Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

Anti-Money Laundering Laws in India

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Money laundering could be defined as the conversion of money that is illegally obtained, in order to make it appear from the genuine sources. Initially, the term “money laundering” originated from the mafia ownership of Laundromats in the United States, who earned money from extortion, gambling and from several other crimes and showed that money as a legitimate income. However, in India, Money laundering became a major matter of concern in the 1980’s.

There are several anti-laundering laws in the nation, which are made stricter in order to prevent money laundering in the nation.

India and Money Laundering

Dollars extracted from drug trade are reinvested throughout the world in different trades each year. The increasing profit generated from this criminal activity has created impulsion for the governments to take necessary legal actions against such activities. As per the recent statistics, the estimated amount of money laundered globally in one year is about 2 to 5% of the global GDP.

During the year 2011-2012, almost 35 stock brokers were probed by SEBI (Securities and Exchange Board of India) for the lapses related to money laundering, which in turn led to actions taken by the stock exchanges as well as the depositories against 300 market entities for violations as long as Anti Money Laundering (AML) rules are concerned.

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The contemporary situation of money laundering in India can also be evaluated through the Basel AML Index, prepared by the Basel Institute on Governance, Switzerland. As per the index score, each country is evaluated on the basis of AML laws, financial regulations, and political disclosures and alike. The overall score ranges from 0 to 10, while 0 indicates least risk, getting 10 on the score card means high risk. The index report made over 140 countries, India is ranked as 93rd with a score of almost 6.05, which indicates towards the fact that India is extremely vulnerable to money laundering.

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Measures to check Money Laundering in the nation

Constant efforts are being made by the Indian agencies and regulators to eliminate money laundering from the roots. The Financial Intelligence Unit –India (FIU) is responsible for managing Anti Money Laundering ecosystem, has contributed in coordinating and strengthening efforts in which could effectively stop money laundering and several such related crimes in the nation.

India, after being admitted as the 34th country member of the Financial Action Task Force (FATF), has helped the country’s enforcement agencies to exchange information. In addition, the membership to FATF has also helped Indian Financial Services to identify those areas that require strict supervision.

The Anti Money Laundering Laws

The prevention of the Money Laundering (Amendment) Bill came into being in the year 2011. The bill seeks to modify the principle act to update the provisions in order to strictly prohibit money laundering in the nation. The amendments were made by the Standing Committee on Finance for the better implementation of the law.

With this amendments made, it is likely to believe that the Anti Money Laundering laws would conform global standards. The crucial amendments made to the principal Act include:

1)Activities such as acquisition, possession, concealment should also be included in order to expand the definition of offence of money laundering.

2)Introduction of the concept of Reporting entity

3)The upper limit of fine in the principal law was 5 Lakhs, which has been removed

4)Special courts can release property in case of decision by a foreign court

5)Prosecution is no more for limited to the individuals but is extended to the companies

6)The monetary threshold that is applied to the offence of money laundering is being removed

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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