Model Rr Track Plans

Money Laundering - India Cooperation

Money Laundering - India Cooperation

By Pranav Srivastava, Year IV, Amity Law School

 

1. INTRODUCTION

As its name suggests, money laundering is an act of money laundering in black and white and clean make money, how to put dirty clothes in our washing machines and get clean clothes, much like money launderers put their ill-gotten gains in various financial channels and get the so-called legitimate income.

Article 1 of the draft European Communities Directives March 1990 defines it as;

"The conversion or transfer of property, knowing that such property is derived from serious criminal activities, with the purpose of concealing or disguising the illicit origin of the goods or assist any person involved in the commission of such offense or offenses to evade the legal consequences of their actions, and the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to the ownership of property, knowing that such property is derived from serious criminal activity. "

Therefore we see that money laundering is an activity where illegal income has been obtained through activities such as terrorism, trafficking, smuggling, drug trafficking, corruption, etc. given the appearance of legitimate income of the scrubber.

In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government regulators (such as the Office U.S. Office of the Comptroller of the Currency) to encompass any financial transaction which generates an asset or a value as a result of an unlawful act, which may include actions such as tax evasion or false accounting. As a result, the illegal activity of money laundering is now recognized as potentially practiced by individuals, small and large businesses, corrupt officials, members of organized crime (eg drug traffickers or mafia), and even corrupt states, through a complex network of shell companies and trusts based in tax havens. Examples of money laundering are smurfing or kite.

Many methods were found to launder money derived from unlawful for the illegal sale of alcoholic beverages during the era of Prohibition in the United States, but this definitely was not the origin, but only a development in the world of money laundering.

After 1931 Al Capone convicted of tax evasion, mobster Meyer Lansky transferred funds "carpet joints" in Florida (small casinos) to accounts abroad. After the 1934 Swiss Banking, which established the principle bank secrecy, Meyer Lansky bought a Swiss bank which would be the transfer of illicit funds through a complex system of shell companies, corporations portfolio and foreign accounts. The term "money laundering" does not arise, as they say, Al Capone used to hide laundries have earnings ill-gotten. It is Meyer Lansky, who perfected the older brother of money laundering, "Capital flight, the transfer of funds to Switzerland and other parts of the coast. The first reference to "money laundering" term itself actually appears during the Watergate scandal. U.S. President Richard Nixon's Committee to Reelect the President "illegal campaign contributions went to Mexico, then brought the money through a company in Miami. It was Britain's Guardian newspaper that coined the term, referring to the process of money laundering. " [1]

This term was first observed in the judicial context in the U.S. case versus $ 4,255,625.39 [2], but the greatest emphasis in this financial crime occurred only after 9 / 11 attack and clearinghouse in Luxembourg called Clearstream affair has been questioned about his unpublished accounts has demonstrated a record of the account belonging Bahrain International Bank, which is suspected of moving money to Osama bin Laden [3].

In India, this has been going on unchecked for years and in fact, sometimes the government has helped launderers amnesty giving various schemes to get rid of so-called black money and make legitimate money. The former India's laws barely recognized the economic crime as never gave importance to the legislative or judicial.

This activity involves usually complex series of transactions designed to conceal the authorities to conceal the origin of the money tainted by such complex business transactions. It also implies that numerous financial institutions and therefore its investigation and prosecution is also very difficult.

Sometimes people also refer to it as a victimless crime, but the reality is that it is a crime against a particular person but is an offense against the nations, economies and the world at large. Developing countries to attract "dirty money", as increasing short-term growth will be as a result find it difficult to attract solid long term foreign direct investment requires maintaining political stability and good governance. Money laundering can also erode a nation's economy, changing demand for cash, interest-making and volatile exchange rates, and causing high inflation in countries where sex offenders are doing business. It also empowers corruption and organized crime. Corrupt officials must be able to launder bribes, kickbacks, public funds and, occasionally, even development loans from financial institutions institutions. Organized criminal groups to be able to launder the proceeds of drug trafficking and commodity smuggling. Terrorist groups use the channels of money laundering to raise money to buy weapons. The social consequences of allowing such access groups with the ability to launder money can be disastrous. [4]

