Prevention of Money Laundering Act, 2002

The term “Money Laundering” is observed that whosoever, directly or indirectly attempts to, indulges or knowingly assists or knowingly is a party or is actually involved in any process/ activity connected with the proceeds of crime including its’ concealment, possession, acquisition or use, and projecting or claiming it as untainted property shall be guilty of the offence of money laundering.

Three distinct stages of Money laundering are:

  1. Placement: It is the first and the initial stage when the black money is injected into the formal financial statement.
  2. Layering: In the second stage, money injected into the system is layered and moved or spread over various transactions in different accounts and different countries. Thus, it becomes difficult to detect the origin of the money.
  3. Integration: Under the third and final stage, money enters the financial system in such a way that original association with the crime is sought to be obliterated so that the money can then be used by the offender or person receiving it as clean money.

Does money laundering also means siphoning of fund?

No, not just siphoning of fund, it actually refers to a whole process or an entire system by which money is actually generated from serious crimes, but they are given such shape and manipulated (by disguising its origin into a series of transactions) that it looks like it has originated from legitimate sources. The point to note is that the volume of money generated by various activities is also very huge. Money laundering revolves around the inflow of Black money in the economy of the country which then deteriorates the GDP of the Nation due to evasion of taxation and non- disclosure of source of income.

Further the question remains how Money laundering affect us? The answer lies in observing the continuous increase in terrorists and militant or other criminal activities worldwide (wide spreading global network of terrorists and others who deal in above crimes) and we cannot be ignorant to the fact that such activities need huge funding and they generate large volume of money. To curb these criminal activities, one needs to follow and hit at this generation and utilization of revenue. PMLA 2002, aims to achieve the infusion of such funds which may be utilized for the illegal activities or in legal activities but generated from an illegitimate source. So, money laundering is simply giving shape to the financial structure required and generated from serious crimes.

India has been following the recommendations of Financial Action Task Force (FATF) and criminalized money laundering. FATF is an international governmental body. Financial Intelligence Unit of India (FIU_IND) was also set up at New Delhi with an objective to coordinate and strengthen the collection and sharing of financial intelligence through an effective national, regional, and global network to combat money laundering and all the related crimes.

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