Money laundering is a process where the proceeds of crime are transformed into apparently legitimate money or other assets. It is the processing of criminal proceeds to disguise its illegal origin. In simple words, it can be defined as the act of making money that comes from one source to look like it comes from another source. Money laundering is a single process however, its cycle can be broken down into three distinct stages namely, placement stage, layering stage and integration stage.

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Impacts of globalization on money laundering:

• Rapid developments in financial information, technology and communication allow money to move anywhere in the world with speed and ease.
• This makes the task of combating money-laundering more urgent than ever.
• The deeper “dirty money” gets into the international banking system, the more difficult it is to identify its origin.
• Because of the clandestine nature of money-laundering, it is difficult to estimate the total amount of money that goes through the laundry cycle.
• There have been a number of developments in the international financial system during recent decades that have made the three F’s-finding, freezing and forfeiting of criminally derived income and assets-all the more difficult.
• These are the “dollarization” (i.e. the use of the United States dollar in transactions) of black markets, the general trend towards financial deregulation, the progress of the Euromarket and the proliferation of financial secrecy havens.
• Fuelled by advances in technology and communications, the financial infrastructure has developed into a perpetually operating global system in which “megabyte money” (i.e. money in the form of symbols on computer screens) can move anywhere in the world with speed and ease.

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:

 PMLA Act:

• 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