[PDF]Money Laundering: The Juxtaposition of Laws for Comparative Analysis

International Journal of Trend in Scientific Research and Development (IJTSRD)
Volume 7 Issue 3, May-June 2023 Available Online: www.ijtsrd.com e-ISSN: 2456 — 6470


Money Laundering: The Juxtaposition
of Laws for Comparative Analysis
Siddesh Dasari
Student, Dr. B. R. Ambedkar Law College, Hyderabad, Telangana, India


ABSTRACT


Money laundering is a problem that has become increasingly
pervasive in recent times and a major concern for governments
around the world. It is a process of concealing the proceeds of illegal
activities as legitimate income. It is a serious crime that has
implications for national security, economic stability, and financial
integrity. Money laundering is a global problem, and countries have
developed various legal frameworks to prevent, detect, and prosecute
it. This research journal will provide a comparative analysis of
money laundering laws in the United States, Saudi Arabia, and India.
Further, this paper will also examine whether India needs to make


changes to its money laundering laws.


How to cite this paper: Siddesh Dasari
"Money Laundering: The Juxtaposition
of Laws for Comparative Analysis"
Published in
International Journal El pa 0 TE

of Trend in
Scientific Research
and Development | ity 12a
(ijtsrd), ISSN: 2456- Glee


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6470, Volume-7 | _ TSRDS6291_


Issue-3, June 2023,
pp.89-96, URL:
www.ijtsrd.com/papers/ijtsrd5629 1 .pdf


KEYWORDS: Money Laundering, PMLA, AML, FEMA, FATF,


FinCEN, BSA, FIU, SAFIU, SAMA, SAR, ED


I. INTRODUCTION:

Economic offences and money laundering have
become increasingly prevalent in the world in recent
years, and are considered to be some of the most
serious and damaging crimes. Economic offences
refer to a range of illegal activities that involve
financial transactions or dealings, such as fraud,
embezzlement, insider trading, and tax evasion.
Money laundering, on the other hand, refers to the
process of concealing the origins of illegally obtained
money by disguising it as legitimate income or
investments.


Money laundering is often considered to be the chief
economic offence due to the immense damage it can
cause to both individuals and society as a whole. It
allows criminals to hide the proceeds of their illegal
activities, making it difficult for law enforcement to
track and prosecute them. This, in turn, can contribute
to the growth of criminal networks and_ the
proliferation of organized crime, as well as
undermining the integrity of financial institutions and
damaging public trust in the economy. There are
many different methods that can be used to launder
money, including the use of offshore accounts, shell


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companies, and complex financial transactions. These
methods can be difficult to detect and prosecute,
making it a challenging area for law enforcement
agencies to tackle.


Despite these challenges, there have been significant
efforts made in recent years to combat economic
offences and money laundering. International bodies
such as the Financial Action Task Force (FATF) have
been established to coordinate global efforts to
prevent and detect money laundering, while many
countries have introduced new legislation and
regulations aimed at strengthening their anti-money
laundering frameworks. While these efforts have had
some success, there is still much work to be done to
address the on-going threat of economic offences and
money laundering. With the growing
interconnectedness of the global economy and the
increasing sophistication of criminal networks, it is
more important than ever for governments, law
enforcement agencies, and financial institutions to
work together to combat these serious crimes and
protect the integrity of the global financial system. In
this this research journal, I will conduct a


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comparative analysis of the money laundering laws in
these countries, highlighting their similarities and
differences. Additionally, I will discuss whether
India's money laundering laws require any changes.


I. MONEY LAUNDERING LAWS

A. UNITED STATES

The United States has a comprehensive legal
framework in place to combat money laundering,
including both federal and state laws. The Bank
Secrecy Act (BSA), 1970 is the primary law
governing anti-money laundering efforts in the US.
The BSA requires financial institutions to keep
records of all transactions, including cash transactions
exceeding $10,000, and to report suspicious
transactions to law enforcement agencies. The US has
also implemented the Patriot Act, which strengthened
the BSA by requiring financial institutions to
implement additional measures to prevent money
laundering, such as customer identification and due
diligence. In 2001, The USA PATRIOT Act was
passed which established the Financial Crimes
Enforcement Network (FinCEN) as the lead agency
responsible for administering the BSA. FinCEN has
the power to impose civil penalties on financial
institutions that violate the BSA. Among other
provisions, the Act expanded the definition of
financial institutions subject to the BSA to include
non-bank institutions such as money services
businesses, introduced new record-keeping and
customer identification requirements, and increased
penalties for violations. The BSA and the USA
PATRIOT Act have been effective in deterring
money laundering in the United States.


