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Money Laundering - a Financial Threat

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Money Laundering - a Financial Threat

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MONEY LAUNDERING – A THREAT TO FINANCIAL SYSTEM

Money – The root of money laundering.
Money is like fire, an element as little troubled by moralizing as earth, air and water. Men can employ it as a tool or they can dance around it as if it were the incarnation of a god1. The primary function of money is to serve as a medium of exchange, and as such it is accepted without question in final discharge of debts or payment of goods or services2. Money is devil’s child and is responsible for many mischief and evils. Money is the root cause of many evils like corruption, black marketing, smuggling, drug trafficking, tax evasion, and human trafficking (a human selling another human in the era of human rights). People are crazy for money. People want more money to cater to their needs and at a point of time they don’t hesitate to have money from any source (black or white who cares). This is the available soft corner where the concept of money laundering enters and prospers.

CONCEPT OF MONEY LAUNDERING
Money laundering has traditionally been considered to be a process by which criminals attempt to hide the origins and ownership of the proceeds of their criminal activities. Money laundering occurs through banks and through NBFIs (Non-bank Financial Institutions) i.e.real estate companies, securities brokers/intermediaries, leasing companies and insurance companies. It is most likely to be prevalent in countries that do not have a developed financial and legal Framework for detection/prevention of money laundering.This is an aspect that can leave financial institutions, particularly banks, in a vulnerable position. As per the international statistics it has been observed that the crores of money is laundered through financial intermediaries effecting the economy and the financial system of the country.

Process of Money laundering :
The process of money laundering is accomplished through three main stages, namely: (i) Placement: This is the first stage in...

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