Money Laundering and

how it is linked with

Terrorist Activities

By
Akash Jindal
Money Laundering


 Money laundering can be described
as the process by which a person
conceals or disguises the identity
or the origin of illegally obtained
proceeds so that they appear to
have originated from legitimate
sources.

Terrorist Financing

 Thefinancing of terrorism can be

described as the process by which
a person tries to collect or provide
funds with the intention that they
should be used to carry out a
terrorist act by a terrorist or a
terrorist organization
Laundered Money may;

 exploit economic and financial

globalization
 have serious social consequences
 provide drug traffickers
 grow organized criminal groups
 grow arms dealers and other
criminals
 strike at the integrity of a country's
financial institutions.
 It distorts the operation of markets
Components of Money
Laundering

Tax
Integration
Placement
Layering
Heavens
Flight Capital
Techniques of Money
Laundering
Placement Layering
Getting Currency into the The movement of funds
financial system so as to from institution to
convert illicit funds institution to hide the
from cash straight into a source and ownership of
financial instrument or the funds, obscure the
bank account audit trail and sever the
link with the original
crime

Integratio
The n
reinvestment of those
funds in an ostensibly
legitimate business so
that no suspicion of its
origins remains and to
give the appearance of
legitimizing the proceeds
 Components of ML
techniques
Placement Layering Integratio
•Smurfing
•Tax Havens & n of haven bank
•Use
•Shipping Money Offshore Banks credit cards
Abroad
•Bank Secrecy Law •Receiving as
•Placement through as a layering consulting or
Banks tool directors fee
•Use of “Pass •Corporations & •Arrangement of
corporate loans
Through” or Shell Companies
“Payable Through” as a layering •Proceeds of
Accounts tool gambling
•Electronic Wire •Use of trusts •Real estate
transactions
Transfers
•Use of walking •Stock Purchase
•Insurance Products accounts
•Use of business
•Investment Related •Establishing self
Transactions owned bank •International
importing and
•NBFCs •Use of exporting
intermediaries
ML Cycle
Factors enforcing Money
Laundering
Ø Acceptance of flight capital by western
countries
Ø Laws and limitations of other countries
Ø
Ø
Ø
Ø
Ø Jurisdictional conflicts and lack of
international coordination
Cnti…

ØTax heavens as sanctuaries

ØOffshore corporations
ØHaving to prove fraudulent transfer

Conti…

Ø Bankings’ role in facilitation of the activity

Ø Bank Secrecy
Ø Volume and complexity of international
transfers of funds
Ø Internet based banking

Conti…

Ø Shortfall of reporting requirements

Ø Criminals influencing Government and
Bank support
Ø The widespread use and acceptance of
trade mis-pricing

ML as Business

Inventions /
Bulk e-mail
Patents

Multi Level Vanity Press

Marketing Publishing

Vending
Franchises
Machines
Scammed activities in
business
Business Internet
Bank Fraud
Loans Services

Cheque Fraud Counterfeiting Cramming

Fake Ads & Fraudulent

Supply Scams
Directories Orders
Job of money laundrer

A money launder's objective in

laundering ill is to : Get it out;
cover it up; bring it back

ML statistics

Contribution by different continents in ML(IMF

report data, year 2008)
Conti…

Contribution by financial sector in ML (IMF report data, year

2008)
ML case in
India( Hawala)
 'money
transfer without money
movement‘


 was developed in India



 Also
known as chop, chit , flying
money and underground bank
Main easons for increase
in ML
• Inspector Raj
• Dual Responsibility
• Undue Delay in Processes
• Excessive intervention by Judiciary
• Very less time in law making
• Considering of problem rather than cause of the
problem
• More interest before investigation but no interest in
concluding the cases
Some corrective
measures
• Understand the need for creation / modification of laws to curb /
eliminate opportunities for scams / frauds based on the
study of global scenario
• Ensure appropriate powers to law enforcement agencies
• Provide facility for 2/3 levels of appeal before any one approach
the judiciary
• Ensure time bound completion for the cases / designating case
officer
• Announce very severe punishment for committing the crime
• Introduction of Compulsory Operations Audit on a periodical
basis

Conti..

§ Utilize services of professionals such as

Chartered Accountants, Advocates &
Company Secretaries for conducting pre-
enquiries with regard to various indicators
available from news media

§ Be independent from every business not only

on paper but otherwise
§