Page 27 - Banking Finance February 2025

ARTICLE

a. the conversion or transfer of property, knowing it is threshold limits to avoid the enhanced due diligence.
acquired from a criminal offense, for the purpose of This method is known as "Smurfing" or "Structuring,"
concealing or disguising its illicit origin or of assisting any where illegal money is split into transactions below
person who participates in the commission of the reporting thresholds set by financial institutions e.g.,
predicate offence to evade the legal consequences of under $10,000 in the U.S. and Rs 50000/- in India. This
his or her actions; and helps them in introducing illegal cash into a Bank
accounts.
b. the concealment or disguise of the true nature, source,
location, disposition, movement, or ownership of rights b. Physical movement of cash, known as currency
with respect to, or ownership of the property knowing smuggling, in this currency is transported to the
that such property is derived from a criminal offense; jurisdictions which are considered to be a safe haven
and for financial crimes.
c. the acquisition, possession, or use of property, knowing c. By prepaying legitimate loans with dirty money. Using
at the time of its receipt that such property was derived dirty money for purchasing foreign exchange, buying
from the proceed of a criminal offense or from chips or tokens in a casino, gambling for a period, and
participation in any one of the forms such as association then cash out.
with or conspiracy to commit or attempt to commit or
d. By blending the illegal money with legitimate cash
aiding or abetting or facilitating.
generated by way of a cash intensive business such as
in a restaurant, clubs, bars, retail stores, petrol pumps
In India, money laundering is defined in the Prevention of
Money Laundering Act (PMLA) 2002, as under: or gas stations etc.
"Whosoever directly or indirectly attempts to indulge
All these methods help criminals to place their money into
or knowingly assists or knowingly is a party or is actually
involved in any process or activity connected with the financial system by disguising the criminal offence behind it.
proceeds of crime including its concealment, possession, Once dirty money is placed in the system, it is ready to be
acquisition or use and projecting or claiming it as circulated within the financial network.
untainted property shall be guilty of offence of money-
laundering." Layering the Stage Two:
The main objective of the criminals in this stage is to detach
In all the definitions of money laundering given by different it from the criminal offenses which generated the same. This
institutions or countries, the most important thing to take is done by creating complex web of financial transactions,
note of the "knowledge" of the criminal offence through which helps criminals avoid the money trail. Few examples
which the dirty money is generated is "essential." of this stage of money laundering are:
a. Moving funds from one jurisdiction to another or from
The entire process of money laundering, which includes the
one financial institution to another via electronic
complex chain of multiple transactions, is completed in three
transfers to make a complex web of transactions.
different stages viz. Placement, Layering, and Integration.
b. High cost & quality goods bought with dirty money, like
Placement the Stage One: luxury Yachts, Cars, arts, paintings, or other items of
value are sold at a discount for clean money.
In this stage, the physical cash or other assets derived out
c. Use of shell companies, the companies which exists only
of a criminal offence are disposed of. This is executed by
introducing them into financial systems. This is done in a on papers, to hide the ultimate beneficial owners of the
manner that "hides" the source of criminal offence and this assets derived out of dirty money.
is the prime motive of criminals in the placement stage. Few d. Converting dirty cash, after layers of transactions, into
examples of placement stage of money laundering are as different monetary instruments like stocks, bonds,
under: insurance products, or derivatives.
a. By splitting up large amounts of cash into smaller
amounts to bring the transactions within the reporting Once the dirty money undergoes layering stage it becomes

24 | 2025 | FEBRUARY | BANKING FINANCE