India: The Misuse and Abuse of Legal Provisions in Money Laundering
| Date | 01 February 1997 |
| DOI | https://doi.org/10.1108/eb027139 |
| Published date | 01 February 1997 |
| Pages | 194-198 |
| Author | B.V. Kumar |
| Subject Matter | Accounting & finance |
India
India: The Misuse and Abuse of Legal Provisions
in Money Laundering
B. V. Kumar
Billions of dollars of black money moves through
the world's financial institutions as part of a con-
fluence of grey money, as bankers call it. Most of
this is profits generated from criminal enterprises
— organised crime, economic crime, drug traffick-
ing and terrorism. This dubious laundered cash,
amounts to an estimated $1trn or more each year.
According to British Intelligence estimates, some
$500bn may have been laundered world-wide last
year. Half of that may perhaps have come from the
illegal trade in drugs, the rest from other forms of
organised crime and terrorism.
With the formation of the World Trade Organi-
sation and the constant pressure that is being
exerted by the World Bank (IBRD) and the Inter-
national Monetary Fund on developing countries,
many of them have liberalised their import control
regimes, foreign exchange regulations and have
gone further in lowering their tariff and non-tariff
barriers. The developing countries were forced to
succumb to such pressures in view of their adverse
balance of payments position and their continued
dependence on International Financial Institutions
for their short-term and long-term credit to meet
their international financial obligations.
Money laundering is a term used to describe the
process whereby cash generated in illegal and
criminal activities is converted to an alternate form
in a manner which conceals its origin, ownership
or other potentially embarrassing factors. While
laundering schemes can be of varying degrees of
sophistication, all are designed to accomplish the
same purpose — to obscure and if possible to
obliterate the audit trail. The infinite varieties and
modus operandi
followed to launder black money is
only limited by the creative imagination and
expertise of the entrepreneurs who devise such
schemes. Money laundering actually involves two
distinct types of process. In the first and most
limited sense, the term describes the conversion of
cash by exchanging a volume of illegally earned
currency for some type of negotiable instrument or
other asset that can be used in commerce without
revealing the illegal source of the funds used to
purchase it. This mode of laundering appears to be
popular with criminals at the lower levels of
traf-
ficking or by criminal organisations who prefer to
spend their earnings quickly, and among new
entrants to the trade who are unfamiliar with the
multiple investment opportunities available with a
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