Q. Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels.

Model Answer: 

Emerging Technologies, Globalisation, and Measures to Combat Money Laundering

Money laundering, the process of disguising illegal funds as legitimate, has been significantly impacted by emerging technologies and globalisation. This global menace threatens economic stability and facilitates criminal activities.

Emerging technologies and globalisation contribute to money laundering:

• Cryptocurrencies: Offer anonymity and decentralized transactions (e.g., Bitcoin mixers)
• Online banking: Enables swift cross-border transfers with minimal oversight
• Fintech innovations: Create new vulnerabilities in financial systems (e.g., P2P lending platforms)
• Globalisation effects:
– Ease of establishing shell companies in tax havens
– Complex international trade networks obscuring illicit fund flows
– Disparities in regulatory frameworks across jurisdictions

Measures to tackle money laundering at the national level:

• Strengthening Anti-Money Laundering (AML) laws and their enforcement
• Enhancing Know Your Customer (KYC) norms and due diligence procedures
• Improving Financial Intelligence Units’ capabilities and resources
• Implementing advanced transaction monitoring systems
• Promoting public-private partnerships to share information and best practices
• Recent Indian initiatives: Amendment of PMLA, stricter reporting requirements for crypto exchanges

International measures to combat money laundering:

• Financial Action Task Force (FATF) recommendations and mutual evaluations
• Enhanced information sharing between countries’ financial intelligence units
• Harmonization of AML standards across jurisdictions
• Global initiatives like the Egmont Group for fostering international cooperation
• Capacity building programs for developing nations to strengthen their AML frameworks

Conclusion: Combating money laundering requires a coordinated global approach, continuous adaptation to technological advancements, and unwavering commitment from all stakeholders.