- Placement<\/strong><\/li><\/ul>\n\n\n\n
In the money laundering cycle, placement is the first step. Large amount of money is made from illegal activities such as drugs sale, prostitution\/human trafficking etc. Money made from these illegal sources has to be disposed of quickly by the money launderer therefore, they deposit it in the financial institutions, spend in retail economy and involve in a business\/acquisition of an expensive property<\/a>. The intention of the launderer here is to remove the cash from the place of possession, thereby escaping any form of detection from the law enforcement agencies.<\/p>\n\n\n\n
- Layering<\/strong><\/li><\/ul>\n\n\n\n
In the second stage, the money launderer hides or disguises the original source of funds by creating layers of financial transactions designed to cover the audit trail and conceal it.<\/p>\n\n\n\n
The main objective behind layering is to-<\/p>\n\n\n\n
- separate illegal duties from the source of crime<\/li>
- moving illegal funds between accounts or business;<\/li>
- buying and selling assets on a local\/international basis<\/a>.<\/li><\/ol>\n\n\n\n
- Integration<\/strong><\/li><\/ul>\n\n\n\n
After the second stage, illegal funds are moved back to the financial system as payments for services provided, thus making the funds look as if it were earned legally.<\/p>\n\n\n\n
Ramifications of Money Laundering<\/h2>\n\n\n\n
The ramifications of money laundering can be disastrous for a nation. Here we look at some of the severe ramifications of money laundering.<\/p>\n\n\n\n
- Economic distortion and instability;<\/li>
- Revenue loss;<\/li>
- Increases criminal activity in the nation;<\/li>
- Damages social fabric of the economy;<\/li>
- Nourishes terrorism;<\/li>
- Leads to volatility in the exchange rate;<\/li>
- Weakens the democratic institution;<\/li>
- Encourages the culture of tax evasion;<\/li>
- Leads to financial crisis.<\/li><\/ul>\n\n\n\n
Money Laundering Prevention Efforts<\/h2>\n\n\n\n
Lawmakers all over the world have understood the fact that concentrated efforts are needed to deal with the menace of illegal funding and money laundering. Indian has various laws in place for tackling smuggling, narcotics, foreign exchange manipulations, foreign trade violations which were enacted to deal with such severe crimes. Some of them were considered to be strong measures. Prevention of Money Laundering Act 2002 is the fundamental statute for combating money laundering in India. The statutes predominant before PML Act 2002 are as follows:<\/p>\n\n\n\n
- Criminal law amendment<\/a> ordinance (XXXVII of 1944);<\/li>
- Smugglers and Foreign Exchange Manipulators Act 1976;<\/li>
- Narcotic Drugs and Psychotropic Substances Act 1985.<\/li><\/ul>\n\n\n\n
Other Analogous Statutes<\/u><\/strong><\/p>\n\n\n\n
Apart from the legislations mentioned above, there is a law of Foreign Contribution (Regulation) Act 1976 wherein the central government regulates the funds flow to different organizations. In case where the government feels that an organization is working against the national interest, then it can block its funds.<\/p>\n\n\n\n
Moreover, the RBI administering FEMA 1999[1]<\/a><\/sup><\/strong> has power to give directions to appropriate directions to the authorized dealers to prevent laws violation. Section 102 and Section 451 to 459 of the CrPc, 1973 allows seizure and confiscation of the crime proceeds.<\/p>\n\n\n\n
PMLA 2002 combats money laundering in India and provides for confiscation and seizure of properties obtained from the laundered money & to deal with any other issue associated with money laundering. For the purpose of Money Laundering, PMLA identifies certain offences under IPC, NDPS Act, Arms Act, Immoral Traffic (Prevention) Act & the Prevention of the Corruption Act, the proceeds of it are covered under the act. In order to combat threat of money laundering in India, the government is entrusting the work of investigation, attachment of property\/proceeds of crime relating to the scheduled offences and complaints filing to the Enforcement Directorate (ED).<\/p>\n\n\n\n
Need for Anti-money laundering<\/a> program for money laundering prevention<\/h2>\n\n\n\n
- Criminal law amendment<\/a> ordinance (XXXVII of 1944);<\/li>
- Integration<\/strong><\/li><\/ul>\n\n\n\n
- Layering<\/strong><\/li><\/ul>\n\n\n\n
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