black money and money lau

8/4/2019 black money and money lau

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Internationalbanking andfinance

Prepared by

Mohit Makhija

Roll no. 29


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What is the effect of black money on the IndianEconomy?

What is Black Money?

The money generated through any or all unrecognized and illegal sources,

be it from land, corruption, fraud or any other unfair mean is collectively

trashed under the label of Black Money by the law of any country.

The law declares every single penny earned from an unsolicited and

unrecognized source as a part of Black Money.

Sources of Black Money in India:

In such a large country as India which may be called semi-developed while

stats say that it's still developing due to the parasite that has stuck its

economy very badly. Yes, it's the corruption, the largest threat to any

country's financial, political as well as social structure.

This corruption only is the major source of black money in India. While

corruption maybe in any form viz. properties, assets, costly gifts (mostly

linked with high ranked officials and provided by the business class

personalities for keeping the noose around their heads loose). All these

forms are directly or indirectly responsible for increasing the black money of

a country such as India. The person who possesses these things obviously

possesses their worth as well. So, he has a property or asset in his

possession that came from some unknown source (as considered by the law)

clearly violating the terms for valid or recognized money. While this is just a

specific example concerning a particular category of the system where

corruption and black money join hands, there are many more suchmajor

sources of black money in India.

Hence corruption and black money are like two faces of a coin while being

illegally supportive towards the growth of each other. So, if we look for thesources of corruption we automatically get the sources of Black Money.

Still there are sources of Black money which can't be called as a product of

corruption and I've mentioned these here in my article Sources of corruption

in India.
http://www.indiastudychannel.com/resources/142360-Sources-Black-Money-India.aspx/http://www.indiastudychannel.com/resources/142360-Sources-Black-Money-India.aspx/http://www.indiastudychannel.com/resources/142360-Sources-Black-Money-India.aspx/http://www.indiastudychannel.com/resources/142360-Sources-Black-Money-India.aspx/http://www.indiastudychannel.com/resources/142360-Sources-Black-Money-India.aspx/


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Impact of black money in India

Its absolutely a shocking fact that around $1.4 trillion Indian money is in

the Swiss Banks. In fact it is the largest amount that any country of the

world has deposited in the Swiss banks. This is certainly a thing worthwondering because nearly whole lot of this money is the Black money of

India.

Even the bank authorities have agreed that out of all most Black money

deposited in the Swiss banks is from India only.

Now that we considered the sources of Black money, we also need to discuss

the various Impacts of Black money in India and also the impact of Black

money on Indian economy.

One might wonder as to what might happen if all that Black money comes

back and what amount would each citizen get if its distributed. Although thefigures are remarkably high yet another aspect of the scene is that this

much government money is lying there. So, we are already short of 1.4

trillion dollars that had to be in governments deposits or the country's

revenue while its not in any way being utilized by the country.

What a loss this is to the Indian economy!

What more, this black money menace is not yet stopped, that means we are

still suffering every second a loss in one form or another. How will India

develop if the money-minded corrupt people keep on converting government

money into their personal black money!

Due to this large scale corruption the development of even the basic

necessities is taking so much time. Leaders promise that a bridge will be

built within a year while the funds issued for the same vanish so quickly into

the pockets of the people involved at various levels that for two years not

even two pillars of a bridge are constructed. This way so many other things

like development of roads, repair works of highways etc also take so much

time. Even our National Highways are ruined at so many places but the

contractors and the big guns of the country don't bother until some tragedyforces them to take action.

Hence the basic and the most important impact of black money in India is

the under-development of the country. The pace at which the country should

be developing is much lower than the present pace thanks to the black

money that attracts the authorities.


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Another impact of Black money in India is that due to corruption the

employment opportunities also decrease and so the youth particularly the

poor unemployed ones who fail to find a means to make their living get

seduced by the illegal acts like smuggling, piracy etc and this is the reason

for the birth of so many criminals each day. These youth feel the lust of

earning quickly and as much as they can but they forget that they are not

doing anyone else's loss, it's their own country's loss.

