Be Mains Ready

Approach

• Start the answer by drawing the link between money laundering and globalization.
• Briefly explain how globalization impacts money laundering.
• Examine the recent policy efforts taken by the government.
• Give a way forward.

Introduction

• Money laundering is the process of making large amounts of money generated by criminal activity, such as drug trafficking or smuggling, appear to have come from a legitimate source.
• The growth in international trade, the expansion of the global financial system, the lowering of barriers to international travel, and the surge in the internalization of organized crime have combined to provide the source, opportunity, and means for converting illegal proceeds into what appears to be legitimate funds.

Body

Impact of Globalization on Money Laundering

• Easy interlinkages of financial institutions have made the three F's-finding, freezing and forfeiting of criminally derived income and assets-all the more difficult.
• Rapid developments in financial information: Easy information sharing facilitates the inclusion of illegal money into the international banking system, which further makes it difficult to identify its origin.
• Development of financial infrastructure along with technological and communication advancement allow money to move anywhere in the world with speed and ease.

Policy efforts by the Government of India to tackle the problem

• India is a full-fledged member of the Financial Action Task Force (FATF). It helps India to build the capacity to fight terrorism and trace terrorist money and to successfully investigate and prosecute money laundering and terrorist financing offences.
• Prevention of Money-laundering Act, 2002 (amended in 2005, 2009, 2012, and 2018) imposes an obligation on banking companies, financial institutions, and intermediaries to verify the identity of clients, maintain records and furnish information in the prescribed form. It seeks to
  
  • Prevent and control money laundering
  • Confiscate and seize the property obtained from the laundered money; and
  • Deal with any other issue connected with money laundering in India.
• Financial Intelligence Unit – India (FIU-IND) is a central agency that
  
  • receives financial information pursuant to the country's anti-money laundering laws;
  • analyses and processes such information;
  • and disseminates the information to appropriate national and international authorities, to support anti-money laundering efforts
• The Black money (undisclosed foreign income and assets) and Imposition of Tax Act, 2015 was enacted to deal with the menace of the black money existing in the form of undisclosed foreign income and assets by setting out the procedure for dealing with such income and assets.
• Benami Transactions (Prohibition) Amendment Act, 2016 aims to expand the definition of Benami Transactions and specifies the penalty to be imposed on a person entering into a Benami transaction.
• Anti-money laundering/counter financing of terrorism (AML/CFT) –guidelines for general insurers, 2013: Each insurance company has to establish and implement policies, procedures, and internal controls/audit in its AML/CFT program. Insurers are also required to maintain records of their transactions under these guidelines.
• Apart from the above-mentioned efforts, the Vienna Convention and the Basel Committee’s Statement of Principles aim to curb the problems of money laundering at the global level.
• Anti-Money Laundering Global Task Force (GTF-AML) of GOPAC (Global Organisation of Parliamentarians Against Corruption) also works with anti-money laundering experts, and organizations such as the Financial Action Task Force (FATF), the World Bank, the International Monetary Fund (IMF), the United Nations Office on Drugs and Crime (UNODC), Interpol etc. and has developed a complementary approach to combating money laundering globally.

Way Forward

• Establishment of comprehensive enforcement agencies
• Promote cashless digital transaction with regulating and monitoring infrastructure in place.
• Ensuring strict implementation of the KYC norms.
• Spreading financial awareness among the common masses about money laundering.