Money laundering is a global problem, Centre tells Supreme Court

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Last Updated24/02/2022

The government informed the Supreme Court that ₹18,000 crore was confiscated under the Prevention of Money Laundering Act (PMLA) from fugitive businessmen Vijay Mallya, Nirav Modi and Mehul Choksi, and returned to banks.
The government said the total proceeds of crime in PMLA cases pending before the top court is ₹67,000 crore.

The Solicitor General said corruption in high offices is a major facilitator of money laundering especially in the developing world.
Corruption is an ""insidious player which undermines democracy"".
Money laundering fuels organised crime and terrorism.
The Solicitor General quoted a UN report which said proceeds of crime being laundered amount to $2.1 trillion, which accounts for 3.67% of the global GDP.
The legislative intent against sharing the ECIR ( Enforcement Case Information Report) with the accused was meant to prevent them from wiping out evidence, which is anyway hard to get.
He highlighted how people accused of money laundering run to small nations with no extradition treaty with India where they can buy citizenships.
The global tolerance to money laundering has come down. This has been evident in the increasing number of predicate offenses.
The Center was responding to a batch of petitions before the court alleging that the PMLA has evolved as the government’s “hatchet” law in recent years, considering the series of raids and arrests of politicians, their relatives and activists.

According to INTERPOL, Money laundering is concealing or disguising the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources.
It is frequently a component of other, much more serious, crimes such as drug trafficking, robbery or extortion.
Some of the common methods of money laundering are Bulk Cash Smuggling, Shell companies and trusts, Round-tripping, Hawala, False invoicing etc.
The advent of cryptocurrency, such as bitcoins, has exacerbated this phenomenon.
Money laundering is an issue that has gained increasing significance following the events of 9/11. It has recognised it as a source of the funding of terrorist activities. The spread of international banks all over the world has facilitated the transmission and the disguising of the origin of funds.

Predicate-offense-oriented law: This means a case under the Act depends on the fate of cases pursued by primary agencies only such as the CBI, the Income Tax Department or the police.
Growth of Technology: The enforcement agencies are not able to match up with the speed of growing technologies.
Non-fulfilment of the purpose of KYC Norms: KYC norms does not cease or abstain from the problem of Hawala transactions as RBI cannot regulate them. Also, the increasing competition in the market is forcing the Banks to lower their guards and thus facilitating the money launderers to make illicit use of it in furtherance of their crime.
Widespread act of smuggling: there are a number of black-market channels in India for the purpose of selling goods offering many imported consumers goods such as food items, electronics etc. which are routinely sold.
Lack of comprehensive enforcement agencies: Separate wings of law enforcement agencies dealing with money laundering, cyber-crimes, terrorist crimes, economic offences etc lack convergence among themselves
Tax Haven Countries: They have long been associated with money laundering because their financial secrecy laws allow the creation of anonymous accounts while prohibiting the disclosure of financial information.

Enlist common predicate offenses: to solve the problem internationally, particularly keeping in mind the trans-national character of the offense of money laundering.
Awareness and education: To infuse a sense of watchfulness towards the instances of money laundering which would also help in better law enforcement as it would be subject to public examination
Proper Coordination between center and States: The more decentralized the law would be the better reach it will have.
Law in every country: All of the countries of the world should enact and enforce the same laws dealing with money laundering so the criminals have nowhere to go.
Special cell dealing with money laundering activities: It should be created on the lines of the Economic Intelligence Council (EIC) exclusively dealing with research and development of anti-money laundering.
This Special Cell should have links with INTERPOL and other international organizations dealing with money laundering. All key stakeholders, like, RBI, SEBI etc. should be a part of this.
There is a requirement to have a convergence of different enforcement agencies, sharing of information is necessary.
Laws in line with conventions: Countries should criminalize money laundering on the basis of the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988 (the Vienna Convention) and the United Nations Convention against Transnational Organized Crime, 2000