Money Laundering: India And The World

Submitted By

Supervised By

Devagya Jha

Dr. Radha Seshan

National Law University, Delhi

2013

TABLE OF CONTENTS
Chapter I: Introduction...............................................................................................................1
Chapter II: Action at the International level to combat Money Laundering..............................3
Financial Task Force..............................................................................................................3
Basel Principles......................................................................................................................4
United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic
Substances..............................................................................................................................6
United Nations Convention against Corruption.....................................................................6
Chapter III: Anti-Money Laundering Legislations in India.......................................................8
Prevention of Money Laundering Act, 2002..........................................................................8
The PMLA Amendment Bill, 2011......................................................................................10
Chapter IV: Other Legislations Dealing with Money-Laundering...........................................12
The Foreign Exchange Management Act, 1999...................................................................12
The Benami Transactions (Prohibition) Act.........................................................................13
The Narcotic Drugs and Psychotropic Substances Act, 1985..............................................14
Chapter V: Analyis of the Ram Jethmalani PIL.......................................................................16
Chapter VI: The Reserve Bank of India and Anti-Money Laundering Measures....................25
Chapter VII: Conclusion..........................................................................................................28
Bibliography..............................................................................................................................ii

Tax evasion alludes to the transformation of cash that is wrongfully acquired, to

make it seem to start from a genuine source. Article 1 of the EC Directive
characterizes the term IRS evasion as "the change of property, realizing that
such property is gotten from genuine wrongdoing, with the end goal of covering
or masking the unlawful source of the property or of aiding any individual who is
included in the perpetrating such an offense or offenses to sidestep the lawful
results of his activity, and the camouflage or mask of the genuine nature, source,
area, aura, development, rights regarding, or responsibility for, realizing that
such property is gotten from genuine wrongdoing".

Tax evasion is not a solitary demonstration but rather is truth be told a process
that is expert in three premise steps: setting, layering and incorporating of
unlawful continues. The primary stage includes the expulsion of money from the
area of securing and bringing it into the monetary framework. The second stage
is the change of cash in whatever number banks as could reasonably be
expected, particularly abroad. The third stage is the reinvesting or coordinating
of this cash into the economy, taking the state of real organizations.

In nations like India, government evasion happens through over invoicing of

fares, under invoicing of imports, speculation through shell organizations and far
reaching utilization of hawala diverts in the transmission of cash. Nonetheless,
hawala exchanges typically alluded to as 'option settlement framework' is the
most widely recognized type of government evasion. It is the exchange or
settlement starting with one gathering then onto the next, without the utilization
of a formal money related foundation, for example, bank or cash trade and hence
is a casual method for moving cash without leaving hints of records. Hawala
exchanges are prominent in light of the fact that they are regularly quicker, more
dependable, in some cases offer a superior conversion standard, and can be
much less expensive than exchanges through authorized money related
organizations.

IRS evasion is a threat on the grounds that it undermines national governments

and global relations between them through defilement of authorities and
legitimate frameworks. It undermines free endeavor and debilitates monetary
solidness by swarming out the private area, in light of the fact that honest to
goodness organizations can't contend with the lower costs for products and
administrations that organizations utilizing washed stores can offer. IRS evasion
serves as a vital method of terrorism financing. In view of its staggering impacts,
battling tax evasion ought to be a need for all nations. At the worldwide level to
battle endeavors to battle IRS evasion started in 1988 with two vital activities:
The Basel Committee on Banking Regulations and Supervisory Practices and the

United Nations Convention against Illicit Traffic in Narcotic Drugs and

Psychotropic Substances. In India, the Prevention of Money Laundering Act was
established in 2002 notwithstanding alternate enactments that were at that point
set up like the Foreign Exchange Management Act, The Benami Transactions
(Prohibition) Act. Other key players in the push to battle tax evasion are the
Reserve Bank of India, the Securities and Exchange Board of India and the
Financial Intelligence Unit- India.

Theory

The measures applied broadly and globally by the powers have by and
large met with achievement, absence of insight and co-appointment is a
significant fort that still needs to be ruptured to accomplish the maximum
capacity of these laws.

