Article by Vijay Pal Dalmia, Advocate, Supreme Court of India and Delhi High Court, Partner & Head of Intellectual Property Laws Division, Vaish Associates Advocates, India

As time passes, so do the techniques employed by money launderers. With increasing innovation and the advent of the internet, criminals are finding new ways to hide and transfer their illicit earnings globally. This article delves into the evolving techniques of money laundering, its far-reaching impact on the world economy, and the measures taken by governments to combat this financial menace.

The Growing Threat

Money laundering poses a grave threat not only to individual financial systems but also to the integrity and sovereignty of countries. The United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, to which India is a party, calls for preventing the laundering of proceeds from drug crimes and related activities. In response to this global menace, the international community has taken significant initiatives. For instance, the Basle Statement of Principles, enunciated in 1989, outlined basic policies and procedures that banks should follow to assist law enforcement agencies in tackling money laundering. Additionally, the Financial Action Task Force established by major industrial nations made forty recommendations that provide the foundation material for comprehensive legislation worldwide. These recommendations include the declaration of money laundering as a criminal offense, the promotion of international cooperation in investigations, and the confiscation of the proceeds of crime.

India's Vulnerability

India, being a fast-growing economy, has become a regional financial power. Its geographical location and extensive system of informal money exchanges and tax evasion techniques make it susceptible to money laundering activities. The rise of Hawala transactions and remittance transfers, along with Indians migrating abroad, has prompted the government to pay closer attention to these practices. Traditional enforcement mechanisms were found to be inadequate to tackle the growing scale of illegal activities funded by laundered money, such as poaching, organ trade, and other heinous crimes. Experts urged the government to take inspiration from international initiatives to fortify India's efforts against money laundering.

The PMLA Journey

To counter this growing threat, India enacted the Prevention of Money Laundering Act (PMLA) in 2005. The act has undergone various amendments over time, strengthening the mechanisms to combat money laundering and related crimes. The legislation empowers enforcement authorities to exercise provisional attachment of properties involved in money laundering offenses, issue summons, conduct searches, make arrests, and seize evidence. The PMLA assigns broad powers to enforcement authorities, similar to those granted to the country's civil courts, in order to effectively implement its provisions and rules.

Role of Financial Institutions

The PMLA places significant responsibilities on financial institutions, including banks, non-banking financial companies (NBFCs), stockbrokers, payment system operators, and others, to maintain records of transactions that qualify as being of a specific nature and involving an amount more significant than the set threshold. The Reserve Bank of India collaborates with relevant government portfolios to prescribe the procedure and manner for providing and maintaining this crucial information. These regulations are essential to detect and deter potential money laundering activities and safeguard the integrity of the financial system.

International Cooperation

Given the transnational nature of money laundering, international cooperation is essential. The United Nations' political declarations and global programs have called upon member states to develop mechanisms to prevent financial institutions from being used for laundering drug-related money and enact legislation to prevent such laundering. India, as a signatory to these declarations, has taken inspiration from international initiatives to strengthen its legislation. This global collaboration helps create a unified front against money laundering and related crimes, as no country can single-handedly tackle the issue due to its cross-border nature.

The Consequences of Money Laundering

The magnitude of money laundered in India has raised concerns. Although the Government of India reported a figure of 1.945 billion Swiss Francs in Swiss banks, experts believe the actual amount could be closer to 40% of the Indian GDP. Such illicit funds fuel further criminal activities, including terrorism, narcotics smuggling, organized crime rings, and even destabilizing banking systems. The implications of money laundering go beyond financial systems and pose significant risks to society and the economy.

Impact on Society and Economy

The consequences of money laundering extend beyond financial systems. Illicit funds may be used to finance drug addiction, increase violent crimes, and foster anti-national sentiments. The lack of funds for government expenditure in a country with a large population poses severe economic challenges. The social repercussions of money laundering, such as drug addiction and an increase in violent crimes, further compound the issue, making it imperative for authorities to address the problem at its roots.

Anti-Money Laundering Legislation

Given the seriousness of the threat posed by money laundering, anti-money laundering legislation has become a global priority to protect economies and societies from criminal activities. By implementing stringent measures, governments aim to dismantle illicit financial networks and strip criminals of their ill-gotten gains. International cooperation plays a vital role in sharing information and intelligence, thereby facilitating effective measures to combat money laundering.


Money laundering continues to evolve, adapting to the changing times and technological advancements. Its impact on the global economy and society is vast, making it imperative for nations to work together to combat this menace. India's PMLA and other anti-money laundering initiatives stand as a testament to the determination to prevent crimes that finance terrorism, drug trafficking, and other illegal activities. The fight against money laundering is an ongoing battle, and constant vigilance is crucial to safeguarding financial systems and ensuring a secure future for all. Governments, financial institutions, and individuals must remain committed to upholding the integrity of the financial system and protecting society from the devastating consequences of money laundering.


Vijay Pal Dalmia, Advocate

Supreme Court of India & Delhi High Court

Email id:

Mobile No.: +91 9810081079



Twitter: @vpdalmia

© 2020, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (India).

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.