Money laundering is the illegal practise of making “dirty” wealth appears legitimate instead of poorly, and its prevention is urgently needed. Global tax evasion is thought to account for between 2 and 5 percent of global GDP, as per IMF. The ‘European Communities Directive and Convention on the Laundering, Search, and Confiscation of the Proceeds of Crime’ defines money laundering as the transition of property with knowledge that a particular piece of property is inferred from a heinous offence, concealing or camouflaging the illicit activity of the asset, or offering assistance to any individual who is involved in pledging such wrongdoings.
Money laundering is not a recent development; rather, it is a global issue. Tax evasion is covered by several international accords, and numerous initiatives have been started to solve this worldwide problem. These initiatives are discussed below-
- The Vienna Convention
This was one of the earliest programmes to stop financial fraud, and it took place in December 1988. This convention’s primary goal is to set out measures to combat financial fraud by requiring the member nations to make it a crime to conceal proceeds from drug smuggling. It also encourages global cooperation in inspections and establishes extradition amongst member states. Later, it also established the rule that local bank confidentiality laws shouldn’t obstruct extraterritorial criminal investigations. It imposes a need on member governments to make tax evasion from drug trafficking illegal. Additionally, it established the principle that national financial secrecy laws shouldn’t obstruct international judicial inquiries.
- The Council of Europe convention
It establishes a uniform policy on the issue of financial fraud, offers a standard definition of it, and offers methods for combating it. Additionally, it creates a framework for international cooperation among members, which may potentially include states with no formal ties to the Council of Europe. Improving international collaboration in the areas of analytical support, inspection, acquisition, and repatriation of the proceeds of all types of criminal activity, including narcotics trafficking, terrorism, and weapons smuggling, is the main goal of this pact. It creates a general criminal code for financial fraud.
- Basel Committee’s
The Basel Committee on Banking Regulations and Supervisory Practices announced its desire to encourage the financial industry to adopt a consistent strategy to ensure that financial institutions would not be used to conceal or dirty money earned via illegal or unethical activities in December 1988. That assertion, however, encompasses all forms of tax evasion through banking firms, including receipt, transfer, and any method of hiding proceeds from narcotics, violence, theft, and other crimes. It does not only refer to drug-related tax evasion. It also focuses on the industry in which no person will be allowed to use any financial system that engages in tax evasion of any kind. It released a “statement of principles” that member state international banks are required to abide by.
- Financial Action Task Force
The ‘Financial Action Task Force’ is an interdisciplinary organisation that was established in 1989 at the G7 summit in Paris with the idea and the objective of encouraging the smooth execution of any legislative, administrative, and tactical steps to fight the evil practises of financial crime. Several recommendations that meet global tax evasion criteria have been accepted by FATF. Eight special suggestions were suggested in October 2001, and a ninth special proposal on the development of global norms for countering the financing and terrorism financing was published in October 2004. These recommendations were however updated in the year 2012. A plan to write a report detailing the connections between financial crime is now being coordinated by the Financial Action Task Force (FATF) Secretariat in an effort to make it easier to apply global AML/CFT regulations. It keeps track of how its members are doing with their efforts to combat tax evasion.
- UN Global Program
It was established in 1997 with the intention of improving the effectiveness of all global initiatives to combat money laundering through services offered to governments for technical collaboration. Technical collaboration is the main goal of this initiative, which comprises initiatives like awareness-raising, training, and institution development. Additionally, it aims to support the development of financial investigation services to guarantee the efficient application of the law.
Interpol strives to maintain international security with the cooperation of local police agencies all over the world. Interpol is crucial in locating criminals, carrying out joint inspections, building capacities and giving training, exchanging information with authorities, and granting them access to data.194 member countries are now a part of the International Criminal Police Organization, which was established in 1923. The Interpol Money Laundering Automated Search Service (IMLASS) was developed by Interpol to support anti-money laundering initiatives by creating a database, locating, linking, and recognizing culprits and individuals from all over the world, as well as tracing the movement of illicit funds.
Legal Framework in India
- Money Laundering Bill
India has enforced the Prevention of Money Laundering Bill, 1999, which defines tax evasion as the act of attaining, acquiring, or owning any criminal proceeds and purposefully engaging in any deal involving a wrongdoing listed in IPC, 1860. India is a signatory to the United Nations Resolution, 1998, which considers on member states to take serious actions against financial fraud. The legislation aims to outlaw and control illegal financial activities drug dealing, opioids, and other crimes.
- Prevention of Money Laundering Act, 2002
In an effort to combat tax evasion and penalize those who profit from it, this Act was introduced in 2002. This law made it possible for our state or any other legitimate public authority to seize any asset obtained via illicit means or with illegal funds. According to this statute, the Financial Intelligence Unit carefully examines all the data to identify any fraudulent activity, if any, and the Enforcement Directorate then conducts the inquiry.
Artificial intelligence and big data are two equally sophisticated anti-money laundering techniques that need to be used to combat the rising dangers of money laundering enabled by developing technology. To successfully combat the issue of money laundering, local and foreign parties must collaborate through enhancing data sharing channels among them.
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