The impact of Black money in India is quite common to observe with the

prices rising each day, increase in the number of criminal activities,

gambling becoming more popular, piracy being done publicly, govt

employees taking unnecessary benefits of their positions by taking higher

bribes, politicians becoming more and more ignorant towards development,

etc.

If the situation continues to get worse, one day will come when the poor

people won't have anything at all and the country will be seeing its worst

ever time, much worse than the pre-independence era even.

Ways to curb the Black money menace in India

With the present setup, India won't be able to alter the levels of Black

money generation in India anytime in the near future because from the roots

to the top it's the Black money that is being transpired. The Baba Ramdev's

campaign failed to do any significant modification because of this fact only.

How can the politicians agree to bring back the money from the Swiss banks

when even they have their shares in it?

Also the rich entrepreneurs of the country have their major shares there and

these only are the supporters of so many parties. The rich people are always

involved in investing for these corrupt politicians then how come politicians

stop their own funds by giving their consent for bringing it back.

It was already known that the govt can never agree to bring back those 1.4trillion dollars.

What we need is a total reform in the setup. Corruption needs to be checked

upon from the roots or the beginning levels only. If the lower order of the

society like the police officials does their duty honestly, so many large scale


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scams can be prevented from even starting. The need of the hour is to track

the roots of the Black money plant and cut them. Take into account the

various sources of Black money and make these vanish and surely the

country's money will be protected. Still there are so many people in the

society who do corruption only because if they don't, they are transferredfrom one place to another meaninglessly. The find their hands tied because

there is no one listening.

Why not frame a tested and trained task force for the complaints of the

general public regarding the black work being done in various areas and

equivalent action is taken without prior notice of the corrupt politicians. Give

someone the power over the Chief Minister and I wonder in a month how

that state will progress.

Its easy to put the burden of clean-up of the system on the youths but when

the hole pond is dirty, a clean fish can't even stay clean itself, cleaning the

pond is still a second thing. If a person decides that he will rise against the

corrupt, he is stopped by all possible means by the bigger giants including

the murder of that person if situation persists. We have many examples of

the same too. Still there is honesty in people who are in politics but there

are very few of them and they are doing the best they can but alone a

person can't stand so much burden for long so whatever we are willing to do

we should never force it alone, do it in a such a way that the people

themselves join you into a movement to change the course of things.

One day or the other the earning of Black money in India will be stopped,

why not we just work hard to convert tomorrow into that special day!


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Money laundering

Introduction

It is well known that black money has been the bane of governments in thedeveloping world, depriving them of much-needed tax revenues and

crippling their already-burdened economies. But the impact of black money

and its laundered equivalent is far more onerous than mere tax evasion in

developing countries, and its tentacles extend globally into the illegal arms

trade, drug trafficking and the funding of terrorism worldwide.

In general, money laundering follows a three-stage process. First comes

placement, where black money is injected into the financial system. Then

comes layering, when money is layered or spread across multiple entities, inorder to conceal the identity of the source. The last stage is integration,

which is routing the money back to the original entity through legal

channels.

KPMG, a leading management consulting firm, has estimated that funds

worth anywhere from $590 billion up to a staggering $1.5 trillion are

laundered annually through the global economy, amounting to 2-5 per cent

of global GDP. Closer home, estimates on the amount of black money in the

Indian economy vary from 20 per cent to 40 per cent of India's total GDP.

Effects of money laundering

Money laundering constitutes a serious threat to national economies, and

respective governments. Economic crimes can have a devastating effect on a

national economy since potential victims of such crimes are far more

numerous than those in other forms of crime. Economic crimes also have the

potential of adversely affecting people, who do not, prima-facie, seem to be

the victims of the crime. For example, tax evasion results in loss of

government revenue, thus affecting the potential of the government to

spend on development schemes thereby affecting a large section of the

population who could have benefited from such government expenditure. A

company fraud not only results in cheating of the people who have invested


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in that company but may also adversely impact investors confidence

thereby affecting the growth of the economy. There have also been

instances of manipulation of stock markets resulting in the loss of a

substantial amount of assets of the small investors. Corruption not only

results in loss of citizens rights but also has the potential of ruining themoral fabric of the society. Therefore, economic crimes constitute a serious

threat to the national economy and system of governance.

Being aware of the incessant increase and rich variety of forms of economic

crime, the impressive sophistication of money laundering operations and

techniques, It deems as necessary the acknowledgment of each

governmental strategy, so far pursued, in order to counter the offensive of

organized economic crime.

The establishment of a reliable legal system composed of deterrent

measures against organized crime, including money laundering, marks a

major step forward, which many countries should take in defining their

viable national strategies.

The international community is putting in place stringent regulations to

combat money laundering, and pressurizing the banking industry to comply

with the implementation of these regulations.

The Political Declaration and Global Programmed of Action, annexed to the

resolution S-17/2 was adopted by the General Assembly of the United

Nations at its seventeenth special session on the twenty-third day of

February, 1990. The Political Declaration adopted by the Special Session of

the United Nations General Assembly held on 8th to 10th June, 1998 calls

upon the Member States to adopt national money-laundering legislation and

programmed;

Indian government considered necessary to have an Act to prevent money-

laundering and to provide for confiscation of property derived from, or

involved in, money-laundering and for matters connected therewith or

incidental thereto, hence passed the PREVENTION OF MONEY-LAUNDERING

ACT, 2002, [Act No. 15 of 2003].


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Sections of MONEY-LAUNDERING

Section -3 defines money laundering as Whosoever directly or indirectly

attempts to indulge or knowingly assists or knowingly is a party or is actually

involved in any process or activity connected with the proceeds of crime and

projecting it as untainted property shall be guilty of offence of money-

laundering.

Section 4 provides for punishment for money-laundering that Whoever

commits the offence of money-laundering shall be punishable with rigorous

imprisonment for a term which shall not be less than three years but which

may extend to seven years and shall also be liable to fine which may extend

to five lakh rupees:

section -5 empowers the authority and enforcement agency to attach the

immovable property / movable property. The said attached property shall

vest in the central government upon adjudication.

Section 41 clarify that no civil court shall have jurisdiction to entertain any

suit or proceeding in respect of any matter which the Director, an

Adjudicating Authority or the Appellate Tribunal is empowered by or under

this Act to determine and no injunction shall be granted by any court or

other authority in respect of any action taken or to be taken in pursuance of

any power conferred by or under this Act. Section 43 provides upon

considering the technical nature of offence for establishment of special

courts for speedy disposal of cases.

Consequence of money laundering

The trend of increasing scale of organized economic crime, including money

laundering, is strongly believed to be a direct consequence of the followingmajor causes.

1. The failure of national legislation to meet the up-dated standards and

norms on fighting organized economic crime, including money laundering.

2. Inadequate level of local legislation to resist the offensive nature of


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organized economic crime, including money laundering.

3. The lack of preparedness of the present financial - institutional framework

in many countries and ineffective investigative practices to deal effectively

with the complexity of the nature of money laundering.

4. The poor performance of law enforcement agencies, on account of the low

level of authority and means provided to them.

5. An ineffective system of mutual legal assistance has been found to be

another factor hindering the tackling of transnational organized economic

crime, including money laundering.

6. Fictitious bank accounts are often used as tools to commit fraud and

money laundering, and cell phones and the internet are frequently used for

committing fraud and drug offences. Therefore, such tools that are often

used to commit the above crimes need to be controlled properly. In addition

financial institutions, telephone carriers and internet service providers should

take responsibility for preventing their services from being misused as

criminal tools.

FUTURE CHALLENGES

It is concluded that joint efforts made by each country, in developing a

reliable strategy of a vigorous domestic enforcement of law as well as

international cooperation, is the most effective means to cope with problems

related to economic crime, including money laundering. It would also be

beneficial to adopt some of the following measures:

1. First and foremost it is important that the number of state parties to the

TOC convention should be increased.

2. Borderless criminal justice is essential in order to deal with borderless

economic crimes including money laundering. Group 2 considers it necessary

that any sense of serfdom embedded in the criminal justice system of each

country be removed.

black money and money lau

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