[Part 3]"'Two proletariats are talking about the bourgeoisie.'Why can Panda never be King of the Jungle?' says one of them.'Because Panda can only rolling and spinning, and later, he doesn't like having iftar together,' says the other.'Then what King could he be?' asks the first.'King of Slapstick!' replies the other.""In the past, until the 1990s,' the Moon moved on, "the issue of Money Laundering only revolved around robbers and pirates, but today, anyone can be suspected of being involved in Money Laundering, starting from commoners, state officials, even the Prime Minister or President—crime doesn't discriminate. David Chaikin and J.C. Sharman in Corruption and Money Laundering: a Symbiotic Relationship (2009), states that there is a symbiotic relationship between Corruption and Money Laundering, they say that corruption and money laundering are symbiotic: not only do they tend to co-occur, but more importantly the presence of one tends to create and reciprocally reinforce the incidence of the other. We'll discuss this in next session.In this session, we'll continue our review of what Chandna tells us about Money Laundering.In Money Laundering, wire transfers are used to remit black money from one location to another once it has been smurfed into the Bank Accounts. Let us see what smurfing means: Smurfing means deposit of illegal cash in bank accounts in such a manner that suspicion is not aroused. Thus, the cash deposits are made in small amounts in multiple accounts. Multiple Accounts can be of same entity or person in different banks and/or branches or of multiple entities (over which the black money holder holds beneficial interest) in the same bank and/or branches.Chandna mentions three ways to transfer Black Money. First, the authentic way: Wire Transfer. There are three major Electronic Funds Transfer (EFT) systems in the world: SWIFT (Society for Worldwide Interbank Financial Telecommunication), Fedwire (Federal Reserve Wire Network) and CHIPS (Clearing House Interbank Payments System).Secondly, the informal way: Hawala Network. Hawala is an Arabic word which means ‘to transfer’. Here it means transfer of funds from one country to another. The method is simple: If Mr Darkhorse, a black money holder based in New Delhi wants to send INR 20 Million of his black money in form of cash to his affiliate in Canada, he will approach Mr Jockey - an Angadia (which means ‘courier’ in Hindi. He is also known as Hawaladar in this process). Mr Jockey takes the cash from Mr Darkhorse in New Delhi and sends a message to his network representative in Canada who then hands over the equivalent amount of U.S. or Canadian Dollars (less their commission) to Mr Darkhorse’s affiliate in Canada.Thirdly, the crude way: Cash Courier and Human Courier. You need to send money from India to Canada illegally, carry it yourself. Since this is illegal, it entails the risk of being caught. No country allows physical carrying of its currency outside its border beyond a permissible limit. Many money launderers get caught while doing so and subsequently become a news item. They carry physical cash/dollars, gold, diamonds or other precious stones from one country to another in this manner.Similarly, launderers send physical cash through money orders, posts or international couriers too for the want of stringent KYC procedures in these modes.Terrorists often use this method to transport currency from one country to another because even if it is caught, it is mostly counterfeit in nature. Hence they do not bear any significant loss.Chandna also mention the methods. Colombian Peso Exchange was a much hyped traditional Money Laundering scheme that came into light in 1990s and was rampant for several decades before its popularity led investigators to kill it completely. Peso is the currency of Colombia whose exchange here refers to exchanging Pesos with US Dollars. This is why the method is also known as ‘Dollar Peso Exchange’.Layer of Trusted Lieutenants, one of the simplest, easiest and most widely used methods in disguising the source of black money earned by a person. A trusted lieutenant can be any person whom the black money holder can trust to be a custodian of his property, either due to closeness with that person or undue influence over him or it may be due to ignorance/ illiteracy of that person.Gifts, simplest as it seems to be, this method states that if a person has got black money and he needs to convert that into white money; he just has to seek a gift of desired amount from a Whitehorse who is willing to depart his white money for a charge. And what that willing person will get in return? It’s the black money with premium.Unsecured Loans, one of the simplest ways of laundering black money into white. Known by various names such as Accommodation Entry, Bogus Loan or Jamakharchi Entry, it is a darling of money launderers and entry operators. In common parlance, the method refers to exchange of cheque for cash. Because of its simplicity and effectiveness, this method is quite rampantly used in procuring white money.Fake Creditors, in business terms, creditors are the vendors or suppliers who have provided some goods or services but are yet to be paid for those goods or services. The Creation of fake creditors used in Money Laundering is again similar to receiving of unsecured loans since lenders are also a form of creditors.Donations to Political Parties are an important part of black money economy. Political parties use money for various purposes – for organising rallies, transporting people from one place to another, hiring vehicles of all sorts including private jets and helicopters, hiring places, equipments, advertisements, distribution of kickbacks, freebees and everything required to win votes. But still, because of the various privileges available to political parties, there remains scope of Money Laundering.Charitable Trusts. If you wonder how a girl is able to travel so much and work so little at such a young age, it is because her parents set up a trust that provides for most of her living expenses. Some of the charitable trusts are not trustworthy. Here, the amount that goes to trust in form of donations/ contributions etc. is used for purposes which are although different from the purposes for which the trust was established but do not appear to be so technically. It can be the trust is exempt from tax on this donation. Full Money Laundering, tax free.Earning Agricultural Income. This is the case in India and similarly in various other countries. To keep poor farmers out of the tax ambit and its compliance as well as to encourage agricultural production, agricultural income is completely exempt from taxation. However, this leaves a loophole open for the money launderers to play their dirty games.Real Estate signifying land, building and business related thereto like acquisition, construction, development, transfer etc. is one of the biggest markets of black money.Ever noticed some businesses where no customer seems coming but still the office, shop, restaurant, hotel etc. keep running for years and continue surviving? Notice more closely and you may find, in this bogus business, Money Laundering to be a reason behind these businesses.A Shell Company or a shell corporation is a corporation without active business operations or significant assets. Such company is not active in business and its assets may not be commensurate to the size of its business. Some shell companies may have had operations in the past, but those may have shrunk due to unfavourable market conditions, company mismanagement, takeover of assets, demerger of assets etc. A shell corporation may also exist even when its operations have been wound up, but still the 'shell' of the original company continues to survive. These types of corporations are not illegal per se but it’s their use that can be illegitimate so as to disguise business ownership from law enforcement or the public. Shell companies may also be used to carry the bogus business as mentioned before. The relationship of Shell Corporations and Money Laundering is akin to that of bread and butter or that of fuel and car.Tax Amnesty Schemes are different from Money Laundering schemes. All other schemes disguise the appearance of black money so that it looks clean (white) whereas amnesty schemes actually convert the black money into white. In simple language, the government through this scheme demands disclosure of black money and levies tax on such disclosure while promising not to question the source of such black money. In effect, the disclosed black money becomes white.There more methods Chandna mentioned in his book, but we'll not disclose them here. We need to conclude that, according to Chandna, not all methods of Money Laundering need to be complex. Some can be as simple as snow, but then the effectiveness of such methods is always doubtful.Chandna then offer some suggestions. First, Education on ill-effects of black money: Imagine family of a top notch bureaucrat telling him not to do anything that is morally incorrect. Professionals and employees refusing to indulge into malpractices at any cost despite pressure from top. A nation develops when everyone develops and it has to flow from top and not bottom of the pyramid.Secondly, Political Governance: If I have hard earned INR 1000, I will spend it extremely wisely and prudently. Does government also exercises such prudence in spirit with respect to public money? If not, taxpayers have got an excuse to lie. If a part of their hard earned money is taken away by government, it should be spent with same responsibility as exercised by the earners (tax payers) of such income. We have stringent corporate governance standards that are applied diligently but when it comes to politics, such standards seem missing. The reason for this difference cannot be that corporate entities are more important for our country than political entities or corporates have got more scope for manipulation.Thirdly, strengthening judiciary: Everything should be done to strengthen judiciary so that a strong check and balance system is created and nobody (even government) becomes bigger than law. Autonomy of the judiciary should be maintained to the maximum. Advanced technology, more resources and high quality infrastructure should be provided. More enabling provisions should be there to decide a case based upon circumstantial evidences. Remember, justice delayed is justice denied.It goes without saying that despite any amount of shortcomings, in a great country with a huge population of good people and potential around, we should value it.In the next session, we'll see David Chaikin and J.C. Sharman's point of view, Biidhnillah.
[Part 1]