With international barriers of globalization have weakened in the fight against money laundering effectively. Today with new technology and modes of communication, money can be easily transferred across international borders. Also "megabyte money", ie money that is in the form of symbols equipment is being used, which can easily be moved much more slowly faster. These have made the three F's of research, freezing and confiscation of criminally derived income and assets-all the more difficult. The estimated amount of money laundered globally in one year is 2 to 5% of global GDP, or $ 800 billion -. $ 2 billion in current dollars U.S. [5]

scrubbers benefit of open borders, privatization, free trade zones, weak states, offshore banking centers, transfer electronic financial smart cards and cyber banking. The countries that are picked up by the bleachers that have no effective laws or enforcement agencies are not active. [6] is now also observed that the trend is changing the trade of international banking channels for money laundering. Since 1992 we have found that more than the price of traded goods such as razor for $ 30 and $ 2400 phone. [7] The lack of transparency in company law countries also represent a major challenge to the fight against money laundering.

The indications predict laundering money through banks and other financial institutions may be, [8]

• Customers to deposit cash via a large cash deposit slips into the same account or clients who have accounts in which numerous large cash deposits are made. Each tank is such that its amount is not significant, but the sum of all claims is important. This is known as "smurfing."
• A substantial increase in turnover in a dormant account.
• Receipt or payment of large sums of cash, which have no obvious purpose or relationship to the account holder and / or your business
• The reluctance to provide normal information when opening an account or providing minimal or fictitious information

In parts of Asia formal banking channels to avoid underground banking channels as "hawala" in India and Pakistan, "fie chen" or "flying money in China. These channels are based in family alliances, violence, etc in compensation and transfer of money by way of scrip issued in lieu of money that can be sent in a different country on presentation the voucher.

 

 

2. PROCESS OF MONEY LAUNDERING

 

The money laundering process has three stages ie, placement, layering and integration. placement stage is the transfer of funds or illegitimate money to a less suspicious, it focuses mainly on the transfer of funds to financial institutions or the retail economy or you can call the physical removal of bulk cash from illegal sources. The second stage is layers where the product's origin is impossible to find a series of complex financial transactions. Finally is the integration phase during which the illegal income reinjected into the economy in the funds business legitimate and no relation to the origin becomes untraceable. [9]

 

 

2.1 Installing the stage

 

The money received from illegal sources is largely form of cash and becomes essential for the bleach to remove it from the location of the acquisition and therefore prevent the authorities of trace therefore This money is put into financial institutions, retail or even in the form of cash smuggling. Therefore the form of money is transformed into traveler's checks savings deposits etc. This first stage of the washing process is carried out when the money is put into the washing process and will soon begin the second stage.

1. Layers 2.2 Stage

 

First attempt to disguise or conceal the true origin of money is illegitimate at this stage through the formation of layers of complex financial transactions to confuse the authorities. This is mainly for transferring money in and out of various financial channels, offshore banks, stocks, commodities, etc. Once these complexes are formed layers and it is impossible for the authorities to trace the origin of the product third and final stage begins.

1. 2.3 Integration Phase

 

At this stage end of the process, money launderers to integrate into the legitimate economy and portray what is legitimately acquired money and therefore it becomes extremely difficult for authorities to distinguish between legitimately earned and money laundering. This can be done through false loan repayments, in preference to the billing etc.

 

3. INTERNATIONAL FIGHT AGAINST MONEY LAUNDERING

1. 3.1 Basel Committee and the United Nations Convention

According to UNDCP estimates of 1980 unlike now nearly 70% of nations have effective legislation to combat money laundering. Fighting began in 1988 with the Basel Committee on Banking Regulations and the Convention United Nations against illicit traffic in narcotic drugs and psychotropic substances, which has been ratified by more than 140 countries. The Basel Committee be held in Basel in Switzerland in December 1988. The committee was composed of the governors of the Central Bank of Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Sweden, Switzerland and the United States. There had been a "declaration of principles" that included three things;

1. Prevention of suspicious transactions.
2. Cooperation with law enforcement.
3. Know Your Customer (KYC) rules.

All of these significantly led to the prohibition of anonymous, suspicious transaction, a detailed record of five years and close monitoring cross-border transactions.

The United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances is the first legally binding instrument to address the issue of money laundering and provides for the identification, seizure and confiscation of proceeds of trafficking drugs and also for punitive action. It also encourages nations to lay the confiscated proceeds to international organizations.

