"MONEY LAUNDERING-COMPARATIVE ANALYSIS-THE UK &INDIAAccording to the „The Independent? report, it is embarrassing to note that nations such asBritain and other rich Western nations have taken much time in launching a first meaningfulinvestigation into money laundering offence. Additionally, as per the estimations of theNational Crime Agency over £100billion of foreign money is laundered in The UK. Thereason for the failure in restricting this offence is because the police are deficient of resources44 for carrying out required investigations into these offences. Based on this explanation weproceed further in understanding certain case laws where the commission of an offence undermoney laundering had been convicted.45 We begin with this section with R v Anwoir and R. v. Boam case laws which clearly statethat conviction under proceeds of „criminal conduct? is based mainly on circumstantialevidence i.e. it is not essential to prove a particular property as a result of criminal offence orthe presence of predicate offence but it is essential to provide such evidence based on whichinferences can be drawn towards the criminal offence. Thus, in the above stated case laws itcan be observed that even though money laundering is a standalone offence in cases such ascircumstantial evidence it is not essential for the prosecutors to prove conviction in relation tocriminal conduct, but it is essential provide inferred evidence that help in proving that thegiven proceeds are result of criminal conduct and are crime. Thus, as per the provisions ofPOCA a criminal offence can be proved as money laundering offence if it is being provedthorough circumstantial, accomplice, forensic or based on audit trials.The other important case law to be discussed is the HSBC bank case where it is shocking toknow that the bank paid £28million for settlement of money laundering a criminal offence.44Armitage Jim, Britain's £100bn-a-year money-laundering problem: police only acted forcefully on sevenreports of grand corruption last year, The Independent, August, 2015;http://www.independent.co.uk/news/business/news/police-lack-resources-to-carry-out-moneylaundering- investigations-10309052.html 45Same as footnote 34 Page 29 MONEY LAUNDERING-COMPARATIVE ANALYSIS-THE UK &INDIAThis case is observed to be one of the biggest banking leaks in the history of the bankingsector. As per the facts it is understood that one of the former employee of the IT departmentof the HSBC Switzerland branch fled to Geneva with the information of many clients withdetails of tax evasion, and later handed them over to the then finance minister. This move ledto the greatest investigation by Swiss, The US and French authorities because the informationin the files had been even forwarded to the British government, but the HRMC couldprosecute only one individual by February. This leak of information had obliged the bank topay compensation for its organisational failings and on allegations that it helped the clients in46 evading tax and the information leak had been used for money laundering.After a brief note on the said case laws, we move further in discussing the offence of moneylaundering in India from its evolution to its current position in the next chapter.MONEY LAUNDERING – INDIAThe current chapter will explain in detail the process of money laundering in India beginningwith its history, where the crime was first time recognized continuing with the lawsimplemented in dealing with this crime and also challenges faced by the government inimplementing these laws and recommendations for development of AML in this economy.Thus, we begin the chapter by discussing the roots of the evolution of this crime in India.HISTORYThe process of money laundering in India is known as Hawala transaction which came intolight in the early 1990?s where many of the politicians were caught in the net. This is one ofthe alternative modes of laundering money. It is also known as an underground system or46Sheffield Hazel, HSBC to pay record £28 million settlement in Geneva money laundering probe, TheIndependent, August, 2015; http://www.independent.co.uk/news/business/news/hsbc-to-pay-record-28- million-settlement-in-geneva-money-laundering-probe-10297603.html?origin=internalSearchPage 30 MONEY LAUNDERING-COMPARATIVE ANALYSIS-THE UK &INDIAremittance system that exists in parallel to the financial channels and „traditional? bankingsystem. This process developed in India before the introduction of the western bankingsystem in the economy. The transactions in this system are processed often without physicalmovement of currency i.e. there is a transfer of value without transfer of funds.Even though this system evolved in India in early 1990?s, it has currently become one of themajor remittance systems globally. As stated earlier this is an alternative system, anindividual who prefer to transfer their money from one place to another they have the optionto either choose to transfer through the formal channel or this parallel channel where theprocess is speedier and cheaper.India with its strict „foreign-exchange? laws has strictly prohibited the use of banking or anyfinancial institution for transaction requirements. The banking sector in India is obliged tofollow strict rules and in that course it must also abide by different policies of the governmentsuch as the „know your customer? policy etc., and it is this move that has made it difficult forthe illegal drug traffickers, embezzlers, corrupted politicians and public officials, con artists,and mobsters to use these financial institutions and the banking sectors for their illegalactivities, thus these large portions of the proceeds are naturally laundered through theprocess of hawala or hundi.In India, this market is estimated to constitute anywherebetween 30% and 40% of the formal market.Being the fastest transferring channel this system originated in the South Asia is known to bevery famous in transmitting illicit money through the channel of underground or alternativebanking system as this money does not enter the formal banking system. This system is notjust famous in India but also in Pakistan. The transaction process under this system is verysimple as the parallel bankers are mostly based on „alliance through family or gangsters? and Page 31 MONEY LAUNDERING-COMPARATIVE ANALYSIS-THE UK &INDIAit is speedy and effective because there is trial left under this system i.e. there is neither a noteon sum received nor is there an order stating the payment of money in India. It works mostly47 on code system, where the “hawaladar” gives a verbal commitment to the seller of dollarsand demand a high rate of commission in exchange. He uses code system to communicatewith his agent in India and irrespective of its high rated commissions in both the services as aseller and as an agent, this system yet handles significant sum of money.The best example for above stated statement is the arrest in New Delhi in the year 1993, bythe Delhi police of a hawala banker who within a period of two years had handles over$1.45billion in payment for his clients resided in Dubai. Some of the reasons for effectiveworking of these schemes are bribery and corruption. It was shocking to hear a hawala bankerclaim that in this nation it is very easy to purchase protection for the illegal activities bybribing the police officers, politicians and the local governments. This form of moneylaundering is the biggest challenge for the economic development of nation like India as itcreates challenges such increase in the crime rate of smuggling, corruption and many other48 financial crimes.Money laundering in India is also known to be the offshoots of drug trafficking. Under thisprocess the transportation and distribution of illicit drugs to markets of Europe and NorthAmerica by using the nation?s border states as the point of transition does help in facilitatingblack money and this is not just an economic phenomenon but has social, historical, political49 dimensions as well.47Individuals who collectmoney and transfer them to India48Lal Bhure,Money Laundering – An insight into the Dark World of Financial Frauds, Siddharth Publications,Page no. 206 to 211, January 200349Prabhakar Sinha, “Funny Money is Serious Biz”, The Times of India, New Delhi, March 2005 Page 32 MONEY LAUNDERING-COMPARATIVE ANALYSIS-THE UK &INDIAThe main reason for fuelling of a black money economy in India is the unholy nexus betweenthe politicians and public servants on one side and the businessmen on the other side. Thismain source of money laundering i.e. illicit drug trafficking has spawned a network of largemoney launderers affecting the economy of the nation and its GDP. It is estimated thatannually global turnover of money laundering in India is near $500 million of which majorshare is from drug trafficking.Thus, after understanding the evolution of money laundering in India through drug traffickingin 1989 and „hawalas? in 1990?s it is very essential to proceed further in understanding thecriminal offence of money laundering as per the Indian legislation.MONEY LAUNDERING AS A CRIMINAL OFFENCEAfter discussing the evolution of the different form of money laundering in the Indiaeconomy we proceed further in discussing those offences which are treated as the criminaloffence of money laundering in India. The law governing the money laundering offence is thePrevention of Money Laundering Act. Section 3 and section 4 of the Act help us inunderstanding the scheduled offences and punishments on convicted crime.Section 3 of the act explains whosoever individual is directly or indirectly involves in the actor money laundering or knowingly or unknowingly assists in the process of moneylaundering or activity connected to the same then they are also subject to conviction underthis act. As stated in chapter 2 about the money laundering offences criminalized in The UK,even in India similar offences are criminalized under the Schedule offence of PMLA.Even in India tipping off, failure to disclose information about the proceeds of moneylaundering are also punishable offences under the PMLA and other substantive laws thatwould be discussed in detail in next section of this chapter. Section 3 of the PMLA describes Page 33 MONEY LAUNDERING-COMPARATIVE ANALYSIS-THE UK &INDIAoffences under the bracket scheduled offences that have been segregated under Part A andPart C of the act. Part A explains all those scheduled offences such as criminal conspiracy, Amnesty Scheme:One of the most popular methods opted for tapping down the black money has been the50 official pardon schemes. During the period between 1946 and 1997 there have beenimplementations of 12 such schemes where the bulk amount of money had been convertedwithout payment of tax. In the year 1997, it has been estimated that over Rs.33,000/- croreworth assets were realized through these schemes.Tax Evasion or Concealment of Income with regards to foreign assets:The offence of evading tax or concealing the actual income earned on foreign assets isconsidered as a predicate offence for the first time in India in the recent times. This offencehas been considered as a criminal offence under the AML laws and is currently ruled underthe provisions of the Income Tax Act as a civil offence and the finance minister Mr. ArunJaitley announced in his speech on budget that the offences convicted under the IT act will beth included in the 15 scheduled offences and thus considering them as predicate offences. Withthe proposal of including this offence under scheduled offences under PMLA India will be inleague with those nations globally where evasion of tax is considered as a crime. But, thedefence to this form of offence is that there has been no proposal with regards to evasion oftax at domestic scenario thus, it still falls within the bracket of civil offence under the IT law.Proceeds of Crime:50Amnesty schemes Page 34 MONEY LAUNDERING-COMPARATIVE ANALYSIS-THE UK &INDIAProperty attained through illegal or illicit activities directly or indirectly by the individual as aresult of criminal activity resulting in laundering of money is proceeds of crime and such actas explained under UK laws is even considered as a criminal act under Indian laws and ispunishable under AML laws as it forms part of scheduled offences.Defined legally a schedule offence is termed under predicate offence and thus occurrences ofsuch offences will be termed as criminal offence of money laundering under the AML lawsand even act such as violation of custom duties or any other activities involved in differentforms of money laundering constitute criminal act and the individual or organisation involvedin such act is punishable and penalized under the AML laws of India.Some of the other scheduled offences identified as criminal offences if they are proved to beresult of activities involved in money laundering are evasion of the duty or prohibiting theperformance of the duty, forging trade symbols, offences which have cross-borderimplications and are specified under Part A of the scheduled offences, offences that are not infavour of property under Chapter XVII of the Indian Penal Code, offences such as sale ofillegal arms, drug trafficking, tipping off regarding the money laundering investigation to theconvicted person, disguising or concealing the actual details of the property, offence bycompany where an individual has acted against the provisions of the PMLA act, or the rulesand directions specified in the company order are punishable under the provisions of the act,etc. The list is not exhaustive as this is an organized crime where there is no proper trialavailable on the commencement of the crime.Punishment:Section 4 of PMLA, a person, convicted of the offence of money laundering is punishedrigorously with 3years of imprisonment which can be extended up to 7years and the Page 35 "