Introduction:
A comprehensive legislation for preventing money-laundering and connected activities, confiscation of proceeds of crime, setting up of agencies, and mechanisms for coordinating measures for combating money-laundering, The Prevention of Money Laundering Act, 2002 was passed by the Parliament.
Money laundering:
- It is the process of creating the appearance that large amounts of money obtained from criminal activity, such as drug trafficking or terrorist activity, originated from a legitimate source.
- The money from the illicit activity is considered dirty, and the process “launders” the money to make it look clean.
How does Money Laundering Work?
A case of Money laundering ostensibly appears to be an above-board financial transaction, however, the criminality underneath is hidden by a three stage process:
- The first stage is when the crime money is injected into the formal financial System. This is called ‘placement’;
- In the second stage, money injected into the system is layered and spread over various transactions with a view obfuscate the tainted origin of the money. This process is called ‘layering’;
- In the third and the final stage, money enters the financial system in such a way that original association with the crime is sought to be obliterated so that the money can then be used by the offender or person receiving as clean money. This is called ‘Integration.
Efforts of Government of India to address money laundering:
In India, before the enactment of Prevention of Money Laundering Act, 2002 (PMLA) the major statutes that incorporated measures to address the problem of money laundering were:
- It prescribes obligation of banking companies, financial institutions and intermediaries for verification and maintenance of records of the identity of all its clients and also of all transactions and for furnishing information of such transactions in prescribed form to the Financial Intelligence Unit-India (FIU-IND).
- It empowers the Director of FIU-IND to impose fine on banking company, financial institution or intermediary if they or any of its officers fails to comply with the provisions of the Act as indicated above.
- PMLA envisages setting up of an Adjudicating Authority to exercise jurisdiction, power and authority conferred by it essentially to confirm attachment or order confiscation of attached properties.
The Black money (undisclosed foreign income and assets) and Imposition of Tax Act, 2015:
- To deal with the menace of the black money existing in the form of undisclosed foreign income and assets by setting out the procedure for dealing with such income and assets.
Benami Transactions (Prohibition) Amendment Bill, 2015:
- It aims to expand the definition of Benami Transactions and specifies the penalty to be imposed on a person entering into a Benami transaction.
Institutional framework:
Enforcement directorate:
- PMLA empowers certain officers of the Directorate of Enforcement to carry out investigations in cases involving offence of money laundering and also to attach the property involved in money laundering.
Financial Intelligence Unit:
- It was established in India in 2004 as the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions.
- FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and related crimes.
- FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.
Way forward:
- Make common people more aware about the problem- The poor and illiterate people, instead of going through lengthy paper work transactions in Banks, prefer the Hawala system which needs to be stopped.
- Fulfilling the purpose of KYC Norms by doing proper KYC.
- Establishment of comprehensive enforcement agencies
- Promote cashless digital transaction
Conclusion:
The Indian government is serious about curbing money laundering so India has to focus on financial literacy education so that people are aware.
