UPSC 2013 Mains GS3 Model Answer - Money laundering poses a serious threat to a country’s economic sovereignty. What is its significance for India and what steps are required to be taken to control this menace?
MA
•Mayuri
Feb, 2025
•1 min read
Q21. Money laundering poses a serious threat to a country’s economic sovereignty. What is its significance for India and what steps are required to be taken to control this menace?
Model Answer:
Introduction
Money laundering involves the illegal process of making large amounts of money generated by criminal activity, such as drug trafficking or corruption, appear legitimate. It is a serious threat to a country's economic sovereignty, as it undermines the financial system, attracts criminal activity, and erodes public trust.
Body
Significance of Money Laundering for India
- Economic Impact: Facilitates corruption, tax evasion, and the illegal flow of funds, affecting the nation’s GDP and financial stability.
- Loss of Foreign Investments: Countries with weak anti-money laundering (AML) frameworks risk being labeled as havens for illicit financial activities, deterring foreign investments.
- Terrorism Financing: Money laundering often supports terrorist activities, threatening national security.
- Undermining the Rule of Law: It perpetuates illegal activities and weakens legal and regulatory frameworks.
Steps to Control Money Laundering in India
- Strengthening Legal Frameworks: Enforce stricter laws like the Prevention of Money Laundering Act (PMLA) to combat financial crimes.
- Enhancing Monitoring Mechanisms: Increase surveillance of financial transactions, particularly in the banking and real estate sectors, to identify suspicious activities.
- International Cooperation: Collaborate with global bodies like the Financial Action Task Force (FATF) to monitor and control cross-border illicit financial flows.
- Public Awareness and Education: Conduct campaigns to educate citizens and businesses about the risks and prevention measures for money laundering.
Conclusion
Money laundering threatens India’s economic and security integrity. A robust legal framework, improved enforcement, international collaboration, and public awareness are essential to effectively tackle this menace and safeguard the nation's economic sovereignty.
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