What is Money Laundering in India? Hawala, PMLA, NDPS, and all you need to know

Money Laundering refers to conversion or misrepresentation of money which has been illegally obtained by unlawful sources and methods. conversion is done in such a way that it appears to have originated from a legitimate source and method. tably, phrase 'money laundering' originated from mafia ownership of Laundromats in United States in 1920s and 1930s as organised criminals earned hefty amounts from extortion, gambling, etc and altered source for sum. 

Money laundering in India

In India, term money laundering, which includes Hawala transactions, gained momentum during early 1990s when a number of bureaucrats, investors, businessmen and politicians were found to have indulged in practice and were caught in its net. oretically, hawala transaction, an alternative or parallel remittance system, dates back to Arabic trers as a means of avoiding ft. system was initiated to include transfer of money or information between two persons and included a third person in transaction. For instance, if a person based overseas wants to send money to ar person in India, y may hand it to a middleman. That middleman n asks ar middleman in India to hand over predecided sum to eventual beneficiary. This circumvents transfers via formal channels and everything y entail, such as records, invoices and charges, if any. 

Predating western banking system, hawala transactions facilitated conversion of money from status of being legal to illegal; from being white money to black money. Black money refers to amount earned, secured on which income and or taxes have t been paid or established. 

goal behind misdeed is to multiply and hide unlawful activities to generate profit. Money laundering is a criminal offence in India and charges in this instance refer to statutory provisions of Prevention of Money Laundering Act, 2002. process of vancing criminal proceeds to disguise illegal origins, activities, earnings in a bid to seek profit. Illegal arms sales, insider tring, drug trafficking, smuggling, embezzlement, bribery, computer fraud scheme and or organised crimes create incentives to legitimize unaccounted for money and illegal gains. 

Here are FAQs on Money Laundering in India

• What is extent of applicability of PMLA?

PMLA and Rules are applicable to all persons which include individuals, companies, firms, partnership firms, associations of persons or incorporations and any ncy, office or branch owned or controlled by any of above-mentioned persons. 

• What is objective of PMLA?

PMLA seeks to combat money laundering while preventing or controlling it or confiscating/seizing property obtained from laundered amounts and to deal with issues related to it. Punishment under Act is provided as under section 4 of statute. 

• What constitutes an offence of money laundering under PMLA?

Any person who directly or indirectly attempts to indulge or kwingly assists or is actually involved in any activity connected to proceeds of crime is guilty of offence of money laundering. Concealment, possession, acquisition or use and projecting or claiming untainted property is an offence under PMLA. 

• What is punishment for offence of money laundering?

PMLA provides for rigorous imprisonment for at least 3 years which may extend up to 7 years along with a fine. In instances of money laundering in relation to Narcotic Drugs and Psychotropic Substances Act (NDPS), sentence may extend to 10 years too. Accordingly, if a company has committed a money laundering offence, n every member in charge and responsible for conduct of business and profit-making will be deemed to be guilty and will be liable to be punished via legal proceedings conducted by Enforcement Directorate.