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Money Laundering (Causes (Corporate secrecy laws, Presence of Tax havens,…
Money Laundering
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Effects
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Macroeconomic effects
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Monetary Policy:
Volatile interest rate, exchange rate and low trust in economy.
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External sector:
Decrease in productivity of domestic enterprises as laundered money used to buy expensive imported products.
Social effect:
Declines the moral and social position of the society by exposing it to activities such as drug trafficking, human trafficking, smuggling, corruption and other criminal activities.
Indian efforts
Prevention of Money Laundering Act, 2002
Into force:2005
RBI, SEBI and IRDA have been brought under the PMLA, and therefore the provisions of this act are applicable to all financial institutions
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Defines money laundering offence and provides for the freezing, seizure and confiscation of the proceeds of crime.
adds the concept of ‘reporting entity’ which would include a banking company, financial institution, intermediary or a person carrying on a designated business or profession
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APG(Asia Pacific Group)
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Functions: Mutual evaluations, technical assistance and training, research, global and pvt engagement
How?
Method
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2) Placement
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Gambling, blending fund in business, loan repayment, currency smuggling.
3) Layering/Structuring
Hiding the origin of funds through layers of financial transactions to cover the audit trail and conceal it.
Moving funds between accounts and transactions, fund transfers bn tax havens,
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Techniques
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Hawala:
No physical movement of money. Used to send remittances as commissions less than banking cost.
Indian Scenario
India's location near the centre of Drug trafficking - Golden Triangle and Golden Crescent makes it a drug transit country
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What?
Process of disguising the origins of money obtained through illegal sources so that it looks to have been obtained from legal sources.
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