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India’s Vulnerability to Money Laundering

India’s Vulnerability to Money Laundering

  • Money laundering involves disguising financial assets so that they can be used without detection of the illegal activity that produced them.
  • Through money laundering, the launderer transforms the monetary proceeds derived from criminal activity into funds with an apparently legal source.
  • Section 3 of the Prevention of Money Laundering Act, 2002 defines offence of money laundering as under:
  • “Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering.”
  • In practice almost all serious crimes, including, drug trafficking, terrorism, fraud, robbery, prostitution, illegal gambling, arms trafficking, bribery and corruption are capable of predicating money laundering offences in most jurisdictions.                                      India’s Vulnerability to Money Laundering

Money is laundered in many ways but ‘there are three main mechanisms:

  • via financial institutions;
  • bulk-cash smuggling across borders; and
  • via traded goods.

The International Monetary Fund has estimated that money laundering worth about $3.5tn occurs each year.

Few locations on the world map are more vulnerable to Money laundering, the features of these Ideal Financial Havens’ are:

  • No deals for sharing tax information with other countries
  • Availability of instant corporations
  • Corporate Secrecy Laws — as the corporate law of certain countries enables launderers to hide behind shell companies.
  • Excellent Electronic Communication
  • Tight Bank Secrecy Laws
  • A Government that is Relatively Invulnerable to Outside Pressures
  • A high degree of Economic Dependence on the Financial Services Sector
  • A Geographical Location that Facilitates Business Travel to and from rich neighbours.
  • Increase in sophistication and employment of professional people for doing the task.


Internal security

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