The laws in regards to the control of IRS evasion in India have specific
escape clauses which need to be managed so as to achieve a successful
measure of control over the entire issue

Research Methodology- The philosophy utilized by the scientist would be entirely

doctrinal in nature and the analyst would be depending principally on books and
articles to think of suitable contentions with respect to the issue of controlling
tax evasion in India.

Part II: ACTION AT THE INTERNATIONAL LEVEL TO COMBAT MONEY LAUNDERING

Budgetary TASK FORCE

The Financial Action Task Force is a between legislative body which sets
guidelines, and creates and elevates arrangements to battle tax evasion and
terrorist financing. The primary accentuation of hostile to government evasion
measures stays on securing documentation of budgetary streams, and
discriminating examination of this money related stream. The Force has given
forty Recommendations and Nine Special Recommendations that give a
complete arrangement of counter measures against IRS evasion. They set out
the standards for activity and permit nations a measure of adaptability in
actualizing these standards concurring specific circumstances and protected
systems. These Recommendations have been perceived, embraced and received

by numerous worldwide bodies as the universal measures for battling Money

Laundering. FATF routinely audits its individuals for agreeability through yearly
self-evaluation practices and intermittent common assessments of its individuals.
Particularly after the assaults on the Twin Towers on September 11, 2011, the
FATF has been embracing the 'carrot-and-stick' approach on one hand, the FATF
has expanded its association with commentators, and on the others, have
expanded the risk of corrective measures against tricky locales.

India turned into the 34th individual from the FATF in June 2010 following five
years of being a 'spectator'. India has altered the PMLA, 2002 and the Unlawful
Activities (Prevention) Act, 1967 to align them with the fundamental suggestions
of the FATF. FATF is vital to India on the grounds that India needs the exhaustive
toolbox for law implementation offices to have the capacity to track the cash
behind terrorist assaults and to empower India to rise as an exporter of
budgetary administrations.

As an individual from the FATF, India likewise acknowledged an upgraded

obligation as the Asia Pacific Regional Review Group Co-seat. India experienced
its first Asia Pacific Group shared assessment in 2005 and a joint APG and FATF
common assessment in 2008. The FATF report proposes that while measures
have been taken to check the hazard of IRS evasion in India, a couple of key
suggestions need to be incorporated for a more successful reaction to this issue
like address the specialized deficiencies in the criminalisation of both
government evasion and terrorist financing and in the household system of
reallocation and temporary measures; a stricter authorizing administration that
takes into consideration viable, proportionate and dissuasive approvals for
disappointments to consent to Anti Money Laundering prerequisites

BASEL PRINCIPLES

In acknowledgment of the helplessness of the monetary area to abuse by crooks,

the Basel Committee on Banking and Supervisory Practices issued a Statement
of Principles (the 'Basel Principles') in December 1988. This was a noteworthy
step towards keeping the utilization of the managing an account segment for tax
evasion purposes, as it set out various rule that saving money organizations
ought to follow like: client recognizable proof, consistence with enactment,
similarity with high moral principles and neighborhood laws and regulations, full
co-operation with national law authorization powers to the degree allowed
without rupturing client secrecy, and so forth. Thusly, the Basel Principles weight
on co-operation inside the limits the obligations of customer classifiedness. The
consistence with these Principles spoke to a real self administrative activity
inside the money related segment.

In 1997, in conference with the supervisory powers of a couple non G-10 nations
including India, it drew up the 25 "Center Principles for Effective Banking
Supervision" which were in the way of least prerequisites planned to guide
supervisory powers which were trying to reinforce their current supervisory
administration. The Principles manage perspectives like allowable exercises of
establishments that are authorized and subject to supervision as banks must be
unmistakably characterized ; the permitting power must have the privilege to set
criteria and reject utilizations of foundations that don't meet the models set ;
saving money administrators must have the power to survey and reject any
recommendations to exchange huge proprietorship or control in existing banks to
different gatherings ; assessment of a bank's arrangements and methodology
identified with allowing of advances and making of ventures in addition to other
things. The Reserve bank of India had surveyed its own position concerning the
Principles in 1998. The evaluation had demonstrated that the vast majority of the
Core Principles were at that point cherished in our current enactment with a few
holes distinguished primarily in the territories of danger administration in banks,
between organization co-operation with other local/worldwide controllers and
combined supervision. Inner working gatherings were situated up to recommend
measures to scaffold these holes.

