• 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.

International framework:–

• THE VIENNA CONVENTION
  • It was the first major initiative in the prevention of money laundering held in December 1988.
  • This convention laid down the groundwork for efforts to combat money laundering by obliging the member states to criminalize the laundering of money from drug trafficking.
  • It promotes international cooperation in investigations and makes extradition between member states applicable to money laundering.
  • . The convention also establishes the principle that domestic bank secrecy provisions should not interfere with international criminal investigations.
• The FINANCIAL ACTION TASK FORCE (FATF):-
  • The FATF is an inter-governmental body established at the G7 summit at Paris in 1989 with the objective to set standards and promote effective implementation of legal, regulatory and operational measures to combat money laundering and terrorist financing and other related threats to the integrity of the international financial system

Statutory framework:-

• 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:
  • The Income Tax Act, 1961
  • The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA)
  • The Smugglers and Foreign Exchange Manipulators Act, 1976 (SAFEMA)
  • The Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPSA)
  • The Benami Transactions (Prohibition) Act, 1988
  • The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988
  • The Foreign Exchange Management Act, 2000, (FEMA)

• 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.

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.