Model Question and Answers for APSC | Money laundering poses a serious threat to a country's economic sovereignty. What is its significance for India and what steps are required to be taken to control this menace?

Ans: Money laundering is a significant threat to India's economic sovereignty, as it can undermine the country's financial system and the integrity of its institutions. In addition to the financial implications, money laundering can also facilitate other criminal activities, such as terrorism financing, drug trafficking, and human trafficking.

Legislative Framework To Tackle Money Laundering:

• To control this menace, the Indian government has taken several steps in recent years, including the enactment of the Prevention of Money Laundering Act (PMLA) in 2002. This law establishes stringent measures for detecting and preventing money laundering, and also provides for the confiscation of illicitly acquired assets.

• Other laws to curb money laundering:

o The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA)

o The Smugglers and Foreign Exchange Manipulators Act, 1976 (SAFEMA)

o FEMA act 1973

Institutional Framework:

• Enforcement Directorate for investigation and prosecution of cases under the PML. The Directorate is under the administrative control of Department of Revenue for operational purposes

• Financial Intelligence Unit – India (FIU- IND) for receiving, processing, analysing and disseminating information relating to suspect financial transactions as well as for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies against money laundering. FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.

Way Forward:

• Other measures that can be taken to control money laundering in India include strengthening the regulatory framework for financial institutions, improving the supervision of non-banking financial institutions, increasing international cooperation, and promoting public awareness of the risks and consequences of money laundering.

• India should also consider investing in technology to improve its ability to detect and prevent money laundering. For instance, artificial intelligence and machine learning can be used to analyse financial transactions and identify suspicious patterns or anomalies.

• The use of blockchain technology can also help to increase transparency and accountability in financial transactions, thereby reducing the risk of money laundering.

Money laundering is a significant threat to India's economic sovereignty, but the country has taken steps to control this menace through the enactment of the PMLA and other measures. To further strengthen its anti-money laundering efforts, India should focus on improving its regulatory framework, promoting public awareness, and investing in technology to improve its detection and prevention capabilities.