Daily Answer Writing Challenge-11th August

Q1. Discuss the role of emerging technologies and globalisation in money laundering. Develop  national and international strategies to combat the problem of money laundering.  (150 Words, 10 Marks) 

Answer: 

According to the UN Office on Drugs and Crime (UNODC) Money laundering is defined as the  conversion or transfer of property while knowing that such property is derived from an illegal  act, with the intent of concealing or disguising the illicit origin of the property or assisting any  person involved in the illegal act in evading the legal consequences of his actions. 

Process of Money Laundering: 

Ways in which Emerging technologies contribute to money laundering: 

• To avoid anti-money laundering reporting, deposits are structured and a large number of  channels, dubbed “smurfs,” are used. 
• Unregulated use of cryptocurrency and alternative financing. 
• A high volume of digital transactions on internet marketplaces is utilised to conceal organised  portions of layered money. 

Contribution of Globalisation to money laundering: 

• The placement of money in the global financial system causes coordination issues across  several governments. 
• Shell corporations operate within the sovereign border under the illusion of lawful activities via  forged invoices and balance sheets, channelling laundered funds into illegitimate businesses.
• Tax haven countries such as Cayman Island and Panama have built their economies around tax  evasion aid. 
• Interconnection of crimes across borders and Increased complexity of crimes.

Measures at the national level: 

• Money laundering is a cognizable, non-bailable offence under the Prevention of Money  Laundering Act (PMLA). 
• The Financial Intelligence Unit – India (FIU-IND) combines national and international intelligence,  investigation, and law enforcement activities to combat money laundering.
• The Black Money (undeclared foreign income and assets) and Tax Imposition Act, 2015 addresses  the threat of black money in the form of undisclosed overseas income and assets. 

Measures at the international level: 

• The Vienna Convention requires signatory states to criminalise money laundering from drug  trafficking. 
• In order to combat money laundering and terrorist financing, the Financial Action Task Force  (FATF) develops policies and encourages the effective implementation of statutory, regulatory,  and operational measures. 
• The OECD has approved a convention to combat money laundering. It provides adequate  safeguards, including access to tax administration in suspected transactions based on  information from FIUs. 
• To prevent money laundering in the securities and futures markets, the International Organization  of Securities Commissions (IOSCO) takes the required actions. 

Money laundering is a global problem that must be addressed globally. To effectively eliminate  the problem of money laundering, international and national stakeholders must work together to  strengthen data sharing mechanisms and take a multilateral approach.