##amlg, we remain resolutely committed to fighting the double evils of money laundering and financing of terrorism. allow me for the next few minutes to wear my central bankers ’ hat as a regulator of the banking sector. from where i sit, i am acutely aware, that money laundering is a threat to both the integrity and stability of the banking sector and even the forex bureaus themselves. further, with increased globalisation, our banking systems are increasingly under close scrutiny by our international trading partners particularly with regard to anti money laundering legal and regulatory frameworks. ladies and gentlemen : in kenya, as i have alluded, we are in the process of enacting a comprehensive anti money laundering legislation. however, this is not to say that there are no measures in place at the moment to deter money laundering. the central bank, as both regulator and supervisor of banking institutions, has played a key role in ensuring that systems to combat abuse of the banking sector by criminal elements are in place. in 2000, the central bank of kenya issued guidelines to all commercial banks pursuant to the banking act on “ know your customer ” and “ customer due diligence ” procedures. the guidelines vest responsibility on the board of directors and management of banking institutions to : • establish appropriate policies and procedures to ensure the effective prevention, detection and control of possible money laundering activities and terrorism financing. • train staff in the prevention, detection and control of possible money laundering activities and terrorism financing. • ensure adequate identification of customers, their source of funds and the use of the said funds. the guidelines were reissued in 2006 following a review that took into account international developments and experiences of financial institutions in implementing the 2000 guidelines. key changes included : • strengthening of customer due diligence procedures. • providing additional guidance on identification of suspicious transactions by commercial banks. • introduction of guidance on customer due diligence procedures for non face to face transactions that have gained increased prominence with the growth in internet and telephone banking. we know that the rapidly changing technologies and the introduction of new financial products remains a major challenge which requires financial institutions and regulatory bodies to constantly remain vigilant of possible abuse of new products by criminals. the central bank continues to monitor adherence to the existing guidelines through its surveillance mechanisms and adopting them to the changing environment. kenyan banks have faced a number of challenges in implementing these guidelines. i am sure that these are challenges also shared in some of the countries represented here. in particular, some customer due dil

deepak mohanty : changing inflation dynamics in india speech by mr deepak mohanty, executive director of the reserve bank of india, at the motilal nehru national institute of technology ( mnnit ), allahabad, 13 august 2011. * * * the assistance provided by abhiman das, sanjib bordoloi and manjusha senapati is acknowledged. i thank the motilal nehru national institute of technology ( mnnit ) for giving me this opportunity to address this distinguished gathering. i propose to speak on inflation which is a matter of concern to all of us. what is inflation? simply put, inflation is the sustained increase in the overall price level. relative change in prices of goods and services is a desirable attribute of market economy as it reflects productivity changes as well as demand and supply conditions. however, when this process transforms into an acceleration of the overall price level, we need to worry as inflation imposes many socio - economic costs. the headline wholesale price index ( wpi ) inflation averaged 9. 6 per cent in 2010 – 11 as compared with 5. 3 per cent per annum in the previous decade. similarly, the average consumer price inflation, measured by the consumer price index for industrial workers ( cpi - iw ), was even higher at 10. 5 per cent in 2010 – 11 as compared with 5. 9 per cent per annum in the previous decade. moreover, this elevated level of inflation also persisted through the first quarter of 2011 – 12. in response to inflationary pressures, the reserve bank has raised the policy repo rate 11 times bringing it up from a low of 4. 75 per cent in march 2010 to 8. 00 per cent by july 2011. it is expected that inflation should come down towards the later part of this year. why has inflation been so high and persisted for so long? this is the theme of my talk today. in my presentation, i propose to address the following questions : is india an outlier among major countries in terms of recent inflation performance? has the inflation process changed? what are the causal factors – global and domestic as well as supply and demand? i will conclude with some thoughts on managing the inflation dynamics on the way forward. is india an outlier in the inflation performance among major countries? it is important to appreciate the global backdrop in which we are experiencing a resurgence of inflation now. in the last decade, inflation was low, both in advanced countries as well as in emerging and