GUJARAT NATIONAL LAW UNIVERISTY

Economic Offences and White-Collar Crime
Money Laundering in India
Submitted by Registration Number 05A067 Submitted to Faculty, Seminar Paper, Economic Offences (Semester X)

Money laundering involves disguising financial assets so that they can be used without detection of the illegal activity that produced them. Through money laundering, the launderer transforms the monetary proceeds derived from criminal activity into funds with an apparently legal source.

.................................................................................................................................................. 4...................................................................................... 3 Hypothesis..................... 2.............................................. 5 Who commits such crimes? .................................................................................................................................................................... 5......................................................................................................... 4 Magnitude of the problem ................................... 7.............................................................................................................................................. 6 Conclusion ........................................................................... 3 Aim ............................................Contents 1............................................ 6 Money Laundering – Indian Legal Framework............ 4 (i) (ii) (iii) (iv) (v) (vi) Introduction ................................................................. 3 Chapterization ......................................... Objective and limitation of study ... 3.............................. 7 2|Page ............................................................................................ 3 Scope .. 6............... 4 Process of Money Laundering ........................................ 3 Review of Literature ............................................................................................. 3 Research methodology ................................................................................................

2006. The quotes having more than fifty words will be italicized and left and right intended. insurance.1. Alagiri. to discover the function of various Indian Regulators like RBI. SEBI in curbing these activities. The paper will restrict its content to Indian market. 5.Dhandapani. “Commentaries on Fema..N. Review of Literature The books by B. (2005). Money Laundering :Issues and Perspectives. Objective and limitation of study The objective of this study is to find the main modus operandi of committing money laundering. CITATION METHOD Uniform Method of Citation. The role of the various government organizations in investigating and booking down the criminals like the Financial Intelligence Unit will be taken account of. fake documents shall not be dealt in this paper. Scope Other economic crimes namely. is an important book to know the basics of the money laundering. import/export fraud. Aim The aim of this learning exercise is to find out the roles of various intermediaries in a Money Laundering scheme. 6. Gururaj. has also helped me in gathering significant details about the 3|Page . Chicago Manual of Style. 15th Edition will be followed for citation during the course of dissertation. 3. Hyderabad: Icfai University Press. Ed. Hypothesis The author proposes to suggest following proposition: Money Laundering is a flourishing business where there are many stake holders and profit bearers. The suggestions and methods of correcting the criminals have to be improvised upon every day. IPR thefts. and also. 4. tax frauds. Research methodology Doctrinal method of research will be followed in making this dissertation. as the criminal keep finding novel methods for commission of crimes. Nagpur:. Money Laundering Act and COFEPOSA by Wadhawa Pulications. primary/secondary market fraud. It deals with almost all the aspects of the money laundering. 2.

In simple terms it is the Conversion of Black money into white money.com/forhistoricalmaterialsonmoneylaundering. astronomical sums of money. terrorist activity or other serious crimes) is given the appearance of having originated from a legitimate source. Punjab and Kerala. Thus.htm#1b have also been instrumental in unleashing the modalities and the penalties for money laundering offences. UP chief minister Ms. and http://fiuindia. The website hosted at www.operations of Hawala and the other modes of conducting money laundering. In the recent past alone. as they have the knack of exploiting weaknesses in any system either traverse a new territory or subvert the system which is their specialized field. Indian newspapers frequently report the money laundering scams perpetrated by the Political leaders and some of the prominent stars are the chief ministers of UP. Brigitte Unger named ‘The Scale and Impacts of Money Laundering. (ii) Magnitude of the problem Economic offenders have exploited weaknesses in almost all areas of economic activity and siphoned off thousands of crores. we can say Money Laundering' is the introduction of illegally gained assets into the legal financial system with the aim of covering up its true origin. Their depredations will continue till the law makers plug loopholes in the affected system.laundryman. 4|Page .unet. scams have cost the exchequer and millions of Indians. Anti money laundering has also been a well researched area in this books. 7. This takes you back to cleaning the huge piles of cash. (i) Introduction Money Laundering is the process by which large amounts of illegally obtained money (from drug trafficking.in/faq-moneylaundering. Mayawati as per the Indian Express reports used some innovative techniques to launder the money by avoiding the tax in legitimate manner. But the economic offenders. She accepted the donations from persons who were road side heroes.gov. The book of Mr. is also important to understand the process of money laundering in United Kingdom. Chapterization This is the preliminary Chapterization proposed to be done in dissertation. UK’ published by Edward Elgar in 2007.

