Money Laundering Prevention Act, 2002 defines money laundering as properties acquired or earned directly or indirectly through illegal means; illegal transfer, conversion and concealment of location of the properties earned through legal or illegal means or assistance in the said acts.
There
are three main stages of money laundering. These
are:
1. Placement: The physical
disposal
of the initial proceeds derived
from
illegal activity e.g. depositing the money earned
by
theft, robbery,
bribery or hijacking to a bank account.
2. Layering:
Separating illicit proceeds from their sources by creating complicated
layers of financial
transactions designed to
disguise the audit trail and
provide anonymity e.g. electronic
transfer of the fund to a fake firm, issuing overseas bank draft,
purchasing travelers cheques, transfer of
fund
from
one bank account to various names of different
bank branches.
3. Integration: It means the
provision of apparent legitimacy to
property gained
in an unlawful way. If the layering process is complete,
integration process place
the
laundered proceeds back
into the economy in such a
way
that they re-enter the financial
system appearing as normal business fund e.g. sale
of flat/house/land purchased by illegal
income.