Act decisively

The claims made by the government on widening the scope of the law against money laundering and strengthening its provisions will carry conviction only if there is a follow-up action in enforcing the provisions. The Lok Sabha has passed amendments to the existing law on the basis of the recommendations of a parliamentary standing commitee, accepting all its 18 proposals. They have brought the Indian law in line with international laws, a requirement in the wake of the country becoming a member of the International Financial Action Task Force.  The law now covers more financial misdemeanours and covert methods of money laundering in its purview and removes the low ceiling of Rs 5 lakh on penalty. It also makes a provision for attachment or confiscation of the proceeds of a crime even if there is no conviction.

These are commendable provisions and the international ramifications of money laundering necessitate more stringent legal measures to counter it. It is a threat to global financial security and has implications for national security also because laundered funds are widely used for terrorist activities. Drug trafficking, tax evasion and creation of black money are all part of money laundering activities. It is well-known that India is a hot centre for all kinds of laundering operations. Illegally earned money is transferred abroad through dubious channels and they return to the country in various ways. Stock markets, the real estate sector and many other areas of financial dealings are badly affected and distorted by the flow of laundered funds, and huge amounts of money in tax income is lost to the exchequer.  

But giving more teeth to the law is not enough if the teeth are not made to bite. It is not because of the inadequacy of laws that money laundering has become a serious problem.  The government has always been lackadaisical in action because politics and big business has been involved hugely in black money and laundering operations. The stud farm owner Hasan Ali Khan from Pune who has faced charges of money laundering to the tune of thousands of crores has not been convicted. The government has the names of a large number of persons who hold illegal accounts in foreign banks but no effective action has been taken against them. Finance minister Chidambaram’s statement in the Lok Sabha that the government is taking action and every piece of information is being investigated sounds hollow in the absence of credible action.