Money laundering is costing billions of dollars to large global economies every year, camouflaged in various forms of trade. According to a recently published report by U.S.; China, Russia, Mexico and India have been identified to be the top four countries marked with hefty illegal financial outflows. The report also highlighted that Pakistan is losing more than $10 billion per annum in money laundering.
The US State Department’s International Narcotics Control Strategy Report, referred to another report by U.S. think tank; the Global Financial Integrity (GFI) which provided the following list:
The average outflow of illicit finances per year:
- China $139 billion
- Russia $104 billion
- Mexico $52.8 billion
- India $51 billion
The report defined a term as Trade-Based Money Laundering (TBML) to be a process used by criminals; through which illegal money is made legitimate under the garb of trade. Globally, traders and people from currency mafia clean up their finances amounting to billions of dollars on an annual basis.
The officials claim is that it is the most common yet intelligent way to wipe out illegal sources of finances. Despite its commonality, it is very difficult to sniff the sources of TBML and even legal experts can easily be deceived in such transactions.
In Pakistan, the situation is similar as billions are shipped off every year in money laundering business by criminals. Individuals indulge in such transactions in their efforts to escape from taxes and to avoid scrutiny from the government. Ironically, such numbers reveal the plight of the people of Pakistan, where a large population lives in extreme poverty.
The report has also highlighted Afghanistan to be a major victim of financial crimes and illegal outflows. It is also hampering its development and law and order situation.
Afghanistan is facing many challenges such as terrorist financing, money laundering, bulk cash smuggling, abuse of informal value transfer systems, and other criminal financial activities.
The report states:
“Afghanistan remains the world’s largest opium producer and exporter. Corruption remains a major obstacle to the nation’s progress”
Although Afghanistan’s National Unity Government has made rules and regulations to prevent such crimes but it still lacks effective implementation and monitoring.
The report gave a few recommendations to India regarding regulating traditional modes of money transfers. It also suggested that they should innovate and develop new payment methods and financial services such as mobile banking.
Some of the common money laundering techniques used in India today are multiple bank accounts, combining illegal finances with legal assets, buying bank cheques with cash, and transferring money using complex legal framework.
A few multinational organizations in India are using their global platform to conduct TBML to dress up their illegal financial flows. Black money could be made legitimate through real estate, creating education funds, charities, and election campaigns. The prime sources of illegal money are illegal trade, human and narcotics trafficking, tax evasion and financial crimes.
Another significant issue polluting Indian economy is counterfeit currency. The recent currency demonetization decision by Reserve Bank of India was an initiative to grapple rising black money. Although this decision solved the problem of counterfeit currency in India but whether long term money laundering issues will be solved; it still remains a question mark.