These features are most often used routinely to compare white collar crimes with other crimes. for example. The profits generated from Hawala transactions are covertly invested in real estate. 5|Page . involve considerable expertise and can also be highly organized and complex. The Hawala mechanism usually does not leave any paper trail and thus is a nightmare for the investigative agencies. which makes them similarly difficult to detect. Some. such generalized comparisons can be misleading because many of these features are not unique to or shared by all white collar crimes. Hawala mechanism facilitates the conversion of money from black to white. These and other conventional crimes are also characterized by an ambivalent criminal status and perceptions of the ‘criminality’ of activities vary over time. so as to launder them. more unambiguously criminal offences are also perceived to be treated leniently – rape cases. prostitution or drug offences. Not all conventional crime involves immediately harmed victims and those crimes that involve willing exchanges between consenting adults. however. Moreover.When CBI raided these guys were found in no position to donate huge sums for political motives. have a high rate of attrition leading to low prosecution rates– and many sentences are criticized as lenient. are also represented as ‘victimless’ and pose particular problems for detection and prosecution. Some conventional crimes are also invisible. As will be seen in subsequent chapters. layering and integration of such funds The concept of Money Laundering can be traced back to the "Hawala" transactions well known in India for long time now. is problematic in other forms of crime – those who drive while drunk may not intend to harm others and can see themselves as ‘unlucky’. successful professional criminals delegate responsibility to minimize the risk of being detected and prosecuted. particularly those that take place in the private sphere of the family. so often seen as a major element in criminal liability. (iii) Process of Money Laundering We can say that the major objectives of Money Laundering activities are: (a) Concealing the true ownership of illegally-obtained money and (b) Placement. Other. films etc. such as gambling. like burglary or robbery."Hawala" is an Arabic word meaning the transfer of money or information between two persons using a third person. Intent.

by way of money laundering could contaminate and corrupt the structure of the State at all levels. organized crime diversifies its sources of income and enlarges its sphere of action. enabling them to penetrate the legitimate 6|Page . It is well recognized that through the huge profits the criminals earn from drug trafficking and other illegal means. The social danger of money laundering consists in the consolidation of the economic power of criminal organizations. Telecom scam of Rs 6 crores inter alia. Most of them are yet to be proved in court of law. the leading role in such embezzlements must go to the banking sector that gobbled public money to the tune of Rs 1.(iv) Who commits such crimes? No clear dividing line can therefore be drawn between white collar and other crimes. Broad comparisons often draw on extreme examples – thus the invisibility. HDW submarine scandal of Rs 64 crores. direct victimization and simplicity of a mugging. The recent economic frauds are high-money soigné scams running to multiple crores. this definitely leads to corruption. Bofors scandal of Rs 64 crores. diffuse victimization and complexity of a major pollution incident may be compared with the visibility. (v) Money Laundering – Indian Legal Framework Money Laundering has a close nexus with organized crime.000 crores in three years with the euphemism of non-performing assets or bad loans that in most cases are advances paid to well-to-do favorites for consideration with the understanding that the clause of the nonperforming assets take care of that. Through money laundering. with many conventional crimes at the other. international frauds. Other major scams of lesser volume are the Bihar bitumen scandal of Rs 350 crores.000 crores. and many of these characteristics would be better seen as representing a series of different kinds of crime to be plotted along a series of continua. lack of intent. this adds to constant pursuit of profits and the expansion into new areas of criminal activity. arms dealing etc. Further. However. Money Launderers accumulate enormous profits through drug trafficking. Cash transactions are predominantly used for Money Laundering as they facilitate the concealment of the true ownership and origin of money. The mother of all the scams of modern India namely the security scam of 1992 involved Rs 8000 crores while the recent fake stamp scam allegedly involves Rs 80. Bihar medical bills scandal of Rs 60 crores.20. Ayurveda scam of Rs 32 crores. intent. it is likely that many white collar crimes would cluster at one end. The Indian Bank scam of the 1990s involved Rs 1300 crores while the fodder scam of Bihar ran to Rs 1500 crores.

The best way to curb these events is coordination of the various agencies involved in economic transactions. 7|Page . Also we need to have a separate court to look after this offence. RBI. Features. and we need to ensure that the benefits accruing out of such proceeds should not be allowed to be used by such criminals. and Financial Intelligence Unit in curbing Money Laundering Practices. expansion in international markets and linkage with other enterprises. specialization. crime is increasingly economic in character. This will serve as a major discourage to the offenders. I wish to propose these changes. need and importance of Money Laundering (Amendment) Act. Criminal associations now tend to be organized like business enterprises and to follow the same tendencies as legitimate firms. growth. In advanced societies. (vi) Conclusion We need to revamp the local law which governs the economic offences.economy. 2009 will also be discussed along with role of other Government organisations like SEBI.

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