Money laundering is a method that criminals use in an attempt to hide the illegal source of their income. In other words, “It is the way to convert the money earned from illegal activities into clean money.” Every year worldwide illegal activities generate trillions of dollars like drug trafficking, arms trading, cryptocurrency, round tripping etc. Since financial crime has become more complex and financial knowledge is more important in combating crimes and terrorism, money laundering has become an important political, economic, and legal debate.

Which Act controls money laundering in India?

Money laundering in India is controlled by the Prevention of Money Laundering Act (PMLA), 2002. This act forms core framework against laundering activities in India. while, Other agencies include Enforcement Directorate (ED), FIU-IND (Financial Intelligence Unit India), RBI, and SEBI.

Stages of Money Laundering

It is a three stage process. they are: Placement stage, Layering stage, Integration stage. The placement stage: The initial stage placement involves placing the illegal money into a legitimate financial system. Furthermore, sometimes this means sending the money to offshore foreign bank accounts.  During this placing process, the money cleans which disguises the funds to look like legitimate income. Example- Invoice fraud.

The Layering stage: Layering stage or in other words structuring. This stage involves complex series of financial transactions. The primary purpose of this process is to separate the illicit money from its original source. by strategically layering a number of financial transactions, in addition to employing fraudulent bookkeeping practices. Example- Investing into stock market.

The Integration stage: This is last stage of money laundering. It is at the integration stage where the money is returned to the criminal from what seem to be legitimate sources. Having been placed initially as cash and layered through a number of financial transactions, the criminal proceeds are now fully integrated into the financial system and can be used for any purpose. Example- The purchase of property.

Money laundering Illegal activities

1. Bank laundering
2. Cash businesses
3. Real estate laundering
4. Gambling
5. Shell companies
6. Casino laundering
7. Smurfing
8. Drug trafficking
9. Human trafficking and migrant smuggling
10. Terrorism financing
11. Fraud and embezzlement
12. Arms trafficking and smuggling
13. Environmental crimes, etc.