The term ‘money laundering’ originated from the Mafia cluster within the USA. Mafia groups earned large amounts of money from extortion, gambling, etc. and showed this wealth as a legitimate source (eg laundromat).
It is known that money laundering became a concern in the United States in the 1980s.
The term fur money laundering has created political upheaval in India. In India, “money laundering” is known as hawala transaction.
It was most popular in India during the 1990s when the names of several leaders appeared in it.
Definition of Money Laundering:
Money laundering refers to illegal money earned as illegal money. Money laundering is a way to hide illegally obtained money.
Through money laundering, money is invested in such activities or investments that investigative agencies are also unable to locate the main source of money. The person who earns money for money is called “launder”.
In money laundering, black money illegally earned comes back to its rightful owner in the form of legal money.
The refund process consists of three stages.
- 1. Placement
- 2. Layering
- 3. Integration
The first phase is the introduction of cash into the market. In this, the launderer deposits cash illegally earned money in financial institutions such as banks or other types of formal or informal financial institutions.
The second step in the second money laundering relates to hiding the ‘layering’ money. In it, Launder hides his real income by making disturbances and other suspicious transactions in the book of accounting.
The launderer deposits funds in investment instruments such as bonds, stocks, and traveler’s checks or their bank accounts abroad. This account is often opened in banks in countries that do not cooperate in anti-money laundering operations.
This is the last stage of the money laundering process. Through this process, the money or money sent to the country is returned to the launderer as valid money.
Such money often comes back through investing in a company, buying real estate, buying luxury goods, etc.
Example of money laundering
There can be many ways to do money laundering, one of the most important is “fake company” also known as “shell company”. Shell companies are a company like a real company
But in reality it does not own any property nor does it actually have any production function. In fact, these shell companies exist only on paper, not in the real world.
However, the launderer shows large transactions in the balance sheets of these companies. He takes a loan in the name of the company, gets tax exemption from the government, does not file income tax returns and through all these fraudulent actions, he accumulates a lot of black money.
If a third party wants to examine the financial records, then false documents are shown to the third party to confuse the investigation as to the source and location of the funds.
Other Methods of Money Laundering Include;
Buying a big house, shop or mall but showing less of its value on paper when the actual market value of that purchased property is too high;
This is done so that you have to reduce it. Thus black money is also raised through tax evasion.
Another method is money laundering when the launderer deposits his money in banks of many countries where the government of another country does not have the right to check his account.
The biggest money laundering examples example of this is Switzerland where a large number of Indians have black money deposited by money laundering.
On the basis of the above article, it can be said that the process of money-laundering is quite complex and clever, to prevent this, the government should develop infrastructure for payment through more and more electronic means.