Assocham says Need a Strong Comprehensive Anti-Money-Laundering Enforcement Agency

New Delhi: In the absence of comprehensive anti-money laundering enforcement agency, India in the wake of its growing financial strength is becoming more vulnerable to money laundering activities, despite its strict foreign exchange laws.

In a joint report brought out by ASSOCHAM and resurgent India on ‘money laundering and its  fall-out’,  it has stated that cyber finance is the growing concept in this developing economy and the pace at which the technology is growing is not matched up with the enforcement agencies.

The report says, there is a need for viewing the issue with the perspectives of money laundering on international forum and money-laundering within the country.  As far as the cross-border money-laundering is concerned India’s historically strict foreign-exchange laws and reporting norms have contributed to a great extent to control money laundering on the international forum.  However, there has been a threat from informal transactions like “Hawala”.

It is estimated that funds transferred through the hawala market are equal to between 30-40% of the formal market.  Due to the large number of expatriate Indians in North America and the Middle East, India continues to retain its position as the leading recipient of remittances in the world, followed by China and Mexico.

While releasing the study the Chamber spokesman said the growth of technology not only helped the common man but has proved to be a boon for these money-launders and India is not an exception to this.

Though India now has KYC norms in place in both money market and capital markets, but these norms have failed to control Hawala transactions, as RBI cannot regulate them.  Further KYC norms become less effective because of indifference shown by the implementing authorities.  Increased competition in the market requires and gives motivation to the banks to lower their guard on this score.

Also India has illegal black market channels for selling goods.  Smuggled goods such as food items, computer parts, cellular phones, gold, and a wide range of imported consumer goods are routinely sold through the black market.  By dealing in cash transactions and avoiding customs duties and taxes, black market merchant offer better prices than those offered by regulated merchants.

The report further states says the ASSOCHAM spokesman that unawareness about the problem of money-laundering among the common people is an impediment in having proper AML regime.  People in India, especially among the poor and illiterate, do not trust banks and prefer to avoid the lengthy paperwork required to complete a money transfer through a financial institution.  The Hawala system offers them same remittance service as bank with little or no documentation and at lower rates and provides anonymity and security.  This is because many don’t treat this to be a crimea and are not aware about the harmful effects of the crime.

Unfortunately money-laundering has now become hybrid and is not only related to NDPS case but many areas of operation.  Separate wings of the law enforcement agencies are dealing with digital crimes, money laundering, economic offences and terrorist crimes.  The agencies do not have the convergence among themselves but the criminals have.

ASSOCHAM says, Money Laundering is global problem and must attract global attention.  Without international cooperation money laundering cannot be controlled.  The criminals outsmart the enforcing agencies and deploy a team of experts having specific domain knowledge to disguise their illicit money and masquerade it as legitimate income.

Development of new high technology coupled with wire transfer of funds has further aggravated the difficulties to detect the movement of slush funds.  The international nature of money laundering requires international law enforcement cooperation to successfully investigate and prosecute those that instigate these complex criminal schemes.  Money laundering must be combated mainly be penal means and within the frameworks of international cooperation among judicial and law enforcement authorities.


Source: Assocham

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