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What is Money Laundering? How does it work? Discuss its impact and explain the Legal Framework in India to deal with it.

Topic : Money Laundering

6. What is Money Laundering? How does it work? Discuss its impact and explain the Legal Framework in India to deal with it.  (250 words)

Reference:  Hindustan Times

Why the question:

Jailed diamond merchant Nirav Modi can be extradited to India to face charges of fraud and money laundering, a UK court ruled on Thursday.

Key Demand of the question:

Explain the concept of Money Laundering and discuss its impact while throwing light upon legal framework in India.

Directive:

Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer:

Introduction:

Start with the definition of money laundering.

Body:

Money Laundering refers to converting illegal earned money into legitimate money. The government does not get any tax on the money because there is no accounting of the black money. So Money Laundering is a way to hide the illegally acquired money.

The term “money laundering” originated from the Mafia group in the United States of America. Mafia groups have made huge amounts of extortion, gambling, etc. and this money is shown as legal money. In India, “money laundering” is popularly known as Hawala transactions.

Then move on to explain how Money Laundering works? Discuss the impacts of money laundering.

Present in detail the Legal Framework in India to deal with Money laundering

Conclusion:

Thus, the evolving threats of money laundering supported by the emerging technologies need to be addressed with the equally advanced Anti-Money Laundering mechanisms like big data and artificial intelligence. Both international and domestic stakeholders need to come together by strengthening data sharing mechanisms amongst them to effectively eliminate the problem of money laundering.