Money laundering is disguising the identity of illegally obtained money so that it would appear to have originated from legitimate sources. Money laundering is generally used by criminals to disguise their illicit funds, terrorists to dodge tracking or tax evaders.
Emerging technologies contribute to money laundering in following ways:
- Use of cryptocurrencies and alternate finance that are unregulated by governments
- Encrypted conversations facilitate exchange of information about money laundering
- Large volume of digital transactions at online market places is used to disguises the structured chunks of layered money.
- Identity theft through hacking of credit card information etc. Is used to layer illegitimate money under untraceable identities.
Globalization contributes to money laundering in following ways:
- Placement of money in global financial system creates problems of coordination between multiple jurisdictions.
- Tax haven countries like Cayman Island, Panama etc. have structured their economies around assistance in tax evasion.
- Distribution of assets across countries prevents punitive action by authorities.
Following national and international measures have been enacted to tackle money laundering:
- Prevention of Money Laundering Act (PMLA), 2002 established the legal framework to prevent money laundering. It criminalizes money laundering as a cognizable, non-bailable offence.
- The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 and Narcotic Drugs and Psychotropic Substances Act, 1985 provides for the penalty of property derived from smuggling or illegal traffic in narcotic drugs.
- Financial Intelligence Unit – India (FIU-IND) coordinates efforts of national and international intelligence, investigation and enforcement agencies against money laundering
- RBI regulations and KYC norms issued from time to time try to keep up with evolving threats and methods of money laundering.
- The Vienna Convention makes it obligatory for signatory states to criminalize the laundering of money from drug trafficking.
- The financial action task force (FATF) sets standards and promotes effective implementation of legal, regulatory and operational measures against money laundering; terror financing.
- The OECD forum has adopted convention against money laundering. It supports appropriate safeguards, access to tax administration in suspicious transaction based on information received from FIUs.
Money Laundering is a global menace which require global effort to curb it. Mutual cooperation among Nations, financial institutions along with use of technological counter-measures such as big data and artificial intelligence is required to curb the menace of money laundering.