A further paper was issued by the Committee in October 2001 covering client
due tirelessness for banks. It tended to confirmation and Know Your Customer
(KYC) measures with a cross-fringe perspective. This commands the bank to take
sensible endeavors to focus their client's actual personality, and have viable
techniques for checking the bonafides of another client.

UNITED NATIONS CONVENTION AGAINST ILLICIT TRAFFIC IN NARCOTIC DRUGS

AND PSYCHOTROPIC SUBSTANCES

This UN Convention was one of the memorable traditions in light of the fact that
the gatherings to the Convention perceived the connections between unlawful
medication movement and other related composed criminal exercises which
undermine the honest to goodness economies and debilitate the solidness,
security and sway of States and that illegal medication trafficking is a global
criminal action that creates substantial benefits and riches, empowering
transnational, criminal associations to enter, debase and degenerate the
structures of government, genuine business and monetary organization.
Part III: ANTI-MONEY LAUNDERING LEGISLATIONS IN INDIA

Aversion OF MONEY LAUNDERING ACT, 2002

The Prevention of Money Laundering Act, 2002 was established on the 17th of
June, 2003 and became effective from the 1sts of July, 2005 with the point of
counteracting IRS evasion and accommodating the seizure of property which had
been gotten from government evasion. The Act accommodates the indictment of
people and lawful substances enjoying tax evasion, and for the usurping and
connection of property acquired through government evasion.

The PMLA contains 75 areas separated into ten parts, furthermore contains a
Schedule partitioned into Part An and Part B.

Part I of the Act manages the preparatory procurements, for example, the degree
of the Act and the interpretational provision. Section II sets out the offense of
government evasion. Segment 2 is the definitional provision, then again, it is
Section 3 of the PMLA that characterizes the offense of IRS evasion, and makes
the immediate or roundabout endeavor to enjoy or intentionally support, or be
purposely included in any methodology or movement associated with the returns
of wrongdoing an offense. The offenses are partitioned into Parts An and B of the
Schedule to the PMLA.

Segment 4 of the Act sets out the discipline for tax evasion as thorough
detainment for a period between three to seven years, and a fine of five lakh
rupees. Then again, if an individual is sentenced under Paragraph 2 of the
Schedule , the term of imprisonment can be stretched out to 10 years.

Part III of the PMLA manages the connection, mediation and seizure of property.
The mediating power designated by the Central Government under segment 48
of the PMLA is enabled under area 5 to append or seize property.
Notwithstanding, the Authority is permitted to connect property for 90 days just
if the individual included has carried out a wrongdoing falling under the Schedule
of the , and if a report has been sent to a Magistrate under segment 173 of the
Criminal Procedure Code, or if a Special Court has taken comprehension of the
matter.

Part IV of the PMLA recommends the commitments of saving money

organizations, monetary foundations and delegates. "Saving money Company"
under PMLA incorporates every single nationalized bank, private Indian banks
and private outside banks, all co-agent banks, the State Bank of India and

Regional Rural Banks. "Delegate" under PMLA incorporates persons enrolled

under Section 12 of the Securities and Exchange Board of India (SEBI) Act, 1992.

Segment 12 (1) commands these foundations to (a) to keep up records

enumerating the nature and estimation of exchanges which may be
recommended, whether it be in a solitary exchange or a progression of
exchanges indispensably associated with one another occurring under a month;
(b) to outfit data of these exchanges to the Director inside an endorsed time
period and to records of the personality of every one of its customers. Segment
12 (2) orders that these records be kept up for a time of 10 years. Under the
procurements of Section 13, a fine may be imposed by the power endorsed by
the Central Government upon such banks and money related establishments
which don't agree to the procurements of Section 12.

Section V of the PMLA manages procurements identifying with inquiry, summons

and seizure. Segment 16 lays out the ability to enter wherever to explore given
to Authority, while Section 17 gives the ability to the Authority under the PMLA to
grab any property. Under ssection 24 of the Act additionally puts the weight of
evidence on the blamed to demonstrate that the returns for wrongdoing are
untainted property.