In addition to the BSA, the U.S. has several other
federal laws that criminalize money laundering. The
Money Laundering Control Act of 1986, for instance,
makes it a federal crime to engage in any transaction
involving proceeds of illegal activity with the intent
to promote or conceal that activity. Similarly, the
Anti-Drug Abuse Act of 1988 makes it a crime to
engage in financial transactions involving the
proceeds of drug trafficking. However, there have
been some criticisms of the BSA, such as the burden
it places on financial institutions and the lack of
clarity in some of its provisions. The United States
has one of the most comprehensive anti-money
laundering (AML) regimes in the world.


B. SAUDI ARABIA

Saudi Arabia has been taking steps to combat money
laundering and terrorist financing through its robust
legal framework and regulatory measures. The
Kingdom of Saudi Arabia has enacted a series of laws
and regulations to combat money laundering and
terrorist financing. The main legislation that governs


money laundering in Saudi Arabia is the Anti-Money
Laundering Law (AML) of 2003, which was amended
in 2017. The law criminalises money laundering
activities and provides a legal framework for
preventive measures to detect and combat money
laundering. The AML law requires financial
institutions and non-financial businesses and
professions to conduct customer due diligence, keep
records of transactions, and report suspicious
activities to the authorities.


In addition to the AML law, Saudi Arabia has also
enacted several other regulations to combat money
laundering, including the Terrorist Financing Law of
2017 and the Implementing Regulations of the AML
Law. The Implementing Regulations provide detailed
guidelines on the implementation of the AML Law,
including the procedures for customer due diligence,
record keeping, and reporting of suspicious activities.


Saudi Arabia has established a financial intelligence
unit (FIU) called the Saudi Arabian Financial
Intelligence Unit (SAFIU) to receive and analyse
suspicious transaction reports. The SAFIU works in
close collaboration with other government agencies,
including the Ministry of Interior, the Saudi Arabian
Monetary Authority (SAMA), and the General
Commission for the Securities Market (CMA).
Despite the robust legal framework, Saudi Arabia
faces several challenges in combatting money
laundering. One of the main challenges is the
informal economy, which is estimated to be around
25% of the country's GDP. The informal economy
includes activities such as cash transactions, which
make it difficult to trace and monitor. Another
challenge is the use of hawala, an informal money
transfer system that operates outside the formal
financial system. Hawala is used to transfer funds
without leaving a paper trail, making it difficult to
detect and trace.


Furthermore, Saudi Arabia is a member of the
Financial Action Task Force (FATF), an
intergovernmental organisation that sets international
standards for combatting money laundering and
terrorist financing. The FATF conducts mutual
evaluations of member countries to assess their
compliance with international standards.


C. INDIA

India has long been a hub for financial crimes,
including money laundering. Criminal organizations
and corrupt officials have been using the country's lax
regulatory framework to launder their ill-gotten gains.
The Indian government recognized this problem and
passed the Prevention of Money Laundering Act,
2002 (PMLA), which was enacted to prevent money
laundering and to provide for confiscation of property


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derived from, or involved in, money laundering. The
PMLA provides for the establishment of the Financial
Intelligence Unit (FIU) to collect and disseminate
financial intelligence to law enforcement agencies.
One of the significant features of the PMLA is the
requirement of mandatory reporting of suspicious
transactions to the FIU. Under the PMLA, every
banking company, financial institution, intermediary,
and individual is required to report any suspicious
transaction to the FIU within a prescribed time frame.
Failure to comply with the reporting requirement can
lead to imprisonment for up to seven years and a fine.
The PMLA also empowers the enforcement
directorate (ED) to investigate money laundering
offenses and attach or confiscate property that is
believed to be the proceeds of crime. The ED is
authorized to conduct search and seizure operations,
arrest individuals, and initiate legal proceedings
against them.


The PMLA has been amended several times to
strengthen the legal framework for combating money
laundering. The most recent amendment was in 2019,
which expanded the definition of the term "proceeds
of crime" and introduced provisions for the
confiscation of assets located outside India. Apart
from the PMLA, other laws and regulations that are
relevant to money laundering include the Indian Penal
Code, 1860, the Foreign Exchange Management Act,
1999, the Benami Transactions (Prohibition) Act
1988, and the Black Money (Undisclosed Foreign
Income and Assets), Imposition of Tax Act 2015 and
the Securities and Exchange Board of India Act,
1992. These laws provide for severe penalties for
offenses related to money laundering, including
imprisonment, fines, and confiscation of property. In
addition to the legal framework, the Reserve Bank of
India (RBI) has also issued guidelines and directives
to banks and financial institutions to prevent money
laundering. These guidelines include the
implementation of Know Your Customer (KYC)
norms, suspicious transaction monitoring, and
reporting mechanisms, and internal policies and
procedures for preventing money laundering.


