Mains Focus – 3rd April 2025
Question
Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. [10 Marks, GS Paper 3, 2021]
Answer
Money laundering is the process of disguising the origins of illegally obtained money to make it appear legitimate. Emerging technologies and globalisation have significantly complicated efforts to detect and prevent such illicit financial activities.
Emerging technologies like cryptocurrencies, blockchain, and digital payment systems offer anonymity, decentralization, and rapid cross-border transactions. While these innovations have legitimate uses, they are often exploited by criminals to move funds without detection. The use of privacy coins, mixing services, and decentralized finance (DeFi) platforms makes it harder for regulators to trace transactions.
Globalisation has led to increased integration of financial systems, liberalized capital flows, and expansion of multinational corporations. These developments, while economically beneficial, have created a complex web of cross-border transactions that can be exploited for layering illicit funds. Offshore tax havens, shell companies, and trade-based money laundering are common practices in a globalized economy.
National Measures:
- Legislation: India’s Prevention of Money Laundering Act (PMLA), 2002 empowers authorities to investigate, seize, and prosecute offenders.
- Institutions: The Enforcement Directorate (ED) and Financial Intelligence Unit (FIU-IND) monitor and investigate suspicious financial activities.
- Technology: Implementation of AI-based transaction monitoring and data analytics by banks improves real-time detection.
International Measures:
- FATF: The Financial Action Task Force sets global standards on anti-money laundering (AML) and counter-terrorist financing (CFT).
- Egmont Group: Facilitates information exchange among financial intelligence units globally.
- Bilateral treaties: Mutual Legal Assistance Treaties (MLATs) help in cross-border investigations.
- Conclusion: While technology and globalisation pose challenges, they can also be harnessed to build smarter regulatory systems. A coordinated global effort with robust legislation, enhanced surveillance, and technological upgrades is essential to combat the menace of money laundering effectively.
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