Sitting in my newly allotted room- oblivion to what has been happening around- I was reading notes authored by Michael Meltzer over the topic Customer relationship management and Data Mining. Before the notes could make me sleep, I came across a software tool developed by IBM which can help in analysing the information in public domain over internet to identifying the cases of money laundering. The software mentioned in the notes is WebFountain and author gives a reference in footnotes to an article published in The Economist in 2004. I thought it would be great to start a new series of blog posts from money laundering issue which according to Baba Ramdev and other so called Indian nationalists, if resolved and if all money in those Swiss bank accounts could be brings back, would make me millionaire at least.
Money laundering is the route by which enormous amounts of illegally obtained money (from drug, terrorist activity, trafficking or other severe criminalities of the same stature) is made to be disguised as if created via a lawful source. In layman terms, black money gets transformed into stainless white money. In India, it has been a common perception that all the big corporate fishes do the acts of peculation, all the politicians and government bodies took bribes, lawyers embezzles funds from their clients and all the common men at some instance either take white money or bribe it to help convert it into black money.
Money laundering has not been any recent trend in world. Consider a bank robber in old times. After the robbery, he would put his money deep down the earth somewhere to escape incarcerations. When common people forgot the incident, he would use the same money to live a wealthy life. It used to happen in china 2000 years before Christ where merchants used to hide their money from Kings; they used to invest it in other business in remote areas or even outside China. Talking about the last century, Al-Capone, the notorious mobster had been charged with tax evasion and money laundering in 1931.Today, politician and businessmen in India are not different from those Chinese merchants or Al-Capone case.
Let’s see how the money laundering system does work. Firstly, the dirty money is placed into the system via a lawful financial institution. It is the most fragile step in the process because banks need to report all of their high value transaction and dubious transaction may lead to complete trace of source of money laundering. Second step, layering involves processing that money through different transactions to make it difficult to track. It could be a transfer of money from one bank to another bank, from one account to another account, from one currency form to another currency form or from currency to some other asset like diamonds, houses etc. After placement and layering third step involves sending back the black money into mainstream via some bank account transfer or business investment.
It was money laundering due to which, in 1989 the then non-Russia G7 to introduce Financial Action Task Force. India has been ranked as a country which “extensively employed the standards” convened by the FATF. Prevention of Money-Laundering Act came into existence quite back in 2005. It makes it mandatory for banks, intermediaries and other financial institutions to maintain detailed records of value and nature of transactions happened. But was it really working? Still why there are so many hue and cries in the political and social atmosphere? That’s the question we need to find an answer for.
I will continue with the same issue in my next post. Till then let me again go back to remaining 15 pages of the CRM and Data Mining notes.
Money laundering is the route by which enormous amounts of illegally obtained money (from drug, terrorist activity, trafficking or other severe criminalities of the same stature) is made to be disguised as if created via a lawful source. In layman terms, black money gets transformed into stainless white money. In India, it has been a common perception that all the big corporate fishes do the acts of peculation, all the politicians and government bodies took bribes, lawyers embezzles funds from their clients and all the common men at some instance either take white money or bribe it to help convert it into black money.
Money laundering has not been any recent trend in world. Consider a bank robber in old times. After the robbery, he would put his money deep down the earth somewhere to escape incarcerations. When common people forgot the incident, he would use the same money to live a wealthy life. It used to happen in china 2000 years before Christ where merchants used to hide their money from Kings; they used to invest it in other business in remote areas or even outside China. Talking about the last century, Al-Capone, the notorious mobster had been charged with tax evasion and money laundering in 1931.Today, politician and businessmen in India are not different from those Chinese merchants or Al-Capone case.
Let’s see how the money laundering system does work. Firstly, the dirty money is placed into the system via a lawful financial institution. It is the most fragile step in the process because banks need to report all of their high value transaction and dubious transaction may lead to complete trace of source of money laundering. Second step, layering involves processing that money through different transactions to make it difficult to track. It could be a transfer of money from one bank to another bank, from one account to another account, from one currency form to another currency form or from currency to some other asset like diamonds, houses etc. After placement and layering third step involves sending back the black money into mainstream via some bank account transfer or business investment.
It was money laundering due to which, in 1989 the then non-Russia G7 to introduce Financial Action Task Force. India has been ranked as a country which “extensively employed the standards” convened by the FATF. Prevention of Money-Laundering Act came into existence quite back in 2005. It makes it mandatory for banks, intermediaries and other financial institutions to maintain detailed records of value and nature of transactions happened. But was it really working? Still why there are so many hue and cries in the political and social atmosphere? That’s the question we need to find an answer for.
I will continue with the same issue in my next post. Till then let me again go back to remaining 15 pages of the CRM and Data Mining notes.
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