Stages in money laundering- Meaning, Stages, Prevention

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Topic Content

1. Meaning Of Money Laundering
2. Stages In Money Laundering
3. Anti-money Laundering
4. Prevention Of Money Laundering
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1. Meaning of Money Laundering?

Money Laundering refers to converting illegally earned money into legitimate money. So Money Laundering is a way to hide illegally acquired money.

In the method of money laundering; money is invested in such a way that even the investigating agencies can’t trace the main source of wealth. The person who manipulates this money is called a “launderer”.

So the black money invested into capital markets or other ventures returns back to the real money holder as the legitimate money.

Read More: Types of bank fraud

2. Stages in Money Laundering

1. PLACEMENT STAGE:- The Placement Stage is when the proceeds of the crime make their initial entry into the financial system. This could be by smuggling cash, loans being paid off with the illegal proceeds, or for use in casinos to gamble, etc.

2. Layering Stage:- The Layering Stage is when criminals want to cut ties that could link the crime with the money. By layering financial transactions, they try to obscure any trail that the authorities could follow to find the origin of the money. They do this by moving funds around multiple accounts, splitting them into smaller amounts as they go, and transferring too many people and places.

3. INTEGRATION STAGE:- The Integration Stage is when the illegally obtained money is returned to the criminal. Having travelled through a number of financial transactions, the proceeds of the crime are now fully integrated into the financial system and can be used for any purpose.

3. What Is Anti Money Laundering?

Anti-money laundering refers to a set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.
Though anti-money-laundering (AML) laws cover a relatively limited range of transactions and criminal behaviours, their implications are far-reaching.

Anti-money-laundering laws and regulations target criminal activities including market manipulation, trade in illegal goods, corruption of public funds, and tax evasion, as well as the methods that are used to conceal these crimes and the money derived from them.

4. Prevention of Money Laundering

Prevention of Money Laundering Act, 2002 is an Act of the Parliament of India enacted by the NDA government to prevent money laundering and to provide for confiscation of property derived from money laundering. PMLA and the Rules notified there came into force with effect from July 1, 2005. The Act and Rules notified there under imposing an obligation on banking companies, financial institutions, and intermediaries to verify the identity of clients, maintain records and furnish information in a prescribed form to Financial Intelligence Unit – India(FIU-IND)

1. The Role of the FATF is to set standards for AML compliance laws globally and also promote effective implementation of anti-money laundering compliance. The FATF recommendations set out a comprehensive framework of measures that most countries implement in order to combat money laundering and terrorist financing.

FATF recommends legal entities to conduct Know Your Customer ID verification of clients by requesting and verifying the client’s Proof of Identity. It could be a genuine photograph of the client’s official document such as a passport

2. Bank Secrecy Act (BSA) is legislation created in 1970 to prevent financial institutions from being used as tools by criminals to hide or launder their ill-gotten gains. The law requires banks and other financial institutions to provide documentation such as currency transaction reports to regulators

3. Criminal Law Amendment Ordinance (XXXVII of 1944): Under this law, police can get the proceeds of crime relating to bribing, breach of trust, and cheating confiscated by an order of attachment and on completion of the criminal prosecution can get an order from court forfeiting the proceeds.

This ordinance was modified in 1946 and is responsible for proof to the accused. In the event of crime under the Prevention of Corruption Act, the implementation rests with the CBI. However, this law covers proceeds of only certain crimes such as corruption, breach of trust, and cheating and not all the crimes under the Indian Penal Code.

4. The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976: According to this law, there is a penalty of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith and incidental thereto. The application of this law is restricted to the persons convicted under the Customs Act, 1962 or Sea Customs A

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