Ajitansh Kar, Gurugram, 5 April 2023
I am assuming that you are reading this article because you have black money lying around that needs to be laundered for your personal use or you are a curious person like I am and are trying to learn more about this topic!
Without wasting any time, lets dive into the subject and learn how money is laundered. Before that, a statutory warning – money laundering is a serious crime and stay away from it!
Before understanding what money laundering is; we need to understand what black money is. Black money is the money obtained through illegal channels or money that has been earned legally but kept undisclosed for tax evasion purposes. Generally black money is found in the form of cash because it is harder to track cash and associate it with a particular person or group than any other forms of money.
It is very difficult to directly deposit or withdraw large chunks of money from your bank account as it can attract unwanted attention and scrutiny of the authorities. The first step in converting your black money to white money is to channelize it in such a way that it seems like your money is obtained from a legitimate business or entity. This is known as Placement. To do this, you need to establish a business or service which deals majorly in cash. Choose a business like a laundromat, stationary, car wash, etc. Buy or rent a shop to set up your business in a remote area or a smaller mall where very less people visit. This is to ensure that you can smoothly and efficiently run your money laundering operations without raising any eyebrows. This is the most important and dangerous step in the whole process because if you get caught during this process, then you may face legal charges and end up with dire consequences.
If you get through the placement process, the next step is known as Layering. This process involves further channelizing of the black money to make it as untraceable as possible. For this process, we would require the help of foreign nations known as Tax Havens. These include countries such as Mauritius, Caribbean Islands, Malta, Panama, etc. These are small island countries which have really strict laws regarding sharing of information related to the companies and investments established in their region. Set up a company in one of the tax havens and charge your Indian business entity a hefty fee for providing a service such as legal, accountancy, marketing, etc. This way you can transfer money from your primary business operations to the tax haven legally. Make three to four other companies and transfer money to them via the same process mentioned above. This way you will be able to make your money very difficult to be traced to the origin or yourself.
After completion of these two steps, your black money has successfully been laundered and cleaned up. The last and final step is to send this money to a place from where you can access it and use it. This last step is called Integration. You now have two ways to access this money. Firstly, you can send the money back to its country of origin though legal channels or send it to other countries such as Switzerland or Luxembourg which have private and secure banking laws. These foreign countries do not share any information regarding the amount as well as ownership of the bank accounts opened in their country. This level of confidentiality and secrecy have made these countries a hub for storing black money. However, most tax jurisdictions have joined hands under multilateral agencies like OECD to bring in transparency through Automatic Exchange of Information. This has reduced the ability of banks in Switzerland, etc. to maintain secrecy.
While this article would have made you better informed about money laundering, I would advise you all to stay away from it owing to the high risks involved.