Section VI of the Act examines the setting up of an Appellate Tribunal to hear

advances on matters mediated upon by the power selected under the Act, while
Chapter VII sets out that unique courts can be assigned for attempting offenses
under the PMLA. Part VIII contains the procurements identifying with the
arrangement of powers under the Act, and certain procurements identifying with
locale and other arrangement of extraordinary officers.

Section IX of the PMLA manages corresponding plans for aid in matters

furthermore sets out the technique for connection and appropriation of property,
while Chapter X contains random procurements.

THE PMLA AMENDMENT BILL, 2011

The PMLA Amendment Bill 2011 was presented by Pranab Mukherjee in the Lok
Sabha on December 27, 2011. The Bill toughens the position on government
evasion, and acquaints 10 key corrections with the Act.

The Statement of Objects and Reasons expresses that the presentation of such
an alteration was fundamental since issue of tax evasion is no more limited to
the geo political limits of any nation, it is important to have a stricter order set
up. Another reasons given for the alteration is that India has turned into an
individual from the Financial Action Task Force and Asia Pacific Group on
government evasion, and the Bill is the exertion of the Indian government to
bring hostile to tax evasion enactments at standard with global models.

There are a few progressions to the definitional statement under the Bill.
Segment 2(ia) presented the idea of 'comparing law', connecting the
procurements of Indian law to the law of remote nations. Area 2(wa) likewise
presented the idea of 'reporting element', which incorporates a keeping money
organization, monetary establishment, delegate or an individual carrying on an
assigned business or calling. The meaning of offense under segment 3 of the
PMLA will be extended to incorporate exercises like covering, procurement,
ownership and utilization of continues of wrongdoing, and would likewise get rid
of the current top of five lakh rupees on punishments for infringement under
Section 4. Area 5 of the PMLA, managing temporary connection, additionally
stands changed, with the times of temporary connection reached out to 180
days, rather than 90 the way things are today. Another segment 12 additionally
has been embedded in the Bill, for it tries to make all the reporting elements to
keep a record of all exchanges, and to check the personalities of their clients.
The time period, notwithstanding, remains 10 years, in any case, the reporting
substances can be made capable in the event that they don't keep or outfit the
data to the Authority as and when needed. The Bill accommodates an alteration
in Section 24 also, as an assumption that the cash included in procedures for tax
evasion might be raised , furthermore accommodates rundown connection and
appropriation of property regardless of the possibility that there is no conviction.
The Bill additionally thinking about consolidating Schedule An and B to delete the
financial edge between the various types of offenses under the PMLA.

Part IV: OTHER LEGISLATIONS DEALING WITH MONEY-LAUNDERING

THE FOREIGN EXCHANGE MANAGEMENT ACT, 1999

It endorses checks and constraints on certain outside trade settlements.

Offenses under the Foreign Exchange Management Act, 1999 are not planned
offenses under the PMLA. The justification behind this is that just the most rough
and critical criminal acts have been said under the PMLA since the PMLA gives
huge forces of capture to law requirement offices. A case of the wrongdoers
focused under the PMLA would be the mafia managing in homicide, blackmail,
terrorism and prostitution who have colossal fluid riches that they need to wash.

Since the forces under the PMLA are so over-coming to, the rundown of booked
offenses thereunder has intentionally been kept short, and FEMA offenses have
been prohibited from their ambit. Indeed, even along these lines, tax evasion is
viewed as a horrifying wrongdoing under the FEMA also, a thought that is
particularly critical in the evaluation of whether an offense can be exacerbated.

Interestingly, the establishment of the FEMA is owed in extensive part to the

death of the PMLA since it looked to unwind the administrative structure for
outside trade, a step that was just permitted when there was certification that
notwithstanding this unwinding, illicit exchanges of medication vendors,
terrorists, arm bootleggers and different culprits of appalling monetary unlawful
acts would not go unpunished.

Among the most renowned discussions including government evasion under the
FEMA is the situation recorded in August, 2011, by the Enforcement Directorate
against YS Jaganmohan Reddy, child of previous Andhra Pradesh Chief Minister,
YS Rajasekhar Reddy.

THE BENAMI TRANSACTIONS (PROHIBITION) ACT

"Benami" is Persian for 'property without a name'. A benami exchange is one

where property is moved or acquired for the sake of one individual yet someone
else is paid thought for the exchange. It subsequently turns into a protected
method for stopping sick gotten riches. Actually, the pretended by benami
exchanges is more flexible than simply that, and stretches out to duty avoidance,
cheating lenders and at times serving as a methods for mafia wears to work
through monikers.

