India and Anti Money Laundering Measures: A Critical Study of Legislation & Its Enforcement

Abstract

Money laundering is the process that criminals use to erase the connection between the crime and the money concealing the criminal source of the funds. The money laundering process has three stages viz., (a) placement, (b) layering and (c) integration. In the initial placement stage, the launderer produces its legal profits into financial system by breaking up large amounts of cash into unsuspicious smaller sums. In the layering stage, the launderer engages in a series of conversions or movements of the funds to distance those from their original source. After successful processing of criminal profits through first two phases, the launderer moves those to integration stage, so that the funds enter the legitimate economy. Money laundering has a very bad impact not only on the national financial infrastructure but it also crumbles the international financial system. This paper aims to analyse the current state of money laundering laws in India, offer a critical assessment of the enforcement machinery, investigate whether the laws as written correspond to the actual situation on the ground, and determine the amount of work needed to implement the necessary changes so that the legislation can be effectively enforced.