PTS 179 Money Laundering, Its Prevention And Black Money

🔆Money Laundering, Its Prevention And Black Money 

✅ Money laundering is a process that involves disguising the proceeds of illegal activities as legitimate funds, intending to make the money appear to come from a legal source.

Money laundering has far-reaching consequences, including the financing of terrorism, organised crime, corruption, and destabilisation of financial systems.

 

Stages Of Money Laundering

 

✅Placement : It is the introduction of funds raised via criminal activities introduced into the legal system through various instruments. 

✅ Layering : This stage conceals money laundering by conducting multiple small transactions. 

✅ Integration : It is the final stage by which illegal funds are reintroduced into the legal financial system and appear to  

originate from legitimate sources.

 

Various Techniques Use for money laundering

 

✅Hawala, 

✅Round tripping, 

✅Shell companies, 

✅Third-party Cheques, 

✅Participatory Notes, 

✅Crypto-currency, 

✅Structural deposits, 

✅Cash-intensive business, 

✅Casino, 

✅Salaries in Cash, 

✅Trade-based laundering, 

✅Credit Card laundering.

Implications And Consequences Of money laundering

 

Economic Impact :

✅ Lack of trust in the financial institutions of a country. 

✅ Disrupt the normal money flow in the economy 

✅ Reduction in tax revenue 

✅ Volatile exchange rate 

✅ Lack of Ease of doing business 

✅ Rise in organised crime

 

Social Impact :

 

✅ Unemployment and poverty 

✅ Increase inequality 

✅ Increase in anti-social activities 

✅ Human trafficking 

✅ Transfer of economic power from the hand of government to criminal

 

Political Impact :

 

✅ Diversion of government spending from developmental activities to enhancement law  

enforcement agencies 

✅ Reduction in government trustworthiness 

✅ Political Instability 

✅ Criminalisation of politics

 

Security Impact :

 

✅ Increase in organised crime 

✅ Terrorism and Naxalism 

✅ Increased cybercrimes

 

Challenges To Tackle Money Laundering

✅ Legal And Regulatory Frameworks: Legal and regulatory frameworks vary across countries, allowing money launderers to exploit systems. The lack of coordination and the multiplicity of money laundering agencies creates opportunities for escape. 

✅ Cross-Border Coordination And Cooperation: Money laundering is a global issue requiring global coordination, but tax haven countries like Panama and Mauritius hinder action. Jurisdictional issues and confidentiality clauses in tax haven countries hinder enforcement agencies' ability to take appropriate action. 

✅ Technological Advancements And Use Of Cryptocurrencies: Emerging technology like digital currencies, electronic fund transfers and cryptocurrencies which provide anonymity to users poses challenges in tracking money launderers.  

✅ Cultural And Social Barriers To Combating Money Laundering: Cultural and social norms can hinder money laundering efforts, as they may encourage cash-based transactions and unregulated financial systems. People often view it as tax avoidance, unaware of the criminal nexus behind it. This increases the volume of money laundering, making it difficult to trace. 

✅ Lack of Resources And Capacity Building In Relevant Institutions: Law enforcement agencies and other organisations may lack the resources and expertise needed to effectively tackle money laundering, highlighting the need for capacity building and resource allocation.

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