The Benami Transactions (Prohibition) Act, 1988, disallows the buy of property
for the sake of someone else who does not pay for the property, and endorses a
discipline of upto three years for an individual who submits this offense.
Nonetheless, the BTPA has been considered generally incapable and is looked to
be supplanted by the Benami Transactions (Prohibition) Bill, 2011, which was
presented in the Lok Sabha a year ago. One of the real reasons refered to for its
wastefulness was that the way in which it had been drafted made the detailing of
tenets thereunder outlandish.

In any case, the Bill has been liable to considerable feedback on numerous
tallies. For instance, regardless it permits benami exchanges for the sake of life

partner, sibling, sister or any lineal ascendant or relative. It has diminished the
most extreme term of detainment for going into a benami exchange from three
years to two years. Perceiving the nexus between government evasion and
benami exchanges, the Bill tries to make the Adjudicating Authority and the
Appellate Tribunal
Section VI: ANALYIS OF THE RAM JETHMALANI PIL

RAM JETHMALANI V. UNION OF INDIA

This milestone case in the range of IRS evasion law denote the main genuine
endeavor of the Supreme Court to effectively control IRS evasion, by ordering
useful measures. The actualities of the case emerge in the accompanying
foundation.

The instances of Hasan Ali and his assistant Tapuria emerge as especially
unfortunate cases of the absence of execution of the IRS evasion laws in India.
Hasan Ali, 53-year-old, child of Hyderabad Excise Officer is known to have
unaccounted cash to the tune of Rs. 20,000 to 35,000 crore. His record at the
Swiss Bank, UBS holds up to USD 8 billion, and he is obligated for a duty default
of about Rs. 50,000 crore in India.

A Writ request was recorded in ___ in light of reports in the media and academic
articles, with respect to the absence of move made by the State dominant
presences in countering the vast aggregates of unaccounted cash in remote
banks, especially those in purviews that are expense asylums with solid
protection laws. The fundamental discord was that the basic privileges of the
individuals under Articles 21, 14, 19 were disregarded by specifically slighting
such extensive scale charge avoidance from persons like Hassan Ali.

The Petition

The Petitioners fought that such an abandonment of obligation to uphold the

expense default from State powers mirrors a complete absence of control over
unlawful exercises of two sorts, one, duty avoidance and two, those criminal
exercises that are financed by the dark cash economy. Besides, such dark cash in
swiss banks was washed and rerouted once more into India for illicit exercises,
along these lines adding to the formation of systems of universal money. Huge
scale criminal exercises like terrorism, arms sneaking, opiate exchange and

comparable exercises which are fuelled by the dark economy are likewise
negative to the security and trustworthiness of India. The applicants likewise
fought that this cash was prone to be that of effective persons and the absence
of activity from the State showed gross indifference towards indictment of
people.

Especially, Hassan Ali Khan & Tapuria had been presented with an Income Tax
interest to the tune of Rs. 40,000 crore and 20,580 crore separately. The
Enforcement Directorate (ED) had, in 2007, reported that Hassan Ali enjoyed
dealings adding up to USD 1.6 billion between 2001-05. The ED likewise
completed an assault in Hassan Ali's Pune living arrangement, which prompted
the revelation of proof of stores of USD 8.04 billion with UBS Bank, Zurich.

In spite of this, in any case, no examination had been initiated by the State into
the matter. The solicitors had battled that the Union of India had floundered on a
few levels:

a)
Both Hassan Ali and Tapuria were in India and henceforth falling inside the
locale of Indian Courts and investigative powers

b)
Union of India, in spite of rehashed RTI applications, was not revealing
data in regards to the Indian account-holders in Swiss Banks

c)
The Swiss Bank, UBS, Zurich, one of the greatest riches administration
organizations on the planet, had specifically, fallen in terrible light with the
Indian powers as it was included in a few untoward tricks prior in the decade.

