Money Laundering in India

Money Laundering in India

India is a major international financial and legal centre, with a strong reputation for honesty and integrity. Unfortunately that is why financial and professional businesses, like banks and solicitors’ firms, are attractive to money launderers – criminals and politicians who sometimes try to hide stolen money and money received as bribe by turning it into legitimate income. The government has introduced measures:

What is Money Laundering?

Money laundering is the process by which large amounts of illegally obtained money (from drug trafficking, terrorist activity or other serious crimes specifically by politicians after granting projects or doing some favor to the corporate as in the case of Andhra pradesh ) is given the appearance of having originated from a legitimate source. But in simple terms it is the Conversion of Black money into white money. This takes you back to cleaning the huge piles of cash. Indian newspapers frequently report the money laundering scams perpetrated by the Political leaders and some of the prominent stars are the chief ministers of UP, Punjab and Kerala. UP chief minister ms. Mayawati as per the Indian Express reports used some innovative techniques to launder the money by avoiding the tax in legitimate manner. She accepted the donations from persons who were road side heroes. When CBI raided these guys were found in no position to donate huge sums for political motives.

Other Indian star in the laundering Business is Ketan Parekh. It is believed that he shifted the proceeds of money received from the BoI pay order scam to various tax heavens and ultimately in the Swiss Banks. These transactions are believed to be just the tip of the iceberg. If done successfully, it allows the criminals to maintain and have control over their proceeds and ultimately to provide a legitimate cover for their source of income. Money laundering plays a fundamental role in facilitating the ambitions of the drug trafficker, the terrorist, the organized criminal, the insider dealer, the tax evader as well as the many others who need to avoid the kind of attention from the authorities that sudden wealth brings from illegal activities. By engaging in this type of activity it is hoped to place the proceeds beyond the reach of any asset forfeiture laws.

The new scenario introduced into money laundering in India is Protected Shell company system. The chief Minster of Andhra Mr .Y.S.R had found this innovative method and there are allegations that some thousands of crores have been misappropriated.

A protected cell company is a corporate entity which holds assets in one or more segregated cells. The purpose of such a structure is to separate the assets in each cell from those in the other cells. In this way companies that are perhaps not large enough to form a captive in their own right may, for example, use a "captive"-type structure.
The assets of each cell must be kept separate and be separately identifiable from both the company's non-cellular assets and from assets attributable to other cells. In particular, cellular assets are only available to satisfy the creditors of the company, who are creditors in respect of that cell. He created some 14 companies and the funds were poured into the country through these companies. Thus he was successful in converting the entire black money into official white money.


As per IMF reports the turnover of this industry could be somewhere around $1.5 trillion. However common man does not pay attention because primarily it seems to be a victimless crime.

It has none of the issues associated with a vanishing of the money from economy or performance of the government or organizations involved in the same and yet, money laundering can only take place after a predicate crime (such as a Drug trafficking or the stock market frauds) has taken place. If the person on the street is the banker he might throw the three letters "KYC" to express his knowledge.