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India gets tough on money launderers

The Indian Government has serious concerns over the prevalence of money laundering and as a prime target for terrorist attacks, the anxiety is to stem the trend and prevent money going into the hands of terrorists.

Finance Secretary Ashok Chawla briefly touched on the subject in response to an Indian Newslink query during a press conference in Auckland on September 17 (see related story in this section).

“This is now a major issue concerning the (Paris based) Financial Action Task Force (FATF) of which 34 countries and territories are signatories. We are of course concerned and taking steps to prevent its proliferation,” he said.

India was admitted to the Task Force at its meeting held in Amsterdam in June 2010.

Key recommendations

FATF made a number of key recommendations to combat money laundering, the foremost of which was the need to address the technical shortcomings in the criminalisation of both money laundering and terrorist financing and in the domestic framework of confiscation and provisional measures.

“India should broaden the Customer Due Diligence obligations with clear and specific measures to enhance the current requirements regarding beneficial ownership. The country should also improve the reliability of identification documents and the use of pooled accounts,” it said.

The Task Force also recommended that the Indian Government should extend the provisions of the Prevention of the Money Laundering Act to the full range of Designated Non-Financial Businesses and Professions.

“India’s serious commitment to combating terrorism in all its forms must be acknowledged. From a law enforcement perspective, this commitment is reflected in an active pursuit of the financial aspects of terrorism. However, this effort has not yet been convincingly followed up by convictions and firm case law,” A Task Force report said.

Indian statutes

There are several statutes relating to the issue in India. These include ‘The Foreign Exchange Regulation Act (FERA), 1973, ‘The Prevention of Money Laundering Act (PMLA) that came into force in 2005; the amended version of ‘The Unlawful Activities Prevention (UAPA) Act in 2008.

The UAPA provisions are in line with the requirements of the United Nations Convention for the Suppression of the Financing of Terrorism (FT Convention).

While money laundering has always been a serious crime since it perpetrates hidden income, tax evasion and creates a parallel economy, it has acquired proportions that are more sinister since the terrorist attacks of 9/11 and the subsequent bombings in Bali, Spain and London. India has been a victim of cross-border terrorism, prompting the Government to put in place several mechanisms to combat the menace.

Analysts say that India increased its focus on money laundering and use of the legal provisions since last year.

“However, there are still some important and in some instances, long-standing legal issues, such as the threshold condition for domestic predicate offences that remain to be resolved. Effectiveness concerns are primarily raised by the absence of any related convictions,” they said.

India has progressively expanded and strengthened its preventive measures for the financial sector, which now apply to all but one of the financial activities required to be covered under the FATF standards. However, several preventive provisions need to be brought more closely into line with the FATF standards, and overall, more time is needed before all requirements are substantially implemented.

According to the International Monetary Fund, the aggregate size of money laundering in the world could be between $US 725 billion and $US 1.8 trillion.

In New Zealand, crime generates proceeds of $500 million to $1 billion every year.

The New Zealand Parliament passed the Anti-Money Laundering and Countering the Financing of Terrorism Bill last year to meet FATF obligations.

Read our editorial, Time to clean out money launderers

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