Issues

On this reason and in view of the particular contentions progressed by the

Petitioners, there were two primary issues were looked to be tended to by the
Court:

1)
Whether the Supreme Court must constitute a Special Investigation Team
(SIT) under a previous Supreme Court Judge to screen examinations instances of
dark cash

2)
Whether the Court must command that the Union must try to first get and
afterward reveal the rundown of Indian ledger holders in banks in Liechtenstein

Contentions of the Petitioners:

Re: Constitution of SIT

The solicitors contended that a SIT should be constituted under the supervision
of previous Supreme Court judges to consistently screen examination and
arraignment of dark cash cases.

Re: Disclosure of financial balance data in banks in Liechtenstein

The committee for the Petitioners presented that a couple of years back, a
worker of a bank in Liechtenstein had offered to disclose names of ledger holders
to the legislature of Germany. Germany had secured these names on had
therefore started procedures against 600 people. The administration of Germany
had likewise offered the rundown of names to different nations in the event that
they decided to start indictments against these people, outside the system of the
Indo-German Double Tax Avoidance Agreement. In this light, it was hazy why,
regardless of a few RTI applications, the Union had not uncovered the names of
these record holders. Also, no ventures to recoup funds or rebuff these people
had been taken in this way.

Contentions of the Respondents

Re: Constitution of SIT

The Solicitor General reacted to the contentions of the Petitioner by presenting

that the Union of India had done their best towards arraignment and examination
of dark cash cases. While they had no key complaint against the accommodation
of the appeal, they contended that a Court observed examination was
reasonable however OK yet not a SIT. They presented that there was at that
point a High Level Committee constituted under the Dept of Revenue in the

Ministry of Finance, which was a body that was fit for practicing all the capacities
and forces tried to be depended to the SIT proposed by the Petitioners.

Also, the Respondents presented that instances of tax evasion essentially include
numerous locales as these ledgers were situated in diverse nations with laws and
Double Tax Avoidance Agreements that ensured the security of these record
holders.

Re: Disclosure of ledger data in banks in Liechtenstein

The Solicitor General reacted to the instance of the Petitioners by presenting that
the rundown of names of ledger holders in the ownership of the Indian
Government were gotten through the DTAA with Germany, as Germany had
particularly solicited the Union from India to take the said data through the DTAA.
The DTAA particularly contained a preclusion on exposure of data acquired
through the DTAA, through its privacy provision. Any activities from the Union in
rupture of this DTAA would endanger India's relations with Germany,

In addition, the exposure of the names of all the record holders would be in gross
infringement of the privilege of protection of people who were utilizing these
Swiss Bank represents genuinely earned cash, therefore falling outside the
domain of a potential examination or indictment for tax evasion. The State
contended that regardless of the fact that it were to unveil this rundown, just
those names of persons against whom examination had been started and
procedures had been launched would be uncovered.

Judgment

Re: Constitution of the SIT

The Supreme Court perceived that despite the fact that a High Level Committee
had been set up with broad powers, the charge-sheet of Hassan Ali had not even
been confirmed by this board, nor was the Committee observing the examination
and guaranteeing expedient advancement. Also, the Court opined that while
these matters might really be spread more than a few locales, even as respects
those persons inside Indian purview, against whom adequate confirmation exists
in the hands of the Indian powers, the Government had not done what's
necessary.

In this way, the Court held that the Union of India should constitute a SIT with
exceptionally expansive forces of examination and indictment of dark cash
cases. The SIT would be obliged to always report improvements to the Supreme
Court. It would include all the individuals from the High Level Committee
alongside the Director of the Research and Analysis Wing (RAW), viz.:

i.

Director, RAW

ii.

Two previous judges of the SC

iii.

Secretary, Department of Revenue, as the Chairman;

iv.

Deputy Governor, Reserve Bank of India;

v.

Director (IB);

vi.

Director, Enforcement Directorate;

vii.

Director, CBI;

viii.

Chairman, CBDT;

ix.

DG, Narcotics Control Bureau;

x.

DG, Revenue Intelligence;

xi.

Director, Financial Intelligence Unit; and

xii.

JS (FT & TR-I), CBDT.

