It is well known that black money has been the bane of governments in the developing world, depriving them of much-needed tax revenues and crippling their already-burdened economies. But the impact of black money and its laundered equivalent is far more onerous than mere tax evasion in developing countries, and its tentacles extend globally into the illegal arms trade, drug trafficking and the funding of terrorism worldwide.



In general, money laundering follows a three-stage process. First comes placement, whern black money is injected into the financial system. Then comes layering, when money is layered or spread across multiple entities, in order to conceal the identity of the source. The last stage is integration, which is routing the money back to the original entity through legal channels.

KPMG, a leading management consulting firm, has estimated that funds worth anywhere from $590 billion up to a staggering $1.5 trillion are laundered annually through the global economy, amounting to 2-5 per cent of global GDP. Closer home, estimates on the amount of black money in the Indian economy vary from 20 per cent to 40 per cent of India's total GDP.

Money laundering constitute a serious threat to national economies, and respective governments. Economic crimes can have a devastating effect on a national economy since potential victims of such crimes are far more numerous than those in other forms of crime. Economic crimes also have the potential of adversely affecting people who do not, prima-facie, seem to be the victims of the crime. For example, tax evasion results in loss of government revenue, thus affecting the potential of the government to spend on evelopment schemes thereby affecting a large section of the population who could have benefited from such government expenditure. A company fraud not only results in cheating of the people who have invested in that company but may also adversely impact investors’ confidence thereby affecting the growth of the economy. There have also been instances of manipulation of stock markets resulting in the loss of a substantial amount of assets of the small investors. Corruption not only results in loss of citizens’ rights but also has the potential of ruining the moral fabric of the society. Therefore, economic crimes constitute a serious threat to the national economy and system of governance.

Being aware of the incessant increase and rich variety of forms of economic crime, the impressive sophistication of money laundering operations and techniques, It deems as necessary the acknowledgment of each governmental strategy, so far pursued, in order to counter the offensive of organized economic crime.

The establishment of a reliable legal system composed of deterrent measures against organized crime, including money laundering, marks a major step forward, which many countries should take in defining their viable national strategies.

Small wonder then that the international community is putting in place stringent regulations to combat money laundering, and pressurising the banking industry to comply with the implementation of these regulations.

The Political Declaration and Global Programme of Action, annexed to the resolution S-17/2 was adopted by the General Assembly of the United Nations at its seventeenth special session on the twenty-third day of February, 1990. The Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8th to 10th June, 1998 calls upon the Member States to adopt national money-laundering legislation and programme;

Indian government considered necessary to have an Act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto, hence passed the THE PREVENTION OF MONEY-LAUNDERING ACT, 2002, [Act No. 15 of 2003].

Secton -3 defines money laundering as Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.

Section – 4 provides for punishment for money-laundering that Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees:

ection -5 empowers the authority and enforcement agency to attach the immovable property / movable property. The said attached property shall vest in the central government upon adjudication.

Section 41 clarify that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Director, an Adjudicating Authority or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. Section – 43 provides upon considering the technical nature of offence for establishment of special courts for speedy diposal of cases.

The Prevention of Money Laundering Act, 2002 (PMLA 2002) and subsequent amendments in the year of 2005, which mandates that in addition to client identity verification, banks and financial institutions need to maintain and furnish records to the various regulatory authorities as defined by the Indian government. It also allows regulatory authorities to freeze, seize and confiscate suspect accounts. Besides these two important laws, there are other laws and guidelines formulated by the government or regulatory bodies such as the Securities and Exchange Board of India (SEBI).

Of course, history has shown us time and again that whenever laws are created, criminals find loopholes to work around them. In an effort to detect money-laundering activities, many Indian banks have deployed anti money-laundering (AML) software solutions. However, as many of these solutions follow fixed rule-based methodologies for detecting anomalies, any novel laundering technique easily slips through the net. For instance, a typical AML software solution that flags or sends out alerts in case a transaction is above a specified threshold will be ineffective if the said amount is split up and/or spread across multiple accounts.

The most serious obstacles which these countries encounter in their attempts to mitigate the negative impact of organized crime on respective economies, is the lack of substantially effective legislation capable of confronting the complex nature of various crimes, including money laundering. The legislative body in each respective country should pay full attention to enact laws that are up-dated with the latest tendencies of organized crime and the most recent developments on modi operandi in money laundering. This is to say; at least countries should define a long list of predicate offences that are likely to put in motion the money laundering process. Confiscation and seizure instruments should be in place as an effective instrument to dismantle the substance of such offences. In addition to that, the countries should be aware that without an appropriate international cooperation mechanism and mutual assistance instruments, no positive result, in the fight against organized crime, will be yielded. Therefore, it is imperative for all countries to further encourage the instalment of a system of norms which operates in a dynamic way in the common interest of the states sharing the same concerns and problems.

International cooperation is essential in identification, tracking and prosecuting of illegal proceeds of crime. Albania has implemented Reciprocity Treaties with neighbouring countries, like Greece, Italy and Macedonia, for exchanging vital information on matters related to the dynamic conversion of illegal proceeds.

The Prevention of Money Laundering Act 2002 provides for mutual legal assistance in India by making enabling provisions for agreements with foreign countries to enforce this Act, assistance to a contracting State in the investigation of an offence, reciprocal arrangements for processes and assistance for transfer of accused persons and attachment, seizure and confiscation of property in a contracting State or India. In the case of Japan, the basic law covering mutual legal assistance is the Law on Mutual Legal Assistance in Criminal Matters. In addition, the Anti-Organized Crime Law stipulates mutual assistance in the execution of court orders for confiscation, collection of equivalent value and securance in criminal cases occurring in foreign countries and this law also stipulates the provision of information regarding suspicious transactions to foreign authorities.

Lao PDR made extradition treaties with Vietnam in 1999, Thailand in 2000, and China and Cambodia in 2001. To tackle crime, including Money Laundering, it is necessary to build cooperative relationships with other countries, as well as to enact laws regarding mutual legal assistance in criminal matters.

In Bangladesh, The Money Laundering Prevention Act 2002 provides for mutual legal cooperation to other countries upon request.

In Vanuatu, The Mutual Assistance in Criminal Matters Act 2002 deals with mutual legal assistance.

The trend of increasing scale of organized economic crime, including money laundering, is strongly believed to be a direct consequence of the following major causes.

1. The failure of national legislation to meet the up-dated standards and norms on fighting organized economic crime, including money laundering.

2. Inadequate level of local legislation to resist the offensive nature of organized economic crime, including money laundering.

3. The lack of preparedness of the present financial - institutional framework in many countries and ineffective investigative practices to deal effectively with the complexity of the nature of money laundering.

4. The poor performance of law enforcement agencies, on account of the low level of authority and means provided to them.

5. An ineffective system of mutual legal assistance has been found to be another factor hindering the tackling of transnational organized economic crime, including money laundering.

6. Fictitious bank accounts are often used as tools to commit fraud and money laundering, and cell phones and the internet are frequently used for committing fraud and drug offences. Therefore, such tools that are often used to commit the above crimes need to be controlled properly. In addition financial institutions, telephone carriers and internet service providers should take responsibility for preventing their services from being misused as criminal tools.

FUTURE CHALLENGES

It is concluded that joint efforts made by each country, in developing a reliable strategy of a vigorous domestic enforcement of law as well as international cooperation, is the most effective means to cope with problems related to economic crime, including money laundering. It would also be beneficial to adopt some of the following measures:

1. First and foremost it is important that the number of state parties to the TOC convention should be increased.

2. Given the fact that the TOC convention gives due consideration to diversities of the legal and financial system of member states and allows each state party to exercise discretionary power to a certain degree, it is feared that those committing economic crimes, including money laundering, may target countries with lenient legal provisions and international criminal organizations may end up setting a strong foothold in these countries, even if every State accedes to the Convention. In order to dispel such concerns States Parties should be encouraged to apply article 34 paragraph 3 of the TOC convention which stipulates “each State Party may adopt more strict or severe measures than those provided for by this Convention for preventing and combating transnational organized crime’’,

since a thorough revision of the convention, increasing the mandatory provisions, is not possible in near future.

3. Borderless criminal justice is essential in order to deal with borderless economic crimes including money laundering. Group 2 considers it necessary that any sense of turfdom embedded in the criminal justice system of each country be removed.

4. It should be recognized that information sharing is important in order to suppress cross-border crimes. Items of information to be shared are as follows: suspicious transaction reports; information relating to offences and suspects modus operandi and others. Despite some countries’ efforts to exchange information on economic crimes, including money laundering, it has become more evident that “information sharing" instead of information exchange is more necessary.

5. To have a unified standard for Criminalization of common criminal offences occurring in each country. Grant authority for universal jurisdiction on the above offences to all countries.

6. The adaptation in local legislation of legal criteria applicable to an increase in scope of predicate offences, which would enable the successful combating of organized economic crime, including money laundering.

7. The establishment of viable practices on confiscation and seizure measures, through the renewed legal concepts that enhance the powers of prosecuting authorities.

8. The financial institutions, telephone carriers and internet service providers should take

responsibility for preventing their services from being misused as criminal tools. In view of this, the following will be in order:

(a) Reinforce personal identification in financial institutions through know your customer

identification norms. Impose sanctions on financial institutions when this is neglected.

Criminalize the selling, purchasing and transferring of bank accounts in the case of Japan.

(b) Create regulations to prevent the use of cell phones for criminal acts. Impose sanctions on cell phone companies when the above regulations are violated.

(c) Create regulations to prevent the use of the Internet for criminal acts. Impose sanctions on Internet service providers when these regulations are violated.