Definition: The process of concealing the proceeds of crime in an effort to conceal their illicit origins and legitimize their future use.

Originated from: The mafia ownership of laundromats in the united states

Techniques: They can be simple, diverse, complex, subtle, but secret.

“After foreign exchange and the oil industry, the laundering of dirty money is the world’s third-largest

business.”

Money laundering - a social menace affecting the globe

Estimated cost of laundering - 2% to 5% of GDP

between $ 500b to 1.5 million annually

India included in ‘High Risk’ group (along with Pakistan,

Singapore, Brazil and Zimbabwe) for susceptibility to

money laundering and ‘Terrorism Finance’ (Source: PWC

report)

India has set up FIU (Financial Intelligence Unit) for

tracking money laundering.

Money Laundering, Directly or indirectly, Attempts or assists knowingly or party to any activity, Connected with proceeds of crime, Projecting it as untainted property, Property or value of such property derived or obtained, Directly or indirectly

Property is a result of crime related to a “scheduled offence”

Under the Arms Act Acquire, possess or use prohibited weapons

Wildlife Protection

Immoral Trafficking

Prevention of Corruption Act Public servant taking bribe, or taking bribe to influence

public servant

Against the country Terrorism, conspiracy, etc

Relating to Drugs Possessing or dealing with Poppy straw, opium,

cannabis

Under the Indian Penal Code Murder, Kidnapping, Extortion, counterfeit notes and

securities, etc

Structuring:

Bulk cash smuggling:

Cash-intensive businesses:

Trade-based laundering:

Shell companies and trusts:

Round-tripping:

Bank capture:.

Casinos:

Other gambling

Real estate: manipulated

Black salaries:

Bank capture:.

Casinos:

Other gambling

Real estate: manipulated

Black salaries:

Tax amnesties:

Fictional loans

Money laundering is commonly defined as occurring in three steps:

the first step involves introducing cash into the financial system by some means ("placement");

the second involves carrying out complex financial transactions to camouflage the illegal source ("layering");

and the final step entails acquiring wealth generated from the transactions of the illicit funds

2. PLACEMENT

3.LAYERING

4.INTEGRATION

• The last stage in the laundering process.

• Occurs when the laundered proceeds are distributed back to the criminal.

• Creates appearance of legitimate wealth.

• Involves distancing the money from its criminal source:

• movements of $ into different accounts

• movements of money to different countries

• Increasingly difficult to detect

• Initial introduction of criminal proceeds into the stream of commerce

• Most vulnerable stage of money laundering process

1.Predicate Crimes

• Corruption and Bribery • Fraud• Organized crime• Drug and human trafficking• Environmental crime• Terrorism• Other serious crimes…

Money Laundering Cycle

Simple Bribe and Money Laundering Transaction

Company A

• Needs to generate $1 million for bribe to Finance Minister.

• Uses invoices from company in Country 2

Country 1

Country 2

Company Bank Account

Country 3

Company owned by Minister’s cousin

Country 4

$500,000 - Purchase of Real Estate

$500,000 - Purchase of Bearer Share

TAX LOSS

GIVE RISE TO CRIMINAL ACTIVITY

WORSEN ECONOMIC CONDITION

INCREASE CORUPTION

SPOIL THE SOCIETY

INTERNATIONAL AFFORTS

o Setting up of org. as FATF

o Coordination & sharing of information by agencies

NATIONAL LEVEL AFFORTS

o Allowing FDI , prevention of money laundering act 2002