Re: Disclosure of financial balance data in banks in Liechtenstein

Article 26(1) of the DTAA (on Exchange of Information) on secrecy of data traded
under the DTAA peruses as takes after:

The capable powers of the Contracting States should trade such data as is vital
for doing the procurements of this Agreement. Any data got by a Contracting
State might be dealt with as mystery in the same way as data acquired under
the local laws of that State and should be revealed just to persons or powers
(counting courts and authoritative bodies) included in the evaluation or
gathering of, the requirement or arraignment in appreciation of, or the
determination of claims in connection to, the duties secured by this Agreement.
They may uncover the data out in the open court procedures or in legal
procedures.

Therefore, it was clear that Article 26 of the DTAA administered just trade of data
that was attempted with the end goal of "doing the procurements of the
Agreement". Since the rundown of names of ledger holders in Liechtenstein was
not data "fundamental for doing procurements" of the Indo-German DTAA, the
Court held that Liechtenstein was not secured inside the ambit of the IndoGerman DTAA. The Court likewise held that the way that Germany requested that
India regard the data as conceded under Article 26 of the DTAA is insignificant.

In addition, there was no bar of mystery forced on uncovering such data with the
end goal of court procedures. The Court struck down the contention of the Union
that these court procedures were restricted to only expense procedures, on the
premise that such a perusing of Article 26(1) would tear it apart
Section VII: THE RESERVE BANK OF INDIA AND ANTI-MONEY LAUNDERING
MEASURES

The Reserve Bank of India has presented rules, taking from forces sourced to the
Section 35A of the Banking Regulation Act, 1949 and Rule 7 of the Prevention of
Money Laundering ( (Maintenance of Records of the Nature and Value of
Transactions, the Procedure and Manner of Maintaining and Time for Furnishing
Information and Verification and Maintenance of Records of the Identity of the
Clients of the Banking Companies, Financial Institutions and Intermediaries)
Rules, 2005 to diminish money related fakes and distinguish IRS evasion
exchanges. These are relevant to both banks and NBFCs under independent

warnings. These rules are known as the Know Your Customer (KYC)
standards/Anti-Money Laundering (AML) guidelines/Combating of Financing of
Terrorism (CFT) models, where we can see that the need to Know Your Customer
is gotten from the points of fighting government evasion, and financing to dread
associations. These gauges were first set down in a preparatory shape in 2002,
however they have been modified much of the time from that point forward, and
they are gathered as two expert brochures discharged consistently on July 1,
2011, with a nightfall condition of one year. The latest rules 'Know Your
Customer' rules have been returned to in the setting of the suggestions made by
the Financial Action Task Force (FATF) on Anti Money Laundering (AML) measures
and on Combating Financing of Terrorism (CFT), and the paper issued on
Customer Due Diligence (CDD) for banks by the Basel Committee on Banking
Supervision. Under these rules, a nonnative in India may transmit USD 2500 for
his/her individual purposes.

These rules basically oblige banks to set out their own particular arrangements
of strategies and benchmarks in agreeability with a genuinely complete rundown
of fuses to be made. They endorse additionally circumstances which would
prompt the general levels of persistence presupposed being improved or
lessened, in light of circumstances present.

Banks are obliged to take after KYC strategies consolidating four noteworthy
components :

(a)

Customer Acceptance Policy;

Under this head, it is obliged that no record be opened unknown or in an

invented name, parameters of danger observation be very much characterized,
circumstances of office be clear and danger profile creation be done amongst
different necessities.

(b)

Customer Identification Procedures;

The approach affirmed by the Board of the bank must be such that it ought to
unmistakably define the Customer Identification Procedure to be completed at
distinctive stages, and where there is suspicion of tax evasion or terrorist
financing, a full-scale due perseverance must be done. Further, intermittent
updation of databases must be finished.

(c)

Monitoring of Transactions;

Banks are obliged to reliably audit the exchanges being attempted to secure
sensible examples, and consequently to have the capacity to notice deviant
cooperations. Further, upgrading of danger classification must be done in time
periods not surpassing 6 months.

(d)

Risk Management

Under this, banks must make satisfactory inward supervisory and reviewing
methodologies to manage the need to cover fitting administration oversight,
frameworks and controls, isolation of obligations, preparing and other related
matters by expressly distributing obligation inside the bank for guaranteeing that
the bank's strategies and methods are executed successfully.

The RBI has been stringently upholding both the KYC rules and the AML rules,
and fined a few co-agent banks for disregarding these rules.

