Chaitanya AwasthiAIR 37 · CSE 2022 · 213 wordsTheir whole copy
Opening · a definition
Money laundering refers to a complex network of mechanisms used to hide illegal sources of income and make it appear legitimate.
Body · points
STEPS INVOLVED
- Placement → initial entry of money into a legitimate institution.
- Layering → Through complex transactions, money is rerouted several times using shell companies etc. to make it impossible to trace.
- Integration → The money is placed into legitimate business/personal investments (luxury goods etc.).
Developed Nations ↳ Despite strong legal checks and balances, countries otherwise 'developed' suffer from and at times facilitate money laundering by acting as important 'pit stop' in the chain. eg. Switzerland, Netherlands etc. ↳ key institutions like HSBC, Bank of America etc have been found involved in it. ↳ It is used as a mechanism of tax evasion denting country's possible resources.
Developing Nations ↳ Impact on such nations is greater due to fragile and vulnerable economies, weak institutions and shallow laws. ↳ Several social and economic costs: (1) Tax Evasion (2) Drug Trafficking (3) Illegal Arms (4) Terror Financing (5) Corruption and Parallel Economy
Close · a way forward
↳ Recent FATF list notes several developing nations as hubs of Money Laundering. eg. Sri Lanka, Argentina etc.
With an interconnected world, Money Laundering is a global problem which needs global regulation, coordination and will to be effectively eradicated.