Money laundering is a global issue that has prompted governments and authorities worldwide to focus on preventing the flow of illicit funds. Tackling money laundering remains a top priority for governments and financial organisations. Legalising illicit profits has various harmful effects on administrative order and economic stability. This article discusses the laws and measures implemented in India to combat money laundering and safeguard the nation’s administrative and economic stability.
AML in India is defined as a collection of policies, laws, and procedures aimed at prohibiting the practice of generating funds through illegal means. The primary laws include the Prevention of Money Laundering Act, 2002 (PMLA) and the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. Specialised authorities like the Reserve Bank of India, Securities and Exchange Board of India, and the Insurance Regulatory and Development Authority of India deal with money laundering issues and establish anti-money laundering standards in accordance with the PMLA and Rules.
India became the 34th member of FATF in 2010. FATF is an intergovernmental organisation established by the G-7 Summit in 1989 and is responsible for setting global standards on anti-money laundering and combating the financing of terrorism. India is a signatory to several United Nations Conventions on anti-money laundering and against the financing of terrorism.
In addition to these enforcement agencies, the reporting entities (such as banks, financial institutions, and intermediaries) play a crucial role in combating money laundering. Under PMLA, they are required to maintain records, verify clients' identities through due diligence processes, identify beneficial owners for all transactions conducted with their clients, and provide information to the authorities when requested. This collaborative approach ensures a more robust and efficient system to combat money laundering and financial crimes in India.