India – U.S. Anti-Money Laundering Dialogue

Context- Recently, India and the United States co-chaired the India-U.S. Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Dialogue in New Delhi.

Key Highlights 

• The India-US Anti-Money Laundering and Counter-Terrorism Dialogue reinforces the commitment of India and the US to work together to address illicit financial risk in the international financial system.  
• It also aims to improve cooperation and information sharing to  combat sanctions evasion and terrorist financing in the region and globally.  

What are Financial crimes? 

• Economic crimes are criminal activities carried out by individuals or criminal organizations to obtain financial gain through illegal methods, such as drug trafficking, human trafficking or terrorism. 
• Examples: terrorist financing, money laundering, corruption, etc.  

What is money laundering? 

• Money laundering is the illegal process by which large sums of money resulting from criminal activity, such as drug trafficking or terrorist financing, appear to  come from a legitimate source. 
• Money obtained from  criminal activities is considered dirty and in this process  it is cleaned. 

Consequences of money laundering 

• Damage to financial systems: Illegal funds entering the financial system can distort economic activity, create unfair competition and undermine confidence in financial institutions.  
• Social consequences: Illicit funds can be used to incite conflict, support terrorism or finance other activities that harm society. 
• Loss of control over monetary policy: Illicit funds moving through the financial system can distort economic indicators, making it difficult for policymakers to make informed decisions.  
• Threat to global security: The financing of terrorism and the spread of weapons of mass destruction (the provision of funds or financial services for the acquisition of nuclear, chemical or biological weapons) pose a threat to national security. 

Global measures to fight money laundering 

• Anti-Money Laundering Task Force (FATF): This is a 39-member intergovernmental body established at the  G7 Summit in Paris in 1989, whose main responsibility is to develop global standards to combat money laundering and terrorist financing. 
• United Nations Global Program Against Money Laundering (GPML): GPML was established in 1997. The aim is to strengthen the capacity of Member States to fight money laundering and to help them deprive individuals of the proceeds of crime. 

India is taking action against money laundering 

• Prevention of Money Laundering Act, 2002 (PMLA): The PML Act aims to combat money laundering in India and has three main objectives: 
  • Prevents and controls money laundering 
  • Confiscate and confiscate  property obtained from  laundered money; and 
  • To deal with all other matters related to money laundering in India.  
• Financial Intelligence Unit of India (FIU-IND): FIU-IND is a central  agency responsible for receiving, processing, analyzing and disseminating information related to suspicious financial transactions. It acts as a coordinating body in the fight against money laundering and related crimes. 

Way Ahead

• Technology and data analysis: The use of advanced technology, including artificial intelligence and machine learning, can improve the ability to detect patterns and anomalies in financial transactions.  
• International cooperation: Strengthening cooperation between countries, law enforcement agencies and financial institutions can improve the tracking and prosecution of money launderers worldwide.

Source:PIB

Practice question:

Q. Give out the major sources of terror funding in India and efforts being made to curtail these sources. In the light of this, also discuss the aim and objective of the ‘ No Money for Terror [NMFT]’ Conference recently held at New Delhi in November 2022.(2023)

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