of Money Laundering. The author explains with reference to case studies the possible effects of Money Laundering. The book gives a comprehensive account of the existing rules and practices and suggests several improvements to make the control systems and oversight more failsafe. Hannan and Hanweck (28) felt that the insolvency for Banks become true when current losses exhaust capital completely. It also occurs when the return on assets (ROA) is less than the negative capital-asset ratio. The probability of insolvency is explained in terms of an equation p, 1/(2(Z2 ). The help of Z-statistics is commonly employed by Academicians in computing…show more content…
The critical elements of infrastructure, legal framework that supports sound banking supervision and a credit culture that supports lending practices are the essence of a strong banking system. Widespread failures have occurred during a period of increased vulnerability that can be traced back to some regime change induced by policy or by external conditions. Patrick Honohan (30) explains the use of budgetary funds to help restructure a large failed Bank/Banking system and the various consequences associated with it. The article discusses how instruments can best be designed to restore Bank capital, liquidity and incentives. It considers how recapitalisation can be modelled to ensure right incentives for new operators/managers to operate in a prudent manner ensuring good subsequent performance It discusses how Government’s budget and the interest of the tax payer can be protected and suggest that monetary policy should respond to the recapitalisation rather determine its

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