Notwithstanding this, they have additionally concocted a round under the PMLA
to control the exercises of NBFCs, Miscellaneous Non-Banking Companies
(MNBCs) and Residuary Non-Banking Companies (RNBCs) regarding tax evasion.
These command keeping records exchanges surpassing a certain quality, and
additionally reporting every suspicious exchange to the Financial Intelligence
Unit in India. Suspicious exercises incorporate bury alia exchanges that don't
bode well, exercises not predictable with the client's business and procurements
of deficient or sporadic data. Nonetheless, these have been condemned in
numerous examples as not being adequately benevolent to the individuals who
live in the chaotic part; to battle this, in March this year, the RBI discharged a
warning unwinding their standards as for confirmation forms for low-pay persons.
Presently, in the event that an individual who plans to keep not more than Rs.
50,000 in his record, and not more than Rs. 1 lakh in all records joined, wishes to
open a record, he may be checked by the methodology of being presented by
some other individual who has been completely confirmed through KYC methods.

The standards took after by the RBI additionally incorporate the necessity to
"Know Your Employee". For example, a worker who drives a sumptuous way of

life that can't be bolstered by his payscale may oblige additional cautiousness
from the superintendent.

Part VIII: CONCLUSION

While it is pass that IRS evasion has been a real issue both broadly and globally,
the accomplishment of IRS evasion measures comprehensively appears to have
been somewhat high maybe demonstrative of the need which this undertaking
has been given in the national situation. Nonetheless, bigger inquiries have been
asked as of late that of whether concentrating on government evasion as an
end in itself is adequate, and whether it is performing its errand of verging on
completion terrorist subsidizing or some other points it is suspected to be
diverted into. The issue is exacerbated by the trouble of sufficiently surveying
the occurrence of government evasion by its temperament, since it exists
outside the limits of the law, any appraisal is essentially ambiguous. More current
modalities of laundering cash are being revealed consistently, and the
inventiveness of the plans just is improved.

It is recommended that the real issue in discovering IRS evasion today is a

disappointment of insight and coordination tragically, these are additionally two
of the most complex zones for development to be made, covering as they do
with common freedoms. In this, an offset needs to be struck continually
remembering the end reason, and the flexibilities ensured in our saying.
Bibliography

Books referred

Doug Hopton, Money Laundering: A Concise Guide for all Businesses.

Global Financial Crime: Terrorism , Money Laundering and Offshore

Centres, (Donato Masciandaro ed. 2004).

Peter Reuter and Edwin M. Truman, Chasing Dirty Money: The Fight Against
Money Laundering, 3 (Institute of Macro-Economics).

Articles referred

Deboshree Bannerjee, Prevention of Money Laundering Act: Critical

Analysis.

Eric Gouvin, Bringing out the Big Guns: The USA Patriot Act, Money
Laundering, and the War on Terrorism.

Indira Carr and Miriam Goldby, The UN Anti-Corruption Convention and

Money Laundering.

John F. Wilson, Hawala and Other Informal Payments Sytems: An Economic

Perspective.

K.P. Krishnan, Legal Regime for AML (Anti Money Laundering) in India.

K.P.Krishnan, India on the FATF high table.

Kishori J Udeshi, Implementation of Basel II- an Indian Perspective.

Mark Pieth, The Prevention of Money Laundering: A Comparative Analysis,

6 Eur. J. Crime Crim. L. & Crim. Just. 159 (1998).

Peter J. Quirk, Money Laundering: Muddying the Macro-economy

Vijay Kumar Singh, Controlling Money Laundering in India-Problems and

Perspectives

Yatish Yadav, Madhu Koda and associates laundered staggering Rs 3536

crore.

Ajay Shaw, Evaluating Indias Money Laundering Legislations

Meghna Bhaskar, Benami Transactions (Prohibition ) Bill, 2011

V. Kumaraswamy, But Thats Not Mine!

Sanjeev Sirohi, Benami Transactions Prohibition Bill 2011 A Critical

Analysis

Vikash Yadav, PMLA 2002: Re-engineered

Vishwas Kumar, SC, CBI court reserve PC fate for Feb order

Miscellaneous Sources

Core Principles of Effective Banking Supervision, October 1999, Reserve

Bank of India.

UNODC on money-laundering and countering the financing of terrorism.