1. 3.2 Financial Action Task Force

FATF (Financial Action Task Force), an intergovernmental organization established by seven major industrialized European Communities in the G-7 meeting in Paris in 1989. It has issued 40 recommendations were given for the first time in 1990 and updated in 1996. These are the methods to combat money laundering, including the ratification of the Convention of 1988, punitive action for acts of money laundering, strengthening cooperation International and the abolition of most banking secrecy laws. FATF also works with international organizations to combat money laundering.

1. 3.3 The UNODC Global Programme against Money Laundering

United Nations Office on Drugs and Crime (UNODC) carries out the World against Money Laundering (GPML) was established in 1997, in accordance with the Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988. That was reinforced by the Political Declaration and Action Plan against Money Laundering of the UNGASS (United Nations General Assembly Special Session), which increasing their scope of drug offenses to all serious crimes [10].

Its main objectives are-

• Assist Member States in implementing measures to combat money laundering and combating terrorism financing.
• Help Member States in the detection, seizure and confiscation of illicit proceeds.
• Provide appropriate technical support to Member States.

In addition to an autonomous international organization and in collaboration with the name of Asia and the Pacific for money laundering (AML) was founded in Bangkok in the year 1997. It comprises 38 member jurisdictions and a number of international and regional observers. Works in collaboration with the FATF, the International Monetary Fund, the Bank World United Nations United Nations Office on Drugs and Crime, the Asian Development Bank, the Egmont Group of Financial Intelligence Units, APEC and others [11].

The APG has five main functions: [12]

1. To assess the compliance of APG member jurisdictions with global AML / CFT through robust peer evaluation;
2. To coordinate technical assistance and training with donor agencies and countries in the Asia-Pacific to improve compliance by members of APG with global AML / CFT;
3. To participate in and cooperate with the international network of money laundering - especially with the FATF and other regional groups against money laundering;
4. To carry out research and analysis on money laundering and trends financing of terrorism and methods to better inform members of the APG and other systemic risks and vulnerabilities, and
5. Contribute to the development comprehensive policies to combat money laundering and anti-terrorist financing standards for the active status of associate membership in the FATF.

The APG also helps countries to establish a national coordination of information and investigate reports of suspicious transactions and develop skills effective to investigate and prosecute money laundering and terrorist financing.

4. LAWS OF NATIONS

 

Different countries have their own specific law to prevent money laundering. Every jurisdiction recognizes different set of crimes for the purpose of money laundering. India Money Laundering Prevention Act also specifies the crimes in three hours. Of Similarly UK accepts all the crimes for this purpose.

1. 4.1 Right of the United Kingdom

In the United Ss Kingdom. 327-340 of proceeds of crime, 2002 (POCA) and other money laundering regulations 2003 and 2007 makes even the possession of criminal or terrorist property, or purchase, transfer, removal, use, conversion, concealment or disguise also punishable money laundering need not involve (refers to assets of any kind, whether tangible or intangible, and avoidance of a liability) and need not involve laundering or (possession of a thief who stole goods included). When a person enters, or it is an agreement that facilitates (by whatever means) the acquisition, retention, use or control of criminal property another person is liable for the infringement. This has an impact on lawyers and other professional advisers in the UK who act for a client who's suspected possessing criminal property of any kind. However, the law was relaxed for banks and financial institutions in 2005, where they were allowed to continue with low-value transactions property of suspected criminals without specific consent for each transaction (but the reporting of all transactions is still required) [13].

1. 4.2 Law of the United States of America

Unlike the United Kingdom here the mere possession of proceeds of crime is not a crime due to a very recent ruling by the U.S. Supreme Court when a majority of 9-0 that overturned the conviction of Humberto Cuellar Mexico and held that for a crime of money laundering money has not committed unless it is proved that there was intent to disguise or conceal the source [14].

Bank Secrecy Act of 1970 requires banks to report cash transactions of $ 10,000.01 or more, but this can be overcome by bleaching using techniques such as smurfing. Control Act 1986 Money Laundering Money laundering more defined as a federal crime. USA Patriot Act of 2001, which came after slaughter of 11.09 extended the scope of previous laws to more types of financial institutions, said a focus on terrorist financing and financial institutions should adopt specific measures "know your customer" (KYC) [15].

