Goseeko blog

What is money laundering?

by Uddipana Gogoi

Money laundering is the process of converting the illegally earned money  into legal one through some financial and non-financial institutions. however, such illegal sources of income may be drugs dealings, human trafficking, illegal arms dealing or any kind of illegal business activities. 


  1. Structuring- It involves the process of placing the entire amounts in different small proportions in different deposit avenues. 
  2. Bulk cash smuggling: It involves deposit of whole bulk amount in offshore banks which maintains high secrecy of accounts.
  3. Trade based : Under this method, the parties overvalued or undervalued the invoices to hide/manipulate the movement of money.
  4. Shell companies or trust: Under this method, formation of a shell company or trust which is not liable to disclose the name of the true owner.
  5. Round tripping: Here, tax havens are using as safe place for making deposits. Because such tax havens keep minimum records about sources of income, tax details etc. 
  6. Bank capture: Sometimes the money launderers purchase the controlling share in a bank. Then they use such banks for such purposes.
  7. Black salaries: Such money is utilizing for payment of salaries to unregistered employees without any contract. 

Prevention of Money Laundering in India

The Prevention of Money Laundering Act (PMLA), 2002 was enacted in January, 2003 and came into force with effect from 1st July, 2005. Thus, it is an the Parliament of India. The NDA government have enacted the act to prevent such activity and to provide for confiscation of property derived from money-laundering PMLA empowers certain officers of the Directorate of Enforcement to carry out investigations in cases involving offence of money laundering and also to attach the property involved in money laundering. Moreover, PMLA envisages setting up of an Adjudicating Authority to exercise jurisdiction, power and authority conferred by it essentially to confirm attachment or order confiscation of attached properties. 

The PML Act has three main objectives:

  • To prevent and control such activity.
  • To confiscate and seize the property obtained from the laundered money; and
  • To deal with any other issue connected with the matter in India.
  • The Act also proposes punishment under sec.4.

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