Money Laundering and how it is linked with Terrorist Activities

By Akash Jindal

Money Laundering
Money

laundering can be described as the process by which a person conceals or disguises the identity or the origin of illegally obtained proceeds so that they appear to have originated from legitimate sources.

Terrorist Financing
The

financing of terrorism can be described as the process by which a person tries to collect or provide funds with the intention that they should be used to carry out a terrorist act by a terrorist or a terrorist organization

Laundered Money may;

exploit

economic and financial globalization have serious social consequences provide drug traffickers grow organized criminal groups grow arms dealers and other criminals strike at the integrity of a country's financial institutions. It distorts the operation of markets

Components of Money Laundering

Flight Capital Tax Integration Placement Layering Heavens

Techniques of Money Laundering

Placement
Getting Currency into the financial system so as to convert illicit funds from cash straight into a financial instrument or bank account

Layering
The movement of funds from institution to institution to hide the source and ownership of the funds, obscure the audit trail and sever the link with the original crime

The those funds in an ostensibly legitimate business so that no suspicion of its origins remains and to give the appearance of legitimi ing the proceeds

Integratio n reinvestment of

Components of ML techniques
!murfing

Placement

Layering

!hipping "oney Abroad Placement through Banks #se of Pass Through or Payable Through Accounts $lectronic %ire Transfers Insurance Products Investment &elated Transactions 'B(Cs

Ta) *avens & +ffshore Banks Bank !ecrecy Law as a layering tool Corporations & !hell Companies as a layering tool #se of trusts #se of walking accounts $stablishing self owned bank #se of intermediaries

Integratio n of haven bank #se

credit cards &eceiving as consulting or directors fee Arrangement of corporate loans Proceeds of gambling &eal estate transactions !tock Purchase #se of business International importing and e)porting

ML Cycle

Factors enforcing Money Laundering

!cceptance of flight capital by western countries "aws and limitations of other countries #urisdictional conflicts and lack of international coordination

Cnti
Tax heavens as sanctuaries $ffshore corporations %aving to prove fraudulent transfer

Conti
&ankings' role in facilitation of the activity &ank (ecrecy )olume and complexity of international transfers of funds Internet based banking

Conti
(hortfall of reporting requirements *riminals influencing +overnment and &ank support The widespread use and acceptance of trade mis,pricing

ML as
Bulk e-mail

usiness
Inventions ! Patents

ulti Level arketing

Vanity Press Pu"lishing

Vending achines

Franchises

!cammed activities in "usiness

Bank Fraud Business Loans Internet )ervices

Che#ue Fraud

Counter'eiting

Cramming

Fake $ds % &irectories

Fraudulent (rders

)upply )cams

#o" of money laundrer

!

money launder's ob-ective in laundering ill is to . Get it out; cover it up; bring it back

ML statistics

Contribution by different continents in "L(I"( report data, year ,--.)

Conti

Contribution by financial sector in "L (I"( report data, year ,--.)

ML case in $ndia% &awala'

'money

transfer without money movement/ developed in India

was

!lso

known as chop0 chit 0 flying money and underground bank

Main easons for increase in ML

Inspector Raj Dual Responsibility Undue Delay in Processes Excessive intervention by Judiciary Very less time in law making onsidering o! problem rat"er t"an cause o! t"e problem #ore interest be!ore investigation but no interest in concluding t"e cases

!ome corrective measures

*nderstand the need 'or creation ! modi'ication o' la+s to cur" ! eliminate opportunities 'or scams ! 'rauds "ased on the study o' glo"al scenario ,nsure appropriate po+ers to la+ en'orcement agencies Provide 'acility 'or -!. levels o' appeal "e'ore any one approach the /udiciary ,nsure time "ound completion 'or the cases ! designating case o''icer $nnounce very severe punishment 'or committing the crime Introduction o' Compulsory (perations $udit on a periodical "asis

Conti((
*tili0e services o' pro'essionals such as Chartered $ccountants1 $dvocates % Company )ecretaries 'or conducting preen#uiries +ith regard to various indicators availa"le 'rom ne+s media Be independent 'rom every "usiness not only on paper "ut other+ise