money laundering
MONEY LAUNDERING: INDIA AND THE WORLD
Table of Contents
Chapter I: Introduction
Money laundering refers to the conversion of money that is illegally obtained, so as to make it appear to originate from a legitimate source.1 Article 1 of the EC Directive defines the term money laundering as “the conversion of property, knowing that such property is derived from serious crime, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the committing such an offence or offences to evade the legal consequences of his action, and the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from serious crime”.2
Money laundering is not a single act but is in fact a process that is accomplished in three basis steps: placing, layering and integrating of illegal proceeds.3 The first stage involves the removal of cash from the location of acquisition and introducing it into the financial system. The second stage is the conversion of money in as many banks as possible, especially abroad. The third stage is the reinvesting or integrating of this money into the economy, taking the shape of legitimate businesses.4
In countries like India, money laundering takes place through over invoicing of exports, under invoicing of imports, investment through shell companies and extensive use of hawala channels in the transmission of money.5 However, hawala transactions usually referred to as ‘alternative remittance system’ is the most common form of money laundering. It is the transfer or remittance from one party to another, without the use of a formal financial institution such as bank or money exchange and thus is an informal way of moving money without leaving traces of records.6 Hawala transactions are popular because they are often faster, more reliable, sometimes offer a better
Table of Contents
Chapter I: Introduction
Money laundering refers to the conversion of money that is illegally obtained, so as to make it appear to originate from a legitimate source.1 Article 1 of the EC Directive defines the term money laundering as “the conversion of property, knowing that such property is derived from serious crime, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the committing such an offence or offences to evade the legal consequences of his action, and the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from serious crime”.2
Money laundering is not a single act but is in fact a process that is accomplished in three basis steps: placing, layering and integrating of illegal proceeds.3 The first stage involves the removal of cash from the location of acquisition and introducing it into the financial system. The second stage is the conversion of money in as many banks as possible, especially abroad. The third stage is the reinvesting or integrating of this money into the economy, taking the shape of legitimate businesses.4
In countries like India, money laundering takes place through over invoicing of exports, under invoicing of imports, investment through shell companies and extensive use of hawala channels in the transmission of money.5 However, hawala transactions usually referred to as ‘alternative remittance system’ is the most common form of money laundering. It is the transfer or remittance from one party to another, without the use of a formal financial institution such as bank or money exchange and thus is an informal way of moving money without leaving traces of records.6 Hawala transactions are popular because they are often faster, more reliable, sometimes offer a better
Bibliography: Global Financial Crime: Terrorism , Money Laundering and Offshore Centres, (Donato Masciandaro ed. 2004). Mark Pieth, The Prevention of Money Laundering: A Comparative Analysis, 6 Eur. J. Crime Crim. L. & Crim. Just. 159 (1998). Ajay Shaw, Evaluating India’s Money Laundering Legislations Meghna Bhaskar, Benami Transactions (Prohibition ) Bill, 2011