Money generated through illegal means is laundered through various means including real estate and election campaigns in India, a report of the US State Department has said.
“High-level corruption both generates and conceals criminal proceeds. Illicit funds are often laundered through real estate, educational programs, charities, and election campaigns. Companies use trade-based money laundering to evade capital controls,” the International Narcotics Control Strategy Report 2012 has said.
The report, which was published in March this year covering 2011, noted that India is a significant target for both domestic and foreign terrorist groups.
The report mentioned that about 86 lakh counter terrorist financing (CTR) and 20,698 Suspicious Transaction Report (STR) were reported between April 2010 to March 2011. India is a regional financial centre, with a rapidly growing economy and well-developed formal and informal financial systems.
“India’s extensive informal economy and remittance systems, porous borders, persistent corruption, and onerous tax administration and currency controls contribute to its vulnerability to economic crimes (including fraud, cyber crime, and identity theft), money laundering, and terrorist financing,” it said.
According to the report, tax avoidance and the proceeds of economic crimes are the mainstays of money launderers in India, but laundered funds are also derived from narcotics trafficking and trafficking in persons, trans-national organised crime, illegal trade and corruption.
“Trans-national criminal organisations use offshore corporations and trade-based money laundering to conceal the proceeds of crime. Criminal networks exchange high-quality counterfeit currency for genuine notes, which facilitates money laundering,” it said.
The country’s porous borders and its location between heroin-producing countries in the Golden Triangle (Southeast Asia) and Golden Crescent (Southwest Asia) make it a frequent transit point for drug trafficking.
The proceeds from Indian-based heroin traffickers re-enter the country via bank accounts, the hawala system and money transfer companies, the report said.
“Several indigenous terrorist organisations coexist in various parts of the country; many are linked to external terrorist groups with global ambitions. Terrorist groups often use hawaladars and currency smuggling to move funds from external sources to finance their activities in India.”
“Indian authorities also report they have seized drugs sold by India-based insurgents to production or trafficking groups in neighbouring countries,” it said.
STR covered entities included banks, insurance companies, housing and non-banking finance companies, casinos, payment system operators, authorised money changers and remitters, chit fund companies, charitable trusts that include temples, churches and non-profit organisations and intermediaries including stock brokers.
There were a total 36 instances of money laundering criminal prosecution or conviction between April 2006 and March 2011, it said.
The report expressed concerns over lack of effective implementation of existing laws to check crime related to money laundering.
“Since Parliament has not yet approved the draft Prevention of Money laundering Act (PMLA) amendments, India lacks both effective criminal asset forfeiture provisions and conspiracy laws.”
“Moreover, effective implementation of the current law remains a significant concern. Despite increased law enforcement resources, as of April 2011, there were still no money laundering convictions or confiscations. Law enforcement typically opens substantive criminal investigations reactively, after an offense is discovered, and seldom initiates proactive analysis and long-term investigations,” it concluded.