In the United States, federal law provides (in part): "Whoever knowingly [l ].... . . conducts or attempts to carry out. . . a financial transaction which in fact involves the proceeds of specified unlawful activity. . . with the intent to promote the exercise of specified unlawful activity. . . shall be punished by a fine of not more than $ 500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both. "

5. COOPERATION IN THE PREVENTION OF INDIAN WASH MONEY

The old laws of the country do not really recognize the threat. There was very little control over the conversion of black money white, the only brake is Chapter XXC of the Income Tax Act 1961, which oversaw the acquisition of real estate in major cities over the value set, and even This provision is rendered inoperative from July 1, 2002.

FERA restrictions on the transfer of money outside India and therefore helped as a check for the transfer of dirty money. However, to overcome this launderers use non-banking channels such as hawala. Also for a very long time India has been the import of dirty money on goods billing, but this has not helped in the export of dirty money as taxes on imported goods to deny the feasibility of such negotiations. There is also no provision in the Customs Act 1962 to until 2003, to address the over-invoicing of goods.

Since FEMA became effective on June 3, 2000, all current account transactions are free of restrictions other than those mentioned in the three schemes FEM (Current Account Transactions) Regulations 2000. On the side of the capital account, there is a restriction on reporting transactions listed in Annexes I and II, and therefore is very easy to bleach to launder money without touching the two schedules. Moreover, the Schedule III of the Act provides for certain transactions relating cap the costs of education, medical treatment, donation etc. where if the money is to be transferred abroad without prior approval of RBI is necessary.

Other laws that had any role to play in the prevention of money laundering are-

• Conservation of foreign exchange and Prevention of Smuggling Activities Act, 1974.

• The Benami Transactions (Prohibition) Order 1988

• The Penal Code India and the Code of Criminal Procedure, 1973

• The Narcotic Drugs and Psychotropic Substances Act, 1985

• The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988

The Prevention of Terrorism Act (POTA) 2002, dealt with the types of heinous crimes like subversion, insurgency and terrorism rather than the current criminal justice system, which is not designed to deal with such horrific crimes. The Act replaces the Ordinance was first enacted on 24 October 2001 and subsequently re-enacted in December 2001. The law also meet the requirement of the United Nations resolution urges member countries to enact a model law deterrent to curb the growing threat of terrorism domestic and global [16].

Money Laundering Prevention Act 2002 (PML Act) was enacted in 2002 and entered into force with the rules notified under the same, the July 1, 2005 See Notification No. GSR 436 (E) issued by the Department of Revenue, Ministry of Finance, Government of India. Was to avoid money laundering and provide for the seizure and confiscation of proceeds of crime obtained or derived directly or indirectly from money laundering and related matters or related. Addition See SEBI Circular no. ISD/CIR/RR/AML/1/06 dated January 18, 2006 included a mandate that all intermediaries must implement an appropriate policy framework According to the guidelines on measures against money laundering and also adopt a Know Your Customer (KYC) Policy. Moreover, in another circular no. ISD/CIR/RR/AML/2/06 dated March 20, 2006, all brokers are advised to take necessary measures to ensure compliance with the obligation S. 12 of the PML Act requiring maintenance and preservation of records and reporting of information relating to cash and suspicious transactions to the Financial Intelligence Unit India (FIU-IND) [17].

The bill for the Prevention of Money Laundering Act was first introduced in 1998, but the definition of money laundering was very close, which was later expanded and S. 3 of the PML Act includes any activity represented the proceeds of crime property spotless.

Now, as U.S. in India also plans to launder money is one of the ingredients of the offense and enough knowledge only in cases of money laundering to help and be involved in money laundering. So unlike the U.S. and the United Kingdom as a person who has been charged with money laundering, mens rea is a necessary ingredient.

Union Cabinet has given its approval on June 5, 2008 for the introduction of Prevention of Money Laundering (Amendment) Act 2008 in Parliament. This will help the government to respond to national needs and international obligations. This bill focuses on adding more financial institutions in the area of ​​the law. It will include money changers, providers of money transfer services, casinos, international gateway etc but the government has chosen not to include companies designated non-financial, professionals like lawyers, CAs, etc.

India is also willing to be a member of FATF in late This year, India has completed all but a formality to amend the Prevention of Money Laundering Act (PMLA) to include a series of crimes, such as information Insider dealing and trafficking, in the time of the crimes. Bill to amend the PLMA is expected to be placed in Parliament soon and the government will able to share the provisions of the proposed law and win a membership. Another six main requirements for membership have already been launched. For example, the FATF wanted the government to establish a trail of all foreign exchange transactions, including hawala. While the RBI has set up a road asking agents, including bank transfer, to maintain records for a period of time, managed to convince FATF hawala deals could not be traced in such operations were illegal. The other five commandments have been fulfilled since the government last year reported changes in the rules relating to the PLMA, specifying that suspected cases financing of terrorism would be part of the suspicious transaction reporting system. The other four specifications were in place as soon as he entered the PMLA into force. Including names of law enforcement agencies to address the relevant laws and the obligation to "know your customer (KYC)" rules that would legally binding. [18]

The creation of the Financial Intelligence Unit (FIU-Ind) two years ago was also part of the exercise for As a member of an elite group.

6. CONCLUSION

 

Today, different legal systems have adopted their own measures and laws to combat money laundering Similarly, the international community has also made measures to counter the threat. India is also advancing in the fight as PML law has come into force and not only that India is also a member of the elite group FATF. Not only has had the seizure and confiscation of proceeds of crime but also planned punitive measures for those involved in money laundering money. SEBI and RBI by issuing circulars and notifications from time to time also have ensured that all financial institutions to follow the 'know your customer "and" know your employee "guidelines. One definition widely vast money-laundering has been given to be less likely to skip any conviction case. LMP also provides for an award Act authority and the special tribunal to judge and decide on money laundering offenses.

Much old American legislation has shown many cases, but now that the very recent judgments of the United States Supreme Court, the definition has become narrower and conviction has become even more difficult. UK law seems to be much more effective, because even a dog thief who stole a dog is guilty of money laundering if you hold or sell the dog without government permission.

Still, such gross amount of money that is blatantly being washed. The only solution to the problem is probably, as suggested by Tom Brown (Interpol) is to have uniformity in the laws of several countries so that there is no place for the bleach to escape. There must be international cooperation against extreme combat this threat and the least developed countries should not have an attitude toward attracting criminal proceeds to promote growth in the short term and should be aware of their long-term consequences. Besides banking secrecy laws should be modified and laws of society should be more transparent. Apart from all the implementing agencies of the above, should take this matter seriously and conduct investigations regular channels for these issues and extra bank as "hawala" and "fie chen 'must be tracked.

[1] Lucy Komisar (4 of October 2001). "Monitoring of Terrorist Money - 'Too hot to handle U.S.?", Pacific News Service. Retrieved February 2006, Jeffrey Robinson three books on money laundering, the launderers, the concentrate and sink through www.wikipedia.com

[2] (1982) 551 F. Supp. 314

[3] Lucy Komisar, Pacific News Service, October 4, 2001

[4] http://www.unodc.org/unodc/en/money-laundering/introduction.html as the July 15, 2008

[5] http://www.unodc.org/unodc/en/money-laundering/globalization.html as the July 15, 2008

[6] Tom Brown (Head of four units to combat money laundering in the International Criminal Police Organization, Interpol)

[7] Professor John Zdanowicz, International University Florida.

[8] http://www.rbi.org.in/scripts/btcdisplay.aspx?pg=btcmoneylaunder.htm as 29 July 29, 2008 (S. Ganesh Member of the Faculty / General Manager Training School of Banking, Reserve Bank of India)

[9] http://www.rbi.org.in/scripts/btcdisplay.aspx?pg=btcmoneylaunder.htm as 29 July 29, 2008 (S. Ganesh Faculty members and General Manager of Bank Training School, Reserve Bank of India)

[10] http://www.unodc.org/unodc/en/money-laundering/index.html as the August 3, 2008

[11] http://www.apgml.org/ as the August 3, 2008

[12] http://www.apgml.org/ as the August 3, 2008

[13] UK Proceeds of Crime Act 2002 by www.wikipedia.com as the August 5, 2008

[14] REGALADO CUELLAR v. UNITED STATES, No. 1906-1456, June 2, 2008

[15] Wikipedia online encyclopedia

[16] http://www.rbi.org.in/scripts/btcdisplay.aspx?pg=btcmoneylaunder.htm as July 29, 2008 (S. Ganesh faculty members and General Manager of Bank Training School, Reserve Bank of India)

[17] http://fiuindia.gov.in/pmla2002.htm as the August 4, 2008

[18] http://news.in.msn.com/business/article.aspx?cp-documentid=1577825 Monday, July 21, 2008

About the Author

Pranav Srivastava
4th Year Student
Amity Law School, New Delhi

Don Irace's P.&W.RR - Ho Scale Model RR - 2011