Judicial Dictionary

Money Laundering

Source of Money :

proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming of Illegal arms sales, smuggling, and the activities of organised crime, including for example drug trafficking and prostitution rings, can generate huge amounts of proceeds. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to “legitimise” the ill-gotten gains through money laundering.

When criminal activities generate substantial profits, the individual or group involved must find a way to control the funds without attracting attention to the underlying activity or the persons involved. Criminals do this by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract attention.

WatchDog

Financial Action Task Force on money laundering (FATF) was established by the G-7 Summit in Paris in 1989

The Volume :

Criminal proceeds amounted to 3.6% 4.2 of global GDP,  of which around 2.5 to 2.7% is laundered

How they do it :

  1. The launderer introduces his/her illegal income/profits into the financial system of a Country, by breaking up large amounts of cash into less smaller sums and  then deposited directly into a bank account, or by purchasing a series of monetary instruments (cheques, money orders, etc.) and then collected and deposited into accounts at another location.
  2. The launderer engages in a series of conversions or movements of the funds to distance them from their source. The funds might be channelled through the purchase and sales of investment instruments, or the launderer might simply wire the funds through a series of accounts at various banks across the globe.  This use of widely scattered accounts for laundering is especially prevalent in those jurisdictions that do not co-operate in anti-money laundering investigations. In some instances, the launderer might disguise the transfers as payments for goods or services, thus giving them a legitimate appearance.
  3. Then the launderer moves them to the third stage – integration – in which the funds re-enter the legitimate economy. The launderer might choose to invest the funds into real estate, luxury assets, or business ventures.

Indian Context : 

The Prevention of Money Laundering Act, 2002 (hereinafter referred to as “the Act”) was introduced for providing punishment for offence of Money Laundering. The Act also provides measures of prevention of Money Laundering. The object sought to be achieved is by provisional attachment of the proceeds of crime, which are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds under the Act. The Act also casts obligations on banking companies, financial institutions and intermediaries to maintain record of the transactions and to furnish information of such transactions within the prescribed time. In exercise of powers conferred by clause (s) of sub-section (2) of Section 73 read with Section 30 of the Prevention of Money-Laundering Act, 2002 (15 of 2003, the Central Government framed rules regulating the appointment and conditions of service of persons appointed as Chairperson and Members of the Appellate Tribunal. These rules are the Prevention of Money-Laundering (Appointment and Conditions of Service of Chairperson and Members of Appellate Tribunal) Rules, 2007. The Central Government has also framed rules called the Prevention of Money Laundering (Appointment and Conditions of Service of Chairperson and Members of Adjudicating Authorities) Rules, 2007.

Categories: Judicial Dictionary