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What is Money Laundering? How does Money Laundering work? Discuss various steps taken by government of India to prevent money laundering.

Topic:  Challenges to internal security through communication networks, role of media and social networking sites in internal security challenges, basics of cyber security; money-laundering and its prevention.

5. What is Money Laundering? How does Money Laundering work? Discuss various steps taken by government of India to prevent money laundering. (250 words)

Reference: Legal Service India

Why this question:

The question is from the static portions of the GS paper III.

Key demand of the question:

The question aims to evaluate in detail about money laundering- definition, purpose, means etc. It also wants us to discuss the available policies such as PMLA to tackle the same.

Directive:

Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer:

Introduction:

Briefly explain what Money Laundering is.

Body:

Write a few lines about the meaning of money laundering- e.g Money laundering is the process of creating the appearance that large amounts of money obtained from criminal activity, such as drug trafficking or terrorist activity, originated from a legitimate source. The money from the illicit activity is considered dirty, and the process “launders” the money to make it look clean.

Discuss the steps in money laundering- Placement-criminally derived funds are introduced in the financial system; Layering-the property is ‘washed’ and its ownership and source is disguised; Integration-‘laundered’ property is re-introduced into the legitimate economy; This three staged definition of money laundering is highly simplistic. The reality is that the so-called stages often overlap and, in some cases, for example in cases of financial crimes, there is no requirement for the proceeds of crime to be ‘placed’. Briefly explain how globalization impacts money laundering. Examine the recent policy efforts taken by the government – India is a full-fledged member of the Financial Action Task Force (FATF), PMLA 2002, and Financial intelligence unit -IND etc.

Conclusion:

Conclude with way forward.