Daily Answer Writing And Mentorship Program


Q: Discuss how technologies are helping in detecting and preventing money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (15 Marks, 250 Words)

                                      For Answer Submission Please Join the Telegram Group: Click here to join the Group

Money laundering is the process of hiding the source of money obtained from illegal sources and converting it to a clean source, thereby avoiding prosecution, conviction, and confiscation of the criminal funds. It is an illegal exercise that converts black money into white money.

Role of technology in detecting and preventing money laundering:
· Artificial Intelligence can identify patterns of transactions, behaviours, and anomalies rapidly, which helps in analysing the results, investigating root causes and prevent money laundering.
· Big data has enabled organisations to move away from just tracking financial crime at a transaction level and to ‘map out’ strings of transactions, which allows easier tracing of original sources of illicit activity.
· With big data, financial institutions gain a clearer understanding of the trail of illicit gains from illegal activities and tracing individuals, entities and supply chains involved in the laundering process.
· Anti-Money Laundering screening software help financial institutions check the details of sender and receivers. Any doubtful individual can be red-flagged and promptly tracked.
· Machine Learning (ML) helps organisations and government agencies in detecting and understanding the evolving methods and patterns used by launderers and devise the strategies accordingly to prevent them.

Measures to tackle the problem of money laundering:
At national Level:
· Foreign Contribution Regulation Act to regulate and scrutinise the foreign funding of persons and institutions/ organizations in India.
· The prevention of Money Laundering Act (PMLA) to combat the menace of money laundering.
· PMLA allows the Central Government to enter into an agreement with foreign governments for enforcing the provisions and exchange of information for the prevention of any offence under PMLA.
· Linking of bank accounts with PAN card and Aadhaar for better tracking of financial transactions.
· PAN card has been made mandatory for any transaction above Rs. 50,000.

At international levels:
· United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988 was the first major initiative in the prevention of money laundering.
· Forty Recommendations of the Financial Action Task Force on Money Laundering, 1990

  • Basel Committee on Banking Regulations and Supervisory Practices to to guarantee that banks are not used to hide or launder money obtained via illicit or unlawful activity.
    · The council of Europe Convention creates a common policy on the subject of money laundering, provides a common description of money laundering, and provides means for dealing with it.
    · Financial Action Task Force on Money Laundering with the goal of establishing high standards and promoting the efficient implementation of legal, regulatory, and operational measures to combat money laundering and terrorist financing.
    · Interpol created the Interpol Money Laundering Automated Search Service (IMLASS) to aid anti-money laundering efforts by building a database and tracking, connecting, and identifying suspects and tracking the flow of unlawful funds.
    · Political Declaration and Global Program of Action adopted by the United Nations General Assembly in 1990.
    · UN Global Program against Money Laundering founded in 1997 to increase the efficiency of all international
    measures to prevent money laundering via technical cooperation services provided to governments.

Strict enforcement at the national and cooperation at the global level, supported by modern technologies, remain the key to detecting and preventing the menace of money laundering.