Jun 3, 2018

What is Money Laundering and case studies?

Stay Alert Series – 22 (a)


Money laundering is the common term used to describe the process by which criminals disguise the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source. The processes by which criminally derived property may be laundered are broad.

There are three stages involved in money laundering; placement, layering and integration. Placement –This is the movement of cash from its source. On occasion the source can be easily disguised or misrepresented.

For better understanding you can refer below chart:

A Typical Money Laundering Scheme 

Why it’s called Money Laundering?

The term "money laundering" is said to have originated with the Italian mafia and such criminals as Al Capone who allegedly purchased 'Laundromats' to commingle (or mix) their illegal profits from prostitution and bootlegged liquor sales with legitimate business sales from the 'Laundromats' to obscure their illegal.

Let’s see some of the cases of Money Laundering and what is the modus operandi?

Punjab National Bank (PNB) is an Indian multinational banking and financial services company. It is a state-owned corporation based in New Delhi, India. The bank was founded in 1894. As of 31 March 2017 the bank has over 80 million customers, 6,937 branches, and 10681 ATMs across 764 cities.

In February 2018, PNB was part of India’s biggest ever fraud in which two junior officers at a single branch had illegally steered $1.77 billion in fraudulent loans to companies, most of them controlled by billionaire jeweller Nirav Modi. Based on the data available with Reserve Bank of India, PNB topped in number of frauds cases across India with 389 cases totaling to Rs 65.62 billion over the last five financial years among all State run banks. 


PNB has a banking subsidiary in the UK (PNB International Bank, with seven branches in the UK), as well as branches in Hong Kong, Kowloon, Dubai, and Kabul. It has representative offices in various Countries in World.

Group financial scandal 2013: a 4000 Crore Scam

West Bengal Kunal Ghosh, Sudipto Sen, Madan Mitra and many more financial scams caused by the collapse of a Ponzi scheme run by Saradha Group, a consortium of over 200 private companies that were believed to be running collective investment schemes popularly but incorrectly referred to as chit funds.

Satyam scam 2009

Dubbed as ‘India’s Enron scandal’, the 2009 corporate scam shook the Indian investors and shareholders community. Ramalinga Raju, the Chairman of Satyam Computer Services, confessed that he had falsified the company's accounts, inflating the revenue and profit. The fraud involved Rs 14,000 Crore.

The CBI investigated the case and Raju, along with 10 other members faced imprisonment. Tech Mahindra took over the company.

Common Wealth Games Scam 2010: 70,000 Crore Scam 

New Delhi, Suresh Kalmadi, Sheila Dixit- the then Chief Minister of Delhi State. It is estimated that out of 70000 Crores spent on the Games, only half of the said amount was spent on Indian sportspersons. 
Discrepancies in tenders such as payment to non-existent parties, wilful delays in execution of contracts, over-inflated price and bungling in purchase of equipment through tendering and misappropriation of funds.

Bank of Baroda Scam 2014

Between May 13, 2014 and June 20, 2015, the Ashok Vihar branch opened 59 Current accounts through which large foreign exchange remittance transactions were undertaken, Bank of Baroda said in its statement to the Stock exchange. 

The purpose of transactions was stated as “an advance payment for imports”. The money was transferred to around 400 overseas parties; most of them were based out of Hong Kong and one in UAE. For these entire transactions branch did not follow the FEMA guidelines. 

Punishment for money-laundering in India

The act prescribes that any person found guilty of money-laundering shall be punishable with rigorous imprisonment from three years to seven years and where the proceeds of crime involved relate to any offence under paragraph 2 of Part A of the Schedule (Offences under the Narcotic Drugs and Psychotropic Substance Act, 1985), the maximum punishment may extend to 10 years instead of 7 years.

Stay Alert and Stay Safe.

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