Il. STASTICS OF MONEY LAUNDERING
A. UNITED STATES

The United States has the highest number of
Suspicious Activity Reports (SARs) in the world.
According to the Financial Crimes Enforcement
Network (FinCEN), the United States saw an increase
in the number of suspicious activity reports (SARs)
filed in 2020. The number of SARs filed increased
from approximately 2.3 million in 2019 to 2.6 million
in 2020. Furthermore, the Department of Justice
(DOJ) reported that the total amount of money seized


from money laundering activities in 2020 was
approximately $1.5 billion. This is a significant
increase from the previous year, where the total
amount of money seized was approximately $1.1
billion. Although unofficially the US government has
estimated that between $500 billion and $1 trillion is
laundered annually in the country. The exact figure is
difficult to pinpoint, as money launderers go to great
lengths to conceal their activities, often using
complex financial structures and multiple
jurisdictions to hide the true source and destination of
funds.


B. SAUDI ARABIA

In 2020, the Saudi Arabian Monetary Authority
(SAMA) reported 128 cases of money laundering,
with 60 resulting in convictions. According to the
Financial Intelligence Unit (FIU), the number of
money laundering cases in Saudi Arabia increased
from 11 in 2016 to 28 in 2020. This indicates an
increase of over 150% in just four years. Furthermore,
the total value of suspicious transactions reported in
2020 was approximately $2.3 billion. This is a
significant increase from the previous year, where the


total value of suspicious transactions was
approximately $1.5 billion.
C. INDIA


According to the National Crime Records Bureau
(NCRB), the number of money laundering cases
increased from 5,220 in 2016 to 6,800 in 2019. This
indicates an increase of over 30% in just three years.
Whereas, according to the Financial Intelligence Unit
(FIV), a total of 4,734 cases of suspicious transactions
were reported by banks and financial institutions in
India in 2019-2020, with a total value of INR 17,948
crores (approximately USD 2.4 billion). This is a
significant increase from the previous year when
3,928 cases were reported, with a total value of INR
21,796 crores (approximately USD 3 billion). In
2020, India reported 792 cases of money laundering,
resulting in 255 convictions. Furthermore, the
Reserve Bank of India (RBI) has reported that the
total value of suspicious transactions reported in 2020
was approximately $16.8 billion. This is a significant
increase from the previous year, where the total value
of suspicious transactions was approximately $9.7
billion.


In terms of the types of money laundering activities
prevalent in each country, India has a high incidence
of trade-based money laundering. Trade-based money
laundering involves the use of trade transactions to
move funds across borders. In the United States, the
most common form of money laundering is through
financial institutions, with criminals using banks and
other financial institutions to launder their funds. In


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Saudi Arabia, money laundering is often associated
with illegal activities such as drug trafficking and
arms smuggling.


IV. LEADING CASE LAWS OF MONEY
LAUNDERING
A. UNITED STATES
1. United States v. Santos - 553 U.S. 507, 128 S.
Ct. 2020 (2008)
This case was heard by the Supreme Court of the
United States in 2008 and dealt with the issue of
whether the term "proceeds" in the federal money
laundering statute refers only to profits, or whether it
includes gross receipts. The defendant in the case was
charged with money laundering for transferring funds
from an illegal gambling operation to various bank
accounts. The Supreme Court ruled that the term
"proceeds" in the money laundering statute refers
only to profits, and not to gross receipts.!


2. United States v. Bajakajian - 524 U.S. 321, 118
S. Ct. 2028 (1998)

This case was heard by the Supreme Court in 1998
and dealt with the issue of whether the Eighth
Amendment's excessive fines clause applies to civil
forfeiture in money laundering cases. The defendant
in the case was charged with failing to report the
transportation of more than $10,000 in cash out of the
country. The government sought to forfeit the entire
amount of the money that was seized from the
defendant. The Supreme Court ruled that the
excessive fines clause does apply to civil forfeiture in
money laundering cases, and that the forfeiture of the
entire amount of the money seized was excessive.”


3. Skilling v. United States - 561 U.S. 358, 130 S.
Ct. 2896 (2010)

The Supreme Court dealt with the issue of whether
the honest services fraud statute could be used to
prosecute individuals for money laundering. The
defendant in the case was the former CEO of Enron,
and was charged with various counts of fraud and
money laundering. The Supreme Court ruled that the
honest services fraud statute could not be used to
prosecute individuals for money laundering, as it was
intended to address conflicts of interest and self-
dealing in the context of public officials and private
executives.”


' United States v. Santos - 553 U.S. 507, 128 S. Ct. 2020
(2008)

* United States v. Bajakajian - 524 U.S. 321, 118